Offering an installment payment plan option on your website generally is a good idea, given that it makes it easier for customers to make large purchases. What’s more, the prevalence of credit card usage and billing automation helps to ensure timely payment. There really is no stigma attached to making payments, and so as long as you make it simple for customers to use, it makes good business sense. Home shopping networks, furniture stores and musical instrument retailers are already doing it with much success. Maybe it’s time you consider adding payment plans as one of your checkout features that sets you apart.
Installment Payments Pros
When customers visit e-tailer websites and add items to their shopping cart, whether they actually make the final purchase is a big question mark. Many factors go into shopping cart abandonment: site slowness, registration difficulty and shipping fee confusion. But the most important factor might occur in the payments stage of checkout. E-commerce customers want to know that you’ll protect their payment information, their transaction will be secure, and they will have different ways to pay.
Go out of your way to showcase the site’s security features when it comes to keeping billing info secure, says Steve Chou, entrepreneur and business course author. And, offer a slew of choices for paying, including PayPal, direct bank transfer, major credit cards, gift cards and installment plans, because 56 percent of online customers expect a variety of payment options, according to Milo’s infographic “No Cart Left Behind.”
Subscription services lend themselves well to the installment option. For example, if you are selling access to an online wine delivery service that would normally cost $60 for the year, you can offer the option of paying six monthly payments of $10 each, or even offer a slight discount if the customer pays upfront for the whole year. TeamSnap, a sports team management service, and Wizard101, an online game in which wizards complete quests, have adopted this method, offering both an annual price and monthly price. You take the user’s credit card info, and then every month on the same day, you bill the payment. The smaller payments make the cost seem smaller and more doable in the minds of your customers.
In choosing which methods of payment to offer, e-tailers must consider their target customers and try to determine what payment methods they will want to use, says Kostas Papageorgiou, a professional blogger. For example, do you want to offer musical instrument customers a one-off price with a discount or recurring payments? Do you want to offer interest-free financing as an added perk? For example, some may find a $2,000 saxophone purchase easier to stomach if the cost is sliced into smaller chunks over the course of six months or a year, turning shoppers into buyers.
Whenever you sell an expensive product, there are going to be people who will be intimidated by the price tag even if they know deep down that the cost is worth the money, says Chou. You’ll get dramatically more signups if you keep your payment amount to less than three digits, he suggests. For example, if you’re selling a series of exercise videos, you can bundle them for $90, or six payments of $15, instead of $109. Psychologically, customers have an easier time buying something that costs less than $100. Once they cross the $100 threshold, cart abandonment occurs more frequently. Here is where an installment plan option may help keep your shoppers on the site and entice them to hit that “Order Submit” button.
Payment Plan Aches and Pains
Payment plans may also help attract impulse buyers who are attracted to coupons, discounts, gimmicks and alternative payment options. Sometimes, these impulse buyers will be good customers. Other times they will not be valuable and will leave quickly. But installment plans will attract them and make them less likely to leave your site and more likely to purchase, providing a boost to sales. With the payment plan option, an expensive item seems more obtainable to these shoppers, says Chou.
However, sometimes shoppers who sign up for your installment plan will have remorse later. They may cancel their subscription or payment plan before even their second payment is processed. Customers who used the payment plan option may later return the product they purchased. They may have opened the product and you won’t be able to sell it again, generating a loss. Declined credit card transactions due to expiring cards and credit limit issues can also create headaches.
At some point, you may have a dispute or chargeback filed against you, says themembershipguys.com, and it’s a good idea to know in advance what your payment processor’s policy is when this occurs as well as the kind of information you need to present in order to fight these claims when they crop up.
It is best to offer payment installments that are six to 12 months in duration, especially for fashion, technology and subscription services. Reserve 24- or 36-month installment plans for big-ticket, costly items such as a suite of furniture.
Bottom line: Administrative costs will increase if you offer installment plans.
It May Be Worth It in the End
Adding installment plans to your retail website may be the right move. For one, your brand will attract more customers and different types of customers who will appreciate the flexibility you’re offering. In turn, you will appreciate the boost to your customer base. Shoppers who otherwise wouldn’t make a large purchase online might be more inclined to do so if they can break down their payments into smaller bites and have more time to pay. As a result, sales could grow faster too—faster than if you offered only a lump-sum payment option. And that could make any setup headaches worthwhile in the end.
References:
https://www.semrush.com/blog/29784-2/
https://helpme.teamsnap.com/article/169-installment-payments-faqe28099s-for-administrators
https://mywifequitherjob.com/payment-plans/
https://neilpatel.com/blog/easy-payment-process/
https://www.themembershipguys.com/choosing-payment-options-for-your-membership-site/
