One thing all businesses have in common is the need to make money. Whether you’re selling goods or services, your number one goal, financially speaking, is to create positive cashflow. Unfortunately, it can sometimes be difficult to encourage people to spend on your product, especially when large price tags are involved.
If your business deals in these big ticket items, or if you’re constantly having to deal with late payment on your invoices, payment plans may be an excellent option for you. Not only will they appeal to your current customers, but they can win you new customers, too.
Here are four ways that payment plans make buying your goods and services easier for your potential customers.
1. Making your product seem more affordable
The key word here is ‘seem’. Often, you will actually stand to make more money over a longer period of time through offering a payment plan. Even if you are charging interest or a flat fee on your plans, by breaking the total down into smaller pieces, you give the impression that your product is more affordable.
For example, you may have an item or service that costs $1200. This can be a daunting figure for customers, as it is in the thousands. If you tell them, on the other hand, that they can take a 12-month payment plan with equal monthly payments, and they only need to pay $110 now, it will be a much easier sum to justify (even though it makes your product more expensive!)
The initial outlay is so much smaller than the original total cost, and people often don’t project past their initial desire to purchase.
2. Giving your customers payment options
Giving options to your customers makes them feel like they have some semblance of power in the transaction. When they can make choices, no matter how small, they will be more likely to view you in a positive light. It may be that the choice is simply to pay up front, or over a protracted period, but that doesn’t matter. The fact that you are giving your customers a choice is the most important thing.
3. Showing empathy for your customers’ cashflow
This point is huge in the psychology of selling. If you show your customers that you understand their cashflow situation, and that you are willing to work with them to maintain their positive cashflow, they will be more likely to purchase your product. This requires some work on your behalf, of course, to identify your target demographic, and market your plans accordingly.
Showing this kind of empathy, especially if the item you’re selling is expensive, gives your organisation a more human, less corporate feel, and customers will be much more likely to shop with you if they feel their needs are being acknowledged.
4. Keeping customers for the long term
When you sign a customer onto a payment plan, you are essentially starting an ongoing relationship with them, as opposed to the instantly completed transaction of an on-the-spot purchase.
Your brand will be kept front-of-mind throughout the term of your plan, and if you offer quality customer service during this locked-in period, you should be able to capitalise on the (somewhat enforced) loyalty that you’ll gain.
While payment plans aren’t suitable for every type of business, it is certainly worth assessing whether they are right for yours. It may be that, by offering payment plans, you will win the customers that were previously considering your goods and services, but could not afford them.
Kane Grose writes for First Class Capital, one of Australia’s most progressive lenders and supporters of small business. He is driven to provide practical, educational information to help small businesses succeed. Find out more at http://www.firstclasscapital.com.au/
To read more articles relevant for Professional Accountants and Bookkeepers, visit here.