The Power of Installment Payment Options to Boost E-Commerce Revenue
September 08, 2023
In today's ever-changing business landscape, it is crucial for businesses to stay agile and adapt to the challenges presented by the lingering effects of COVID-19 pandemic. Every customer and every sale are more valuable than ever, and finding innovative ways to help customers make purchases on a tighter budget can make all the difference. One strategy that benefits both businesses and customers is offering multiple payment options, such as monthly payments or "BNPL" (buy now, pay later). By giving customers the flexibility to pay less up front without worrying about immediate financial strain, businesses can boost their e-commerce revenue. In this article, we will explore five reasons why offering installment payment options is a win-win for businesses and their customers.
How Does Buy Now, Pay Later Work?
The BNPL checkout experience is designed to be seamless and user-friendly. At the point of checkout, shoppers are presented with the option to pay in full after 30 days, split the payment into 3 or 4 equal interest-free installments, or finance larger purchases over a longer period with potential interest charges.
The convenience and flexibility of BNPL payment options make them highly attractive to consumers. Whether they need an immediate purchase or want to plan for future expenses, BNPL provides the freedom to choose how and when to pay without accruing interest.
1. Convert More Visitors
The ability to make monthly payments instead of paying in full upfront has been proven to significantly increase sales conversions. Customers are more likely to make a purchase when they have the option to spread out the cost over time. For example, marketing legend Dan Kennedy shared a case study where a client increased sales by offering a product for two payments of $19.95 instead of a single payment of $29.95. This simple change resulted in selling twice as many units, even though the price was $10 higher. By offering installment payment options, businesses can tap into the psychology of affordability and convert more website visitors into paying customers.
2. Buyers Will Spend More Money
The convenience of a payment plan often leads customers to spend more money on a purchase. Studies have shown that people are willing to pay a higher price for an item when they have the option to spread out the cost over time. For example, an online business selling a course found that 90% of customers who chose to pay monthly opted for a ten-payment plan that cost $100 more than a four-payment plan. This demonstrates that customers are willing to pay more in total to avoid a larger one-time cost. By offering installment payment options, businesses not only increase their average order value but also provide customers with the financial flexibility to afford higher-priced items.
3. Buyers Appreciate Choices
Customers appreciate having choices when it comes to payment options. According to a study, 56% of customers expect a variety of payment options at the checkout page. By offering installment payment options, businesses show that they understand and cater to their customers' needs. This goodwill can lead to positive word-of-mouth recommendations, better reviews, and higher customer loyalty. The ability to provide flexible payment solutions demonstrates a commitment to meeting customers where they are and making the purchasing process as easy as possible.
4. Offer a Touch-Free Solution In-store and Online
Monthly payment options are not limited to online shopping. Businesses can offer these options both online and in-store, providing customers with a contactless payment solution. For example, integrating with a payment gateway like Affirm allows businesses to offer touch-free payment processing and monthly payment options directly on customers' mobile devices. This not only enhances the customer experience but also addresses the current need for contactless transactions. Businesses that offer installment payment options through a secure and convenient platform like Affirm have seen an increase in average order size and have the advantage of a simplified, risk-free payment process.
5. Lower Overhead and Admin Costs
One of the primary concerns businesses may have when considering installment payment options is the potential increase in administrative tasks and costs. However, partnering with a reliable payment solution provider like Affirm can alleviate these concerns. With Affirm, businesses receive the full transaction amount within two business days, while Affirm handles all the banking, payment tracking, and risk management. This eliminates the need for businesses to manage payment plans, follow up on expired credit cards, or handle product returns. By streamlining the payment process and minimizing administrative tasks, businesses can focus on driving sales and growing their revenue.
Embracing Installment Payment Options
In conclusion, offering installment payment options, such as monthly payments or BNPL, can be a game-changer for businesses looking to boost their e-commerce revenue. By providing customers with the flexibility to pay over time, businesses can convert more visitors into paying customers, increase average order values, and build customer loyalty. Additionally, offering touch-free payment solutions both online and in-store enhances the customer experience and addresses the need for contactless transactions. Partnering with a reliable payment solution provider further streamlines the process and reduces administrative tasks and costs. In these challenging times, businesses that embrace installment payment options can stay ahead of the competition and thrive in the ever-evolving e-commerce landscape.