October 15/22, 2018: Volume 34, Issue 9
By K.J. Quinn
Consumer financing in today’s retail landscape is considered a must, as it plays a major role in where customers shop and ultimately buy. Most shoppers decide on their payment method prior to entering the store, according to published reports, an indication salespeople must be prepared to address queries on credit options.
“Letting a consumer know about finance options early in the sales process makes things much easier than bringing it up at the end,” noted Tom Urban, general manager, Great Lakes Carpet & Tile, Wildwood, Fla. “We find most consumers who take a finance option don’t really need credit, but they are smart enough to take advantage of using the bank’s money instead of their own.”
Industry studies indicate most consumers seek out promotional financing plans when making a major purchase. This makes it easier for shoppers to spread out payments for their flooring purchase over numerous months while helping dealers create a platform for building their business. So offering options at every customer touch point, experts say, is crucial to any credit program’s success.
“Flooring is considered a major purchase, and financing makes a reality out of what may otherwise be out of reach for some consumers,” said Keith Spano, president, Flooring America/Flooring Canada/The Floor Trader/International Design Guild. “Our most successful sales professionals start talking about financing options early in the conversation.”
When financing choices are discussed during the flooring sales consultation, it makes it easier for salespeople to leverage it as a closing tool without sounding offensive to customers. “Once they understand the customer’s goals, they should always confirm they can meet and exceed expectations with reasonable monthly investments that will fit into the customer’s proposed budget,” said Mike Fredricks, senior vice president of business development at Fortiva Retail Credit. “This will help them upsell additional products and services and should be reinforced throughout the sales process.”
Nolan Stribe, vice president, Wells Fargo Retail Services, attests to the strategy. “Customers who know their options up front can make an informed decision about how to pay for their products and services. While it may feel natural to wait and discuss payment options when your customers are ready to pay, it’s important for your customers to understand available financing options earlier in your discussions.”
Lending plans range from private-label credit cards, deferred payments and same-as-cash, which provide consumers with low monthly payments and extended financing. What’s more, financing plans enable sales associates to show more high style/price product options that meet customer needs. “When financing options are available for the retailer and the customer, there is a better opportunity to upgrade a purchase with a superior product or a broader project with more square footage, and provide the customer the opportunity to budget the purchase over a period of time,” Wells Fargo’s Stribe explained.
Financing programs vary throughout the year, based on manufacturer-based promotions/buy downs and dealer sale periods. “We try to mention financing options to all of our clients,” said Elisabeth Stubbs, owner, Enhance Floors & More, Marietta, Ga. “We offer six-month, interest-free financing on most purchases and 12 months on purchases over $5,000.”
Enhance Floors & More offers longer term financing when its suppliers run a promotion and buy down the rate the store pays. “We find that generally the less apt clients seem to need to finance, the more they are interested in financing,” Stubbs added. “They understand the concept of using ‘other people’s money.’”
Wells Fargo provides a credit card program with various promotional financing options generally ranging from six months to 60 months with no interest if paid in full, plus reduced-rate plans. “Retailers may establish a minimum purchase or down payment requirement for certain plans,” Stribe explained. “They can also help answer the customers’ questions to enable them to choose the plan that works best for them, based on their anticipated purchase amount, desired monthly payment, etc.”
Great Lakes Carpet & Tile reports one-year, no interest with zero down payment is its most popular finance option. “Many consumers are reluctant to give a deposit, so we use this to separate ourselves from the competition,” Urban said. “We inform the consumer that her one year starts from the day of signing the credit paperwork and, therefore, we can submit to the finance company and actually get paid in full from them before we even start most jobs.”
Prime promotions are effective in getting customers in the door, offering deferred interest, lengthier terms, high credit lines and other attractive terms. “However, providing customers who might not qualify for the prime credit promotion a second look option incentivizes them by offering the ability to access products and services while paying over time,” Fortiva’s Fredricks explained.
Fortiva’s second-look credit programs offer merchants the opportunity to assist 25% to 50% of the customers walking in the door who don’t qualify for primary credit offerings and promotions. “That equates to a 10% to 20% increase in revenues, more referrals, improved customer satisfaction scores, employee retention and cash flow,” Fredricks added.