Options for Payment and Payment Methods
“Always deliver more than expected," Larry Page, co-founder, Google.
This statement, now more than ever, is critical to the service industry. Customer expectations are extraordinarily high and aren’t going to drop anytime soon. When customer expectations are exceeded, when the perceived value is more than the price, business wins.
To deliver more than expected, businesses must always be looking for new and creative ways to generate sales and cash flows. Consider this: in 2020, Credit cards accounted for 38 percent of transactions in the United States. Debit Cards 29 percent and good ol' cash money 12 percent. Mobile wallets accounted 10 percent and each of Charge card, pre-paid, and Point of Sale (POS) financing tallied 4 percent. (statista.com)
While credit cards are clearly the dominant player in payment method, “forty percent of your customers don’t qualify for traditional financing*”
Source: Board of Governor of The Federal Reserve System. (2021, May). Economic Well-Being of U.S. Households in 2020. Retrieved from federalreserve.gov/publications/files/2020-report-economic-well-being-us-households-202105.pdf (page 4)
With the average repair order in tire and automotive shops quickly approaching $300 and likely to be $350 by the end of the year, consumers need options.
Purchasing repairs whether tire or automotive part for the consumer is considered a double negative purchase. First, it’s not something they typically want to spend money on and certainly haven’t budgeted for the cost. Second, it’s often a push product, meaning consumers know little about the product and brands and need to be educated. Pull products, like iPhones, don’t have that problem.
Think of the difference of when a customer buys a new 80” television versus two new tires. Not many neighbors are jealous of the thick treads on the rear wheels of your SUV.
This creates hurdles that must be overcome in the industry to service different kinds of customers. For the consumer that doesn’t have cash in the bank, or space on the credit card, POS financing can be the bridge a consumer needs to get to work, pick up the kids, and keep critical cash open for gasoline and groceries. Some consumers need POS financing, others simply want it so there is breathing room on their existing credit cards, or possibly because they can take advantage of aggressive 0 percent pay down terms.
One of the most important steps in introducing all the options your business offers is to do it early, before the topic of price of repair are brought into the discussion. “We have a wide variety of tires to choose from, as well a wide variety of payment methods.” This, or something similar to this, should be standard language for all customer transactions. When the time comes to present price to the customer, a service advisor can simply add “And I’d be happy to walk you through the steps of our in-house financing if you are interested.” Today’s modern customer is interested in choice – the idea that solutions can be tailored to their individual need(s). Withholding choices or strong arming any particular solution is often one of the greatest infractions advisors make. Just as a customer would be educated on the proper tire for their vehicle and then are free to choose the brand, so goes options of payment.
In today’s modern world, there are a myriad of options to offer the consumer, and you need to understand all these various options and how they affect your bottom line. Make sure you look at the different costs that may be related to offering each of these different payment plans. For example, one of the added benefits with some options like lease to own is that there may be much lower fees or no fees to the dealer when compared to credit cards.
So, while cash is still king, it is the availability of it that matters. The world of payment options and options on how to pay is expanding at an incredible rate. Modern retailers need to stay alert and make sure they can make it easy for customers to say yes to business.
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This article is part of the SNAP! Finance series. As more articles are released, they can be found below: