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Financing options give retailers edge to upsell

February 2/9, 2015; Volume 28/Number 16

By Nadia Ramlakhan

Screen Shot 2015-02-09 at 3.01.40 PMThe American consumer loves the idea of being able to “buy now, pay later” and has even come to expect some sort of financing option alongside a large purchase whether it’s a car, furniture or electronics. With financing and payment plans a customer can have the flooring of her dreams right away at a price she can afford. For the retailer, financing can be used as a tool to upsell and increase the average ticket—it’s a win-win for everyone.

“Research shows that consumers who participate in retail financing programs either purchase more goods or better quality goods,” said Keith Spano, president, Flooring America. “It certainly helps the trade-up process and also helps customers stretch to afford a product they couldn’t without financing. We’ve seen the average ticket almost double. With any major purchase consumers expect a financing offer and you’re doing yourself a disservice if you’re not meeting their expectations.”

Flooring America works with Synchrony Financial to offer its members a different financing deal each month along with four major national promotions every year. For example, the buying group’s current financing promotion is a three-year program, while next month all hard surfaces will be included in a 10-month program. According to Spano, special deals that include everything in the store tend to sell better than product-specific or brand-specific deals.

“When we offer a deal on one product or brand, it puts the salesperson at a disadvantage,” he said. “Our goal is to help our RSAs trade the customer up to better products, so now we’re doing things a little differently. For example a 4-star product may be at one rate while a 5-star product may be at a lower rate.”

Mohawk has adopted a somewhat similar financing strategy. While the consumer can take advantage of extended financing on any product in the store, the retailer will receive a rebate or rate reduction if the consumer decides to purchase a Mohawk product.

“We offer rate reductions on Mohawk products, but it’s invisible to the consumer,” said Mike Zoellner, vice president of marketing services. Typically Mohawk offers its aligned dealers six to eight one-week promotions throughout the year, during which special rates are offered, as well as during its popular spring and fall campaigns. Although financing options in the industry can run anywhere from a few months to a couple of years, “12 to 18 months seems to be the sweet spot,” he said.

Carpet One encourages its members to offer financing year-round as a way to drive incremental sales. “We provide additional support with special financing promotions during key sales times and in coordination with new product launches and product-specific sales,” said Bill Wissler, vice president, strategic sales. According to Wissler, the biggest impediment to closing a sale is the worry about paying for the entire purchase at the time of sale. The ability to finance a job over time with no down payment eases that stress on the customer.

Many retailers agree that financing should be talked about early and often in the sales process to be effective. “We certainly like to introduce [customers] to our current promotion early in the sale when they first come into the store,” said Ed Cross of Ed’s Flooring America in Hooksett, N.H. “We like to talk about it in the beginning, in the middle and wrap up with it at the end.”

Bobby Meredith of Flooring America in Oklahoma City takes another approach to let customers know their options. “We put financing options right on the price tags. We bring it up as soon as the customer inquires about price. When she asks how much a product is, we answer with, ‘Approximately $3,000 or $250 per month using our 12-month deferred-interest program.’” This method allows the customer to consider financing while she’s thinking about her price equation.

If a customer is hesitant to make a purchase, offering a financing option is a great closing tool. “There’s less objection to price when consumers know they can break the payments down into 12 or 18 months or over a three-year period,” said Steve Dalene, owner of Dalene Flooring Carpet One in South Windsor, Conn. “When price is no longer an issue, the product she is getting is exactly what she wants and it’s usually a higher quality and price than what she came in looking to spend.”

Displaying signage throughout the store with details of specific promotions lets the customer know they are available. “I like signage throughout the store,” Cross said. “It supports what our sales associates are talking about and brings it to the top of the consumer’s mind.”

Joe Zago of The Carpet Guys in Troy, Mich., said business escalated quickly when he started offering financing to customers because it eliminates the seasonal ups and downs after big holidays. “We doubled our business the second we were able to offer it. Before, we were installing carpet in three to six homes a day whereas now we’re going to 20 to 30 homes a day.”