By Jacqueline Hinchcliffe—The ability to use credit to make purchases has many advantages, the most obvious being the ability for customers to buy now and pay later. At the same time, retailers get to reap the benefits as most credit purchases equate to a much bigger ticket. On top of that, specialty retailers can leverage financing tools to keep consumers in the so-called “purchasing loop” over an extended period of time, which opens up repeat revenue opportunities for dealers down the road.
All this begs the question: What kind of credit programs are most effective at driving sales? Companies like Synchrony Financial, a Mohawk partner, and Wells Fargo, which works with Shaw Industries, offer a range of options to suite a variety of consumer needs and situations. It’s all about giving shoppers more choices while helping retailers close more sales.
“We provide a range of promotional financing offers, from six-to 60-month options for major consumer purchases, and our private-label credit card and financing programs are offered through a variety of flooring partners across the country,” said Sam Mudrick, assistant vice president of sales, Synchrony Financial. In addition, the company recently introduced a new tool that allows consumers to see if they prequalify for an account without impacting their credit score, he added.
It’s no secret that credit gives consumers another avenue to make a purchase. Financing is also beneficial in that it provides trade-up opportunities. Alan Hundley, vice president of corporate finance, Shaw Industries, cited data showing that financing fosters an increase in ticket size, whether it’s upgrading from a “good” to “better” product or adding on more merchandise like an area rug. “We’ve seen tremendous growth over the past couple of years in the number of customers involved, the volume of financing and the average ticket size,” he said.
Synchrony Financial’s Mudrick agreed, adding that financing not only paves the way for upgrades but also helps retailers seal more deals in the process. According to Synchrony research, 52% of cardholders said they would not have been able to make the flooring purchase of their dreams if financing wasn’t presented as an option. Furthermore, survey respondents said they would certainly have visited other flooring retailers if the initial retailer did not offer credit as an option.
Proven programs
Floor covering retailers who have effectively and consistently promoted credit attest to the benefits. Case in point is Jeff Jones, owner and president of American Flooring of Yulee, based in Yulee, Fla. Jones has been utilizing financing in his store for the better part of 17 years and has found the 36-month program with 0% interest, deferred interest or equal payments is the “sweet spot.” Compared to other options such as 18 months, the 36-month program drives sales the most at American Flooring.
“It has helped us to get higher volume sales,” Jones explained. “Let’s say it’s a $15,000 job; the average consumer doesn’t have $15,000 lying around, but she can afford $500 to $600 a month. So, it has increased our overall sale.”
The key to leveraging credit, though, is making consumers aware that it’s a viable option. “To get people to use financing, you have to let them know, ‘Hey, we do offer it,’” Jones explained. “Depending on what terms are going on at the time, we let them know we have 12 months, 24 months and 48 months. If you don’t tell the customer when you’re talking with her, then she’s never going to know you offer it.”
Another proponent of credit is Typhannie Watson, owner, Carpeting by Mike, Somerset, Wis. For more than a decade, Watson has been utilizing credit options in her store. She finds the 12-month deferred interest option, year-round, provides the most bang for the buck. She offers this option not just for certain selections and brands that might be on sale, but throughout the year. More importantly, Watson and her sales reps broach the subject of financing early on in the conversation, which puts many customers at ease.
“We always have our running joke that we recently stopped taking Monopoly money because of fraud,” Watson joked. “It really catches them off-guard, but it makes them a little less uncomfortable about the money conversation.”
Watson suggested bringing up financing options often and even integrating it into the buying process by sending it in the estimate email. This way, it’s viewed in the customer’s home, behind closed doors, so they don’t feel pressured or awkward, she said.
Since implementing credit options, Watson has noticed increased ticket sizes and customers making purchases more frequently. “Those are big ones, but also I’ve seen them purchasing sooner than expected,” Watson explained. “So, if the price came in higher than they were expecting, with the financing they’ll do it now versus waiting six months or a year.”
Other dealers share similar positive experiences when it comes to credit. In the spring of 2014, Allentown, Pa.-based Crest Flooring introduced its first financing offer—36 months, no interest. Over time, it has grown to produce the greatest source of revenue in the store, according to Steve Weisberg, president. More recently, he has added 12-, 18- and 24-month options.
“For many people, buying floor covering is a major purchase, sometimes costing thousands of dollars,” Weisberg said. “Financing provides an additional tool for consumers to say ‘yes’ to placing an order.”
For businesses looking to improve sales via financing options, Weisberg recommended having a good opening proposition. “I’d start off with a 36-month program since it has proven to drive the most business when we run the offer, which is usually for a six-to-eight-week time frame,” he noted.
However, to successfully use credit options to one’s advantage, it’s imperative that the sales force is comfortable selling financing. “If [the sales force has] any hesitation or are uncomfortable talking about financing with a customer it’ll never work,” Weisberg noted. “The vast majority of people lease their cars and are used to paying a monthly cost—same with a mortgage. Once the salesperson comes up with a total cost for a job, present it by the cost per month.”
