By Mike Rittler, TD Bank
From appliances to home exercise equipment, many Americans don’t have the cash on hand to pay for big-ticket items. For others, it simply makes sense to take advantage of no- or low-interest offers. Always on the lookout for ways to boost sales, retailers are building partnerships with banks to offer direct-to-consumer loans.
These in-house financing offers can build sales and encourage customer loyalty. With financing available, customers may also purchase additional items. Forrester Consulting found a 15% increase in average order value when financing was offered. It also found an 18% sales increase when web sites showcased “six months to pay” banners.
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Financing partnerships also have other big advantages. They free up cash flow and relieve the considerable time and administrative burden that happens when merchants provide their own in-house financing options.
To be successful with in-house financing, however, retailers need to understand how financing fits with their business. Equally important, they need to find the right partner.
So, how to get started? Here are three ways to make sure a financing partnership works for your business.
Right Products + Right Financing = Success
First, identify your key product offerings. What are your signature items? If you carry expensive items, such as home, lawn and garden products; electronics; furniture; appliances; and home fitness equipment, you may stand to benefit most.
Next, look at your sales and identify where there’s opportunity for growth. If you can align your product mix with trends and offer financing, you may be on your way to more and bigger sales.
Consider what interest rates could work for your targeted customer base. What about offering a deferred-interest program to consumers? Allowing customers to pay over a longer period can help make costlier purchases more manageable. Your financial partner should be able to provide you with all the details and available options, including how the financing will be made available (online, in stores or over the phone), and how it will be administered.
For a financing program to work, it needs to be easy to implement and scale. Look specifically at your upfront and ongoing costs, including training.
Beyond Financing — Make It Easy For Customers To Say Yes
In terms of marketing the options to customers, consider their needs beyond financing. Can you make their lives easier or better in some way? For example, ICON and TD Bank recently partnered to make financing available on ICON’s gym equipment. That made the equipment more affordable to a larger customer base. Equally important, financing made it convenient for customers to work out at home, on their own schedule.
Use your knowledge of your customer base to offer terms — including interest rates, payment times and minimum amount eligible for financing — that are attractive to them but still profitable for you.
Choose The Right Financing Partner
Look for a partner that has expertise in your retail segment and offers customized financing plans that meet your needs and those of your customers. They should help you define your sales goals and offer flexible solutions.
They can also help you find the right mix of products that it makes sense to finance and advise on the suitability of your customer base for various financing options.
Do your due diligence and understand fully any options that are presented to you. Also, be sure to look into the privacy protections of your financing partner, to make sure that confidential data from your consumers is fully secured throughout the payment lifecycle and beyond.
Staying ahead of what your customers want and need is critical to the success of your business. With a customized financing partnership, you can get more of your products and services into the hands of current and potential customers. People want what you’re selling. Direct-to-consumer loans can be the untapped advantage you need to increase customer sales and loyalty.
Michael Rittler is the Head of Product Development and Merchant Relations for the Retail Card Services division of TD Bank, N.A., managing a diverse portfolio of private label credit card programs in the United States and Canada, including Raymour & Flanigan, Fred Meyer, Diamonds International and The Yard Card program. He Joined TD bank, N.A. in 2014 from JP Morgan Chase, where he held a number of leadership roles within Card Services, most recently as General Manager for Affinity & Retail Partnerships.
