Understand Your Customers Better
The ways consumers behave according to whether they have credit card or cash is a fascinating study of human nature and consumer psychology. Understanding these trends is also useful for merchants. Equipped with the knowledge of how your customers are likely to behave around different payment options allows you to tailor how you offer those options and how you can use them to attract more sales. Here’s some of the findings from prominent studies and how you can use them to your advantage:
Offer credit card payment facilities to tempt more spending
Consumers tend to spend more when they can pay using credit card. The psychology behind this is simple: it’s easier to spend money when it is more abstract, and the consequences of paying are further in the future. When you have cash in hand, it is a physical and obvious reminder of exactly how much you are spending. With a credit card, you can buy now and worry about the amount later, usually in at least a month.
According to one study, consumers are willing to pay up to double the price of the same item when using credit cards. The phenomenon is known as the “credit card premium”. As a merchant, you can confident that you are not only inviting more sales, but increasing the totals of each sale, when you offer a credit card payment option.
Know which products or services will sell better with cards versus cash
Studies have shown that consumers also focus on different things when shopping with a credit card versus cash in hand. With a credit card, shoppers are more likely to value quality and product features over price. With cash, the price of each item is more likely to be the most salient determining factor when deciding whether to buy the item. In the same vein, using credit cards results in more spending for items where the value is in the future, like gifts and travel, or the value is less concrete or certain, like on-going subscriptions or tickets for sports or concerts.
When credit card users focus on the features of a product instead of the price, they are more likely to choose the products with the best features, which are usually the products with the higher price tag. Merchants can use this to their advantage by promoting feature-laden products (and once-off or gift products) to credit card users to increase their sales. Conversely, if a merchant is wanting to increase their sales in products of a lower price tier, emphasizing cash payments over card payments is a good approach.
Understand and appeal to the reasons why your customers prefer credit cards
One of the main reasons to use a credit card instead of cash is that credit card usage typically offers benefits and rewards, such as frequent flier miles or spending points. Even people who do not carry a balance each month are prone to using their credit cards more often than is financially responsible, but this is to the merchants’ advantage if they know how to market their business and promote their available payment options.
For more information about credit card payments or to sign up for a merchant account, please call (888) 924-2743 or go to Charge.com.
