How In-Store Merchandising Can Revolutionize Your Financing
Catalina Spas went against traditional wisdom in the spa industry when it put point-of-sale (POS) marketing material mentioning prices on its showroom models. Most spa retailers are wary of displaying prices on showroom models because they can vary substantially depending on the options customers select and the full up-front cost can sometimes appear large. Catalina Spas owner Scott Orbell was prepared to challenge the prevailing wisdom and place POS marketing material on his showroom models. The material states the monthly price ranges available on each model, to show customers just how affordable spas can become if monthly payments are used.
The decision has paid dividends, helping the Edmonton-based store double the number of spa sales it finalized through financing to $100,000 within a year. Importantly, Mr. Orbell says half of these deals would not have been done without financing.
The Psychology of Price Tagging
Financing can be a powerful sales tool. Not only does it help people buy large ticket items they lack the up-front cash for – it can also be used as a great marketing device to drive sales. For example a $10,000 hot tub can suddenly become a $150/month hot tub with financing. This is called affordability and can have a powerful psychological impact, especially when these two figures are displayed properly. Research by Russell R. Mueller Retail Hardware found that effective displays can increase sales by more than 540%. Crelogix Regional Manager Stacey Mills says displaying monthly payment options is a great way of demonstrating to your customers what they can fit in to their budgets. “The Canadian debt load of your average consumer increases every year – consumer demand for financing grew by 2.6% last year,” he says. “If a customer is in the market to buy a hot tub, then 9 times out of 10 they will be more motivated to make the purchase when they find out that payments on a $10,000 hot tub are only $150/month.”
Using POS Marketing Material
A good consumer financing partner will provide your business with free affordable monthly payment promotional material and training on how to use it. The material provided should include tags demonstrating how affordable your merchandise is on a monthly payment program. This can be placed throughout your store to both inform customers that financing is available and as a sales tool to help close deals. For example:
- Tagging your showroom merchandise with monthly payment options instantly shows how affordable big ticket merchandise can be. Mr. Orbell recommends tagging merchandise with the lowest monthly price possible to give customers an idea of how affordable large ticket items are with instalment credit, as an effective way to get the conversation started. “We always put up signs stating monthly payment ranges” he says. “With spas there are a lot of options for each model that can affect the cost, which we can work through with them later.”
- Placing POS marketing material at the till can be an effective way of reaching customers during the business end of the transaction, when they are considering how to pay. It can also help steer customers away from using payment options such as credit cards, where you will lose a percentage of the sale to fees. “If a consumer is using a credit card at your store they are using financing, but a version of financing that is costing you 2-3%,” Mr. Mills says.
- Include monthly instalment payment options as part of any quotes you send out, under the final price estimate. The more you create an environment where customers are aware of all their options, the better. “We put monthly payment tags on each hot tub description right at the hot tub, and then the POS card I put at my front desk,” Mr. Orbell says. “Then we also have a sticker on the front door saying financing is available, along with my Better Business Bureau and Interac stickers. We have also just started putting payment plan options on any invoices we send out.”
The Power to Up-sell
Creating an environment where customers understand all their payment options can also help increase the sale of larger ticket items. “The customer needs to know their full options when they walk in,” Mr. Mills says, giving the following example. Say you have a family of four looking for a new hot tub. They want the six-person model costing $12,000 but feel it is out of their price range and settle on the $8,000 model, which serves their needs. With POS marketing material on both hot tubs the family can see that the $12,000 model is only $20/month more using instalment credit – a much more affordable option.
Seeing the Difference
Tagging your products with marketing material can be an effective way to create an environment that will motivate customers. People obtain an estimated 83% of information through sight so displaying affordable pricing on your products is the best way to reach them. Mr. Mills recommends introducing the idea of monthly payments as soon as possible. “When you introduce yourself to a customer you should ask what their monthly budget is, or what they are willing to spend a month,” he says. “Right away you get into the conversation of instalment credit and this opens up the door.” Once this door is open, your customers will realize they can afford to buy what they really want.