Credit card usage is a key component in creating customer loyalty, from earning frequent flyer miles to rewards points. In today’s economy can you increase loyalty by encouraging your customers to use their cards less?
A few weeks ago I wrote about the importance of keeping pricing consistent and instead adding value. This is important because cutting your pricing may impact your ability to recoup a higher margin for an extended period of time.
But in today’s economy, the pressure facing companies to provide discounts on their products and services is strong.
So what can you do to encourage consumers to purchase your product, remain loyal to your brand and keep your price consistent?
Change your model – by giving your customers the incentive to pay another way.
The average company pays between 1.5% and 5% in credit card service charges. If you have $5,000,000 in revenue and are paying 3.5% in service charges, up to $175,000 of your bottom line could be going to the credit card companies.
While you may consider this a cost of doing business, what if you encouraged your customers to pay by cash, check or bill pay by putting 2.5% of their bill (based on the 3.5% noted above) into a loyalty account for them to use towards future purchases? You would still come out ahead by $50,000.
Such a program provides many consumer benefits:
- Reduces their cost on future services
- Does not increase credit card debt (according to IndexCreditCard.com the average consumer household is carrying a $10,640 balance on their credit cards)
- Saves money by not having to pay interest on credit card purchases
- Provides value for products and services they already use
Your company benefits as well:
- Reduces transaction costs (thus benefitting the bottom line)
- Increases customer loyalty
- Provides unique point of difference
A recession is great time to change how you do business without changing your business.