Create Loyal Customers By Aligning With Their Financial Interests
The entire post-Thanksgiving weekend has become synonymous with big sales and big spending. While all eyes have been on a predicted shift to online shopping over in-store, one crucial detail remains static: consumers are spending. In fact, 2017 is shaping up to be one of the biggest holiday shopping seasons ever. Despite the good news for an industry that saw record store closings this year amid increasing concerns over the dominance of Amazon.com, the giving season comes with a dark side: financial stress and regret.
Customers Worry About the Cost of Holiday Shopping
Affirm recently conducted a survey of 1,000 U.S adults about their holiday shopping habits and the results were enlightening. While many reported that they plan to spend more this year, they also reported the hangover that accompanies it. A staggering 61 percent said that holiday spending causes marital or familial discord. Over a third (34 percent) are also worried about how they’ll cover their desired spending costs this year.
That’s not entirely surprising when digging further into their financial preparations. Over half (53 percent) only set a tentative budget ahead of time with no formal plan. Nearly a quarter (23 percent) don’t create a budget of any kind. This leaves many foraging for funds afterwards or planning to use money they don’t currently have. Twenty-four percent are planning to use their 2018 tax return to cover costs, and 19 percent are relying on a holiday bonus from work. Many even reported borrowing money in the past from family (23 percent) or friends (16 percent).
By far, the biggest culprit of financial uncertainty are credit cards. While most respondents chose credit cards as their preferred payment method for holiday shopping, 15 percent said they have maxed out a credit card JUST to cover holiday purchases. Fifty-eight percent of those who used credit cards last year also don’t know how much they ultimately paid in total interest on their purchases. Furthermore, 14 percent said they've previously signed up for deferred interest products, with 69 percent saying they ended up paying more than expected and 51 percent eventually regretting getting that deferred interest product later on.
Focus on Customer Experience and Avoid Financial Traps
Retailers need to take note of these troubling findings. Attracting customers with holiday promotions is the perfect time to establish long-lasting relationships heading into the new year. Here are three tips for creating a better customer experience:
- Avoid deferred interest products. Most customers who sign up for these end up regretting it. The National Consumer Law Center even issued a warning about deferred interest products, and the Consumer Financial Protection Bureau has called for more transparency on these promotions.
- Offer a simple and transparent credit alternative. Eighty-seven percent of Americans surveyed have also expressed interest in a simple way to pay for large purchases over time that's not a credit card. Creating trust through transparency has proven to drive brand loyalty through a better customer experience.
- Consider the customer’s best interests first. Payments may be the last step of a transaction, but it’s just the beginning of a long-term customer relationship. Begin by partnering with a payments provider that's aligned with consumers’ best interests.
When consumers have seemingly endless options to shop online, one way to get and keep their business is to give them flexibility when it comes to payments. Offering a better overall shopping experience is what will get them to return and lead them to become loyal customers. Give them a reason to return in 2018.
Rob Pfeifer is chief retail revenue officer at Affirm, a company that provides affordable ways to buy online that are more flexible and transparent than other credit options.