How to 3x AOV with Consumer Financing

Best Practices | April 4, 2019 | 7 mins

Offering consumer financing comes with plenty of benefits. These flexible payment options increase customer purchase power, give shoppers greater control over how they pay, and reduce cart abandonment. Here at Bread, we’ve collected further data that shows consumer financing increases average order value (AOV) by up to three times.

The benefits are undeniable, but that doesn’t mean that introducing consumer financing for your ecommerce business is not without its challenges.

You need to identify and implement the right tech stack, create a friction-free finance flow that reduces the burden on your customers, and comply with consumer credit laws.

All of those factors can make it tough to know how to leverage this payment option to your advantage. This guide will teach you what you need to know to start 3x-ing AOV with consumer financing.

What Is Consumer Financing?

Consumer financing gives your customers the option to pay for big-ticket items in installments that span a period of time. Rather than needing to pay the total cost at checkout, they break the total into more manageable amounts.

When you implement consumer financing, customers will see a “pay over time” option on a product page. When they select that option, they’re prompted to answer a few approval questions to pre-qualify for credit.

As the retailer, you don’t shoulder any of the risk related to that credit (that falls to the finance company), and you receive the full payment upfront—despite the fact that the customer is paying in installments.

Consumer Financing Success Metrics

Online shopping is supposed to increase convenience for consumers. However, there are still plenty of roadblocks that stand in the way of customers actually completing purchases.

Things like hidden costs (such as shipping) that surprise them at checkout, labyrinthine payment processes, complicated or shady return policies, dated product page designs, and confusing product copy prevent your customers from spending more—or lead them to abandon their carts altogether.

Consumer financing addresses those first two pain points and can help e-tailers close more (not to mention larger) online sales.

30% of shoppers using consumer credit said they wouldn’t have made the purchase at all had it not been for the six-month financing that was offered to them. A credit payment option can also result in a 17% increase in incremental sales, plus our own data shows that consumer financing triples the average order value.

Get Started 3x-ing AOV with Consumer Financing

Those are all convincing arguments for implementing consumer financing in your own customer journey. But where and how can you really make the most of it? Here’s what to do.

Offer Financing Earlier in the Customer Journey

Consumer financing is a huge benefit to you and your customers. So why would you relegate it to the final checkout page?

Educate your customers about their payment options higher up in the sales funnel by including it directly on your product pages or on your homepage. Promoting this option early increases your customers’ purchase power as they’re shopping, which means they’ll feel more empowered to add things to their cart.

Bread’s data shows that people want to know how much money they can spend well before getting to checkout pages. If you look at two of the biggest online shopping days of the year—Black Friday and Cyber Monday—shoppers applied for financing well before checkout with 80.2% doing so on Black Friday and 77.3% on Cyber Monday.

Find out more about holiday ecommerce trends.

As just one example, Bread customer and stand-up paddleboard company YOLO Board states their financing options on their homepage. As a result, more than 55% of the company’s customers check to see if they qualify for financing before they reach checkout.

In short, consumer financing is a powerful tool, so leverage it early on in the buying process rather than hiding it on your checkout pages.

Offer Consumer Financing in Emails

Cart abandonment is a major challenge in the ecommerce industry (an estimated 69.89% of online shopping carts are abandoned). Fortunately, email campaigns have proven to be an effective strategy for bringing those customers back.

A reported 46.1% of consumers actually open cart abandonment emails (that’s significantly higher than the 20.81% average open rate of a marketing message across all industries), while 13.1% click inside the email.

However, if you want shoppers to actually complete the purchase, they might need a little extra nudge. This is why it’s helpful to promote your financing options directly in your cart abandonment emails.

Include a clear call to action (not something detailed in the fine print) that instills a sense of urgency and encourages consumers to see if they qualify for financing.

It’s also helpful to explicitly state how much the shopper will owe today for what’s in their cart if they choose financing. Seeing that smaller number (as opposed to the larger total cost) is far less intimidating, which means they’ll feel more inclined to actually complete the purchase.

Bread customer and cabinet company The RTA Store added personalized financing offers to their own emails. After doing so, they experienced a:

  • 155% increase in revenue
  • 3x improvement in email conversion rates
  • 86% higher AOV

Don’t require your shoppers to search for their financing options. Put alternative financing options right in front of consumers to give them greater flexibility (and the extra encouragement to complete their outstanding purchases).

Offer Cross-Channel Financing

Consumers are more connected than ever, which means that the customer buying experience doesn’t always occur on one device or channel.

Over Black Friday and Cyber Monday, Bread found that 60% of consumer pre-financing qualifications happened on mobile, compared to 45% of actual checkouts. Customers browse on mobile but still have a slight preference for completing the purchase on a desktop.

This is just one of many examples that prove that the customer journey can span numerous different platforms and touchpoints, and retail teams need to optimize the experience across all of those channels.

Of course, retail teams should be offering and promoting financing options across all of their channels, including:

  • Calls to action on their websites
  • Social media retargeting advertisements

Additionally, the process of creating an account online should be optional—and it should also be fast, simple, and streamlined. This allows shoppers to painlessly create accounts, browse and fill their carts using one channel, and easily return to complete the purchase using another.

You can also implement some programming tricks to identify whether a customer is a returning shopper or brand new, so you can strategically prompt account sign-ins (rather than aggressively requesting account creation from brand new customers).

This is important, especially when you consider that 30% of users abandoned their carts when they were asked to register upfront.

Improve UX

Cart abandonment is a hurdle, and many of the reasons that shoppers leave their carts without completing their purchases relate to the level of difficulty in checking out. Research shows that 26% of online shoppers in the United States have abandoned their orders due to a complicated or overly lengthy checkout process.

Reducing friction around the checkout process—including applying for financing—is just one way to turn users into purchasers. There are numerous techniques to improve your shopper experience around the checkout and payment process, including:

  • White-label Your Financing Solution: Customers are concerned about security (55% of global consumers admit they decided against buying something online due to privacy concerns), and it’s jarring when a third party jumps into the payment process. How can customers know if this is a secure place to share their sensitive or private information? With Bread, you can change the appearance of the financing solution to match your own branding, so you provide a seamless and reassuring experience for customers.
  • Reduce the Amount of Clicks: To reduce friction, limit the total amount of clicks and actions necessary to move from putting an item in the cart to pursuing financing to checking out. For example, with Bread, customers can get pre-qualified for financing without ever leaving your site.
  • Promote Payment Options Early: Again, customers want to know their options far earlier than checkout. Promote financing options directly on your homepage and on product pages to improve the shopping experience, reduce anxiety over payment, and empower customers to add items to their carts. With Bread, financing options are interest-free and can be paid off over terms as long as 18 months.

Making these small changes will improve the shopping experience and keep consumers coming back for more, boosting customer loyalty and lifetime value.

Increase AOV for a Stronger Bottom Line

Achieving a higher AOV means higher revenues and a stronger bottom line. Offering consumer financing is a data-backed way to maximize AOV and give your consumers the purchasing power they crave.

Implementing consumer financing does come with a few challenges, but it doesn’t need to be overly complicated. These steps will help you get set up so that you can focus on what matters: growing revenue and building customer loyalty month-over-month.