There is one main reason to offer a financing/pay over time solution: to create more sales. Any retailer will tell you, especially if they are selling high ticket items, that being able to offer financing is key to creating more sales which they would have otherwise lost.
That makes complete sense. There are a variety of financing options to offer customers – both online and in-store. No matter how you implement the solution that works for you, there are two key performance indicators (KPI) that you should keep in mind when implementing the specific solution and also when following the success of the program.
The first KPI is the uplift in conversion/sales. This is pretty straightforward for e-commerce – understanding your funnel. You can measure the number of users on your site, the percentage of them who add items to the cart and the percentage of those that complete the purchase. Having a financing option should have a very positive impact on the checkout conversion rate. This is very similar for in-store: After offering financing, monitor the increase in the number of purchases compared to similar time periods before offering financing.
The second KPI is the uplift in the average order value (AOV). This is an important contributor to higher sales: how much more money shoppers are spending on each purchase. This is different from the first KPI, mainly because the increase in sales isn’t coming from an increase in the number of new purchases (conversion) but from a higher purchase value. The right financing solution will clearly display the monthly payments, making even big-ticket purchases more affordable and accessible. This will allow shoppers to spend more on each purchase – either by upgrading to a better model or by adding more products to their cart.
Both KPI’s are the key contributing factors to an overall increase in sales but are very different in terms of customer behavior. There are certain ways to optimize financing programs to increase conversion and AOV. So if you’re at the evaluation stage before implementation, or reviewing the results of your current financing solution, keeping a close eye on both these KPI’s will give you the best indication of the success of your financing program.