For retail stores, attracting potential consumers to browse or try something on is usually only part of the marketing battle. Regardless how great the product is, money may often come in between a costumer’s desire to buy and their reluctance to part with their cash. Fortunately, by providing consumer financing, retailers can increase the likelihood that those browsing on their website or perusing in their stores will go ahead and make that final purchase.
Similar to Credit Cards
Store financing generally works like regular credit cards. Once approved by the lender, customers may purchase the product on credit, so they don’t need to pay for the item right away. For who may want to make a big purchase but may not be able to afford the item immediately, this delay can offer them some relief. This can potentially increase the chances of them buying, since it gives them time to earn more money without needing to give up the product. Furthermore, the retailers don’t lose any cash. They still get their money from the third party lender when the purchase is being made. The lender then recoups the money from the costumers when the bill is due.
Provides Incentives to Customers
Additionally, consumer financing may include various incentives. These can include no interest on payments made during a certain time period. This essentially allows the costumer to possess the item for free for a little bit. This can especially work for those who just need little bit of extra time to gather the money they need, since they may end up not having to pay any interest at all. Another type of incentive often made available by store financing may be certain discounts for customers who use the financing. For example, a customer may get ten percent off on purchases the first time they utilize the financing option. For someone who may hesitate to buy an expensive item, the saving they would receive may influence them to make the purchase.
Choosing the right Lender
Since stores usually work with a lender to offer the financing, it’s important that retailers choose one that works best for them. Some businesses, for example, may choose a lender that does not have fees or who charges lower percentages. Others, however, may decide that a certain incentive and, therefore, higher revenue is worth the additional cost. Businesses typically need to do a cost-benefit analysis in order to determine which financing lender works best for them.
Many stores may have multiple customers going into their stores, looking at items, trying things out and then not making any purchases. Consumer financing can help increase the likelihood that these shoppers will become buyers.