Small business owners sometimes debate the pros and cons of whether to accept credit cards as acceptable forms of payment. Merchants are also consumers and as such, understand that cash-only businesses have limited opportunities to attract and keep the best customers. Consumers want choices of products and services to buy and how to pay for them.
Accepting credit cards offers great opportunities to grow your business. Recent research supports this. Professor Promothesh Chatterjee of the University of Kansas and Professor Randall Rose of the University of South Carolina studied consumer behavior involving different payment methods.
What they found was customers who paid cash were more likely to be concerned about cost. Those who paid by credit card were more concerned with a product’s benefits.
It’s not surprising that there is a greater emotional response to cash payments over paying by credit card. One minute you are holding a stack of money in your hand, and in the next minute, you’re handing it over to the merchant to pay for the sale. Now you see it, now you don’t. Customers experience what can be called “the pain of payment” which may be difficult to ignore when making cash payments.
Credit card payments offer immediate gratification and no immediate, apparent pain of payment. The actual payment is delayed, usually by several weeks. The product has already been consumed by the time the bill arrives. With this mindset, consumers are more likely to purchase products of higher values that offer multiple benefits.
Small Business owners should also consider this scenario; rather than buying a no-frills coffeemaker, the shopper may grab the model with the built-in water filter, bean grinder, strength controls and frothing wands from a merchant who accepts credit cards. If features and benefits are foremost on your customer’s mind rather than cost, they’ll be more likely to make the purchase and spend more to get all the bells and whistles!
Ask yourself — do you want to limit your customer’s ability to buy the high-ticket items because paying by cash is too cost-restrictive? Of course not! You want to increase your sales and raise your average ticket value.
In fact, merchants can capitalize on consumer behavior by promoting the fact that they accept credit cards. Advertising the concept of “buy now and pay later” will add additional incentives. The consumer behavior study shows that some subjects were primed for credit card use, while others were primed for cash use. A consumer could enter a store without a payment method in mind, and be primed for credit (even if they ultimately chose to use cash).
Having credit card signs or credit offers in the store helps to prime customers to use credit to make buying decisions on the basis of benefits — rather than costs. Credit-paying customers were less concerned than cash customers about cost factors. For cash-paying customers, every major concern in their decision making was related to costs — of product, delivery, setup, warranty fees, etc.
Remember — evidence suggests that payment methods impact buyers’ purchasing decisions. If you want your customers to think about benefits over cost, give them the opportunity to buy higher valued products in greater volumes. Accept credit cards to fuel your success and make a beneficial impact on your bottom line!
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