Most of the ecommerce platforms and offline stores these days are opting for consumer financing. The main reason behind this change is it offers stores high profit and sales which their business can grow. Apart from that, it benefits the consumers also as they can buy various products with a limited budget and can pay over a period of time. As the owner of the ecommerce platform, if you are looking forward to consumer financing, then there are various things you have to consider.
What is customer financing?
Basically, customer financing allows people to acquire goods and services from the business without paying the total amount at the time of buying. For example, if you have purchased a Television and you don’t want to pay the total amount at one go, then the business from whom you are buying that product will offer you the option of customer financing.
Here the third-party consumer financing companies play an essential role. That means you have tied up with any of the best financing companies and they will pay you the amount when the customer pays. Overall, it works like buy now, deliver later services which are in high demand these days.
Overall, after opting for this option, your sales and conversion rate will increase, and on the other hand, consumers can take home whatever they want to. So, it’s a win-win situation on both sides.
Benefits of consumer financing
It helps in attracting more customers
Many individuals don’t have money to buy products. In that case, customer financing is a great option that attracts more and more customers. According to the recent report by Forrester, businesses that offer financing options to their customers sell around 20-30% more as compared to those who don’t. Overall, if the business doesn’t offer financing options, then they are losing business.
Better prices for the customers
Visitors coming to the website may hesitate to check out if they see the prices of the products are higher than they are willing to spend. So, by splitting the large payment into several smaller ones, the individual buys those products and services without any difficulty.
Increases loyalty, trust, and referrals
As the owner of the business, the main goal is to offer a service that is memorable to the consumer, and in turn, you need loyalty and trust. This is possible when you are offering your customers a financing option in their purchase which will encourage them to return to your business in the future and also refer your services to their near and dear ones.
It is true that if the customer is satisfied, they will give you countless referrals and also come to your business just because you are offering flexible payments plans and reasonable rates.
Fast payments and increased cash flow
Without any doubt, one of the most significant benefits of consumer financing is that the financed sales payments are processed quickly after the loan gets approved. That means as a business, and you get paid upfront without any risk.
Capture customers on the spot
Once the business has acquired the customers, there are only 60-70% chances of returning to your business to make another purchase. But in the case of consumer financing, there is a high possibility that customers will surely complete the checkout process and take home your product.
Now, let’s discuss some of the considerations which small businesses have to keep in mind: –
The first factor which you should consider when opting for consumer financing to the small business is whether the products and services you are offering are suitable for funding. That means the products and services you are offering are inexpensive or have a big ticket? Does your target audience have that much funds to pay up-front.
Products and services eligible for a payment plan
Consumer financing companies don’t permit every product or service cost to be paid in installments. That means they always put in place the minimum cost threshold. However, various products and services which are below that threshold are not eligible to be paid in installments.
Cost of consumer financing
There is one thing that small businesses must keep in mind is they should only offer consumer financing if both you and your customers can afford it. When you go into the market to select the best consumer financing company, it is complex to choose the one as there are many. Some of the companies are free for merchants, and others charge you some percentage of each sale.
The set-up of consumer financing
The set-up of consumer financing options must be painless for the merchant. Apart from that, if you talk about the customer’s side, applying for customer financing and enrolling in any of the payment plans are also painless.
So, as a business, avoid programs that require you to integrate costly or complex equipment into the existing payment infrastructure, or consumers have to fill lengthy paperwork.
The bottom line
Bringing new customers to the business is a very challenging aspect. But if you offer customer financing options to them, it is the one way to attract and retain newcomers to buy your products and services. So, if you want your business to grow and touch the height of success, then offer your customers a financing option and then see the real difference in the growth.
I hope you liked this post on customer financing!