Buy now, pay later: The benefits of enabling deposits & advanced payment options
enabling deposits and advanced payment options
We all know what our consumers want - they want more and they want it now... for minimal payment.
What do you want as a seller though? You want security, a healthy cash flow and well-paying customers who value your product. Well, deposits or partial advance payments can be a great tool to help enable you to better manage your sales process and balance sheet. Funnily enough, whilst it may seem counter intuitive that asking for money upfront actually helps your sales, there are some psychological factors that work in your favour!
Deposit/Partial Advance Payment: An partial advance payment, or deposit, is the part of a contractually due sum that is paid or received in advance for goods or services, while the balance included in the invoice will only follow the delivery. I.e. You buy a sofa for £1200+VAT but only pay a deposit of £200 upfront.
What are the benefits of allowing deposits/advanced payment options?
1) Increases buy-in from a customer
It may seem like stating the obvious but paying for something (even if in part) gives us a sense of commitment and we're less likely to back-out of our plan to purchase. So, a deposit payment or partial advance payment can help increase your customer buy-in (quite literally) and decrease the number of cancelled orders.
2) Increases buyer certainty
A deposit can also help you position your product as high-quality and trustworthy as you are requiring a level of commitment from your customer and only work with the best customers (exclusivity). This exclusivity can increase a buyers certainty that you are legitimate and to be trusted.
Furthermore, a study from the University of Leicester showed how "advance payments could signal buyer creditworthiness and lead to larger credit sales" helping you to establish your credibility (as you too are now committed to the transaction) and in turn, help customers buy more from you.
3) Helps your cash flow
This is simple accounting but if you get the money upfront you have more money in your bank account and so your cashflow is instantly improved...
4) Increases chance of selling high-value items (it is more salient!)
Mark Wickersham notes the interesting psychological effects of staging a payment - it decreases the pain felt by a customer if you spread a payment. Effectively, the payment becomes more salient and again this can lead to more sales as the 'pain threshold' (especially for high value items) is lowered.
5) Gives you the option of selling on finance
Deposit payments give you the practical option of putting a customer onto a finance payment plan, once they've committed a basic deposit. This mechanism in itself can give you the flexibility you need to service your customers better.
How can you enable deposit or partial advance payments within iPages?
Within iPages, deposit payments are best thought of as just that - advance payments for a product. They are therefore set per-product (inc.VAT) as they are the payment you'd like the customer to make towards the product at the checkout. Deposits are then collated at the checkout and only the advance payment sum is taken initially. The customer however, will receive an invoice for the entire amount and will need to reconcile their account prior to their order being dispatched.
You can read more about setting up and managing deposits/advance payments by clicking here.
Would you like to know more about deposits/advance payments?
If you'd like to know more about enabling advance payments - or the other ways you can get creative with your payment methods - do not hesitate to get in touch with our team here.
Sources:
https://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp12-18.pdf?uol_r=d307e306
https://www.wickersham.co.uk/blog/why-your-customers-want-to-pay-you-in-advance