When most of us think about increasing profits we think of either increasing sales or cutting costs. Yet cut costs wrong and you can risk business and its long-term prospects, as was evident at Walmart in the US after staff reductions caused longer checkout lines, less store help and disorganization. Meanwhile, increasing sales can be an elusive goal and often outside your control. A third way to increase profits – often overlooked – is increasing ticket size. Ticket size is the average amount each customer is spending at your store with each transaction. Increasing this can be an effective way to grow revenue at minimal cost. A simple and effective tool in doing this can be consumer financing, which turns the large up-front costs of big ticket sales into manageable monthly payments.
Here are 5 easy ways consumer financing can help your business grow its ticket size.
1. Make Up-sells Affordable
Offering consumer financing options such as instalment credit allows customers to easily afford bigger, better and more premium products. These are often the products they want more anyway but are unsure about affording due to their higher price tags. The advantage of using instalment credit financing is that such products become more affordable when their cost is spread out over time. “If there’s a $1,000 and a $1,500 option, someone might not want to spend $1,500 out of their pocket – but could do it for $20/month via instalment credit financing,” explains sales financing and training consultant James Plewak, of Ontario-based Strength Finance. “You can also show customers what you can do for $4,500, and show them the minor difference in terms of monthly payments.”
2. Bundle It
Offering financing options such as affordable monthly payments means you can easily sell product bundles, in a similar fashion to up-selling. For example, instead of just selling a dirt bike why not sell a bundle including jacket, boots, pants and helmet? Sales expert Ric Arnold says packaging as much as $1,000 in add-ons (such as extended warranties) and accessories can add less than $20/month to their payments (or a miniscule $0.75/day). “By doing this you have just sold $1,000 worth of product,” he further elaborates. “The customer was probably going to purchase the accessories anyway. This way they get the accessories they want from your store, which helps improve your customer loyalty and retention, and move inventory at full retail price.”
3. Marketing Programs
Partnering with the right consumer financing provider will mean the opportunity to offer marketing programs that can help increase your ticket size, such as no interest/no payment. These promotions should not just help you close more sales, but also close bigger sales. “Think of how excited a customer will be when they learn they can buy that hot tub or used motorcycle they have had their eye on for months that day with no interest or payments for six months, allowing them to save that extra cash they may need,” Crelogix Home Improvement District Manager Sébastien Dumas says. “When taking advantage of such marketing programs it is important that customers are made aware of what is available. People will rarely ask about their financing options out of fear that it puts them in a weaker negotiating position. Ensure you properly market your programs and promotions to put them at ease.”
4. Add Loan Protection
Loan protection, or insurance, exists to provide a safety net for customers using consumer financing. It is offered by consumer financing companies and their partners to ensure borrowers will make their payments through difficult times, such as involuntary unemployment or disability. This is vital to preserve their credit rating. However it is also “an incremental revenue opportunity,” according to Kent Taylor, of Western Life Assurance. “Offering loan protection allows you to increase your per-transaction revenue. It also cultivates future sales by ensuring customers do not become victims of circumstances out of their control, and maintain their healthy credit for their next purchase.”
5. Invest in Financing Expertise
Investing time, training and money into consumer financing can pay dividends. Just like in-depth knowledge of your product range helps sales staff close sales, knowing your financing options can help close big ticket sales. Not everyone is a financing expert, which is why good consumer financing providers will offer your staff training on how to use financing. “Becoming an expert on consumer financing does not happen overnight,” says Crelogix’s Mr. Dumas. “A provider also needs to provide ongoing coaching to ensure your methods are always up to industry standard. Investing money into specialty financing staff can also help increase ticket size. For example, LMG Finance Inc. Director Rob Williamson says they have found F&I managers can easily help power sport dealerships grow yearly sales by 20-40% while generating $600-$1,000 revenue more per sale via commissions, protections and warranties.
In a nutshell:
Growing ticket size with consumer financing can be a simple-yet-effective way of growing a business, as these five tips demonstrate. Critically, it is an opportunity within the control of most Canadian businesses that can help build long-term success. A good consumer financing partner will help you make the most out of financing to increase your ticket size and grow your business.