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Retail Focus: Using Promotional Financing to help Close the Sale
By Sue Yasav, VP (Market & Consumer Insights), Synchrony Financial
Today’s financing options are myriad, spanning the gamut from no-interest payment plans to special promotional offers of a few months or more. But one thing is certain: financing has a permanent place in today’s retail landscape.
Financing options are more than just a convenience. They’re a powerful marketing tool, providing benefits to retailers and consumers alike. In an increasingly competitive shopping environment, even small businesses may find that an offer of credit can be a key factor in gaining and keeping a loyal customer. A store can now offer financing for large items and maybe a private label credit card program with rewards. And many customers who buy big ticket items may be looking for financing in order to purchase.
Defining the Value of Promotional Financing
Synchrony Financial recently conducted a research study across 13 different product categories, asking consumers about their journey toward making a major purchase (of $500 or more) and the role financing plays in their path to purchase.
The effect of financing programs was strong enough to make, in some cases, a double-digit difference in spending. We found that Synchrony Bank cardholders who used financing to make a purchase of at least $500 spent, on average, 35 percent more than non-cardholders.
The study revealed meaningful incremental lift in sales. In addition, data from two Synchrony financing programs found that incremental sales of 19 percent and 27 percent when financing was available to consumers. Compared to non-cardholders, customers who used financing purchased more items, had higher average tickets and returned to shop more often.
How Customer Financing Helps Drive Incremental Spend
Presenting customers with financing offers can expand their options.
Financing can help close the sale, drive customer loyalty and create an opportunity to increase and maintain market share
• Getting the Product they Really Want
In addition to making an item more affordable, there are opportunities for retailers to speak to their customers about the higher priced item they may really want. For example, a customer shopping for a new appliance may decide that a higher quality brand is now more easily within reach. Or that extra accessories and features can now be included.
• Customers Purchasing in More Categories
Having extra buying power may lead to an additional purchase. A customer only committed to a new sofa may choose to add a coffee table to their sofa purchase when using promotional financing.
• Repeat Sales
Having a retailer’s branded card in their wallet is a reminder of a positive experience with the brand. In fact, 68 percent of major purchase shoppers say they are likely to use their card again on future purchases. Nearly 40 percent of Synchrony Bank cardholders who made purchases in big ticket categories made repeat purchases over a three-year period.
Next time out, cardholders may first consider retailers with whom they already have an established relationship. In fact, Synchrony Bank data shows that cardholders are twice as likely to be repeat shoppers as non-cardholding shoppers.
Shoppers hunt for value. Three-fourths of Synchrony Bank cardholders surveyed say they “always” seek promotional financing offers when making a major purchase.
Their search is a determined one. 80 percent of major purchase shoppers conduct online research before they visit a store, and more than a third of shoppers say they look for financing on the retailer’s website. 77 percent of Synchrony Bank cardholders say that promotional financing influences their final choice of retailer.
Clearly, financing can help close the sale, drive customer loyalty and create an opportunity to increase and maintain market share.
Awareness is the Key to Success
The first task of marketing a financing program is creating awareness. This can be particularly important during the holidays when multiple retailers are competing for share and trying to drive foot traffic to their stores. During the holidays, shoppers may be looking to make larger purchases and are seeking different ways to pay for them. Advertising financing offers can help retailers compete more effectively for market share and foot traffic.
Since 80 percent of major purchase shoppers start with online research, a promotional offer on the website is key.
The other key ingredient is the in-store sales associate. A Synchrony Financial study shows that 64 percent of major purchase shoppers state that the in-store visit had a greater influence on their purchase decision than their online research.
Undeniably, financing represents an opportunity to close the sale, drive customer loyalty and create an opportunity to increase and maintain market share. Retailers able to identify the right financing options for shoppers can expect consistent success and more satisfied customers.