Are you looking for unique ways to convert more customers? You may have expanded your marketing, improved your customer service, participated in SEO and other digital strategies and still not have the market share you want. Have you ever considered business to consumer financing? These are some things you should know about this option.
What Is It?
When you offer consumer financing, you allow your customers to make payments on the products and services they purchase from you. Consumer or department store credit cards are types of consumer financing. You still receive your full payment upfront, less any fees your financing company charges, but the buyer gets to pay off the purchase over time. The buyer also pays interest on the purchase.
Both small and large companies offer consumer financing. The key is to convert browsing customers into purchasing customers by offering them instant gratification without a high initial outlay.
What Are the Pros and Cons?
Consumer credit programs increase customer conversions. Also, a Consumer Credit Benefits study found a 15% increase in order size when consumer credit was provided. In addition, more than 80% of people said they would use the card again, which suggests a significant increase in customer loyalty. You also receive the total payment up front if you work with a third-party financier. Therefore, the finance company takes on the risk.
If you do not work with a third-party provider, you may take on bad debt from customers who do not pay their bills. You will also have to expand your accounts receivable department and may experience an impact on your cash flow because you don’t receive immediate payment. If you work with a third-party provider, these contracts typically include a clause that they can be terminated at any time, and frequent chargebacks or bad debts can encourage this termination.
How Is It Done?
Yes, you can absolutely offer to finance your customers’ purchases. This is especially valuable if your customers are other businesses. In fact, this is a common practice. However, offering financing to consumers is a bit more complicated. It requires extensive legal work and lots of time. For example, you will be responsible for checking your customers’ credit and pursuing collections.
However, you can also work with a third party that offers consumer financing. These firms typically offer these services to many companies, so they have reliable, efficient and effective processes. Most companies choose to work with third parties. You will probably pay a per-transaction fee and the customers pay interest on their purchases. Your cost will be based on the provider you choose to work with.
Offering business-to-consumer financing may be a valuable strategy for your business. Be sure to do your due diligence so you adopt the best strategy.