By Sandra Needham
Extending credit to your customers may not be on your agenda, but it should be. Risky? Yes. But, it has proven to be an effective method of accruing a large clientele base and of establishing a healthy rapport with customers. Over the past few years, small businesses have reported that extending credit boosts sales up forty to fifty percent.
Maybe extending credit is not such a crazy idea after all.
WHY EXTEND CREDIT?
A credit policy also indicates your business is financially stable. A business in danger of going under does not give its customers the option of paying at a later date. A struggling business demands payments immediately, in order to keep its sinking operation afloat. Customers do not perceive credit-extending businesses to be teetering on the brink of bankruptcy. They know they will receive their goods and services as promised.
Credit policies increase sales for another reason. Some customers are unable to pay for a product or service in its entirety. If customers have the option to pay for items in monthly installments, they will be more inclined to make purchases which do not fall within their current budgets.
Other times, customers want to see if they are fully satisfied with a product before bringing out their checkbooks. Offering a line of credit to these customers gives them the signal you are confident about your product's quality. Guaranteeing satisfaction makes frugal customers more comfortable with their purchases. Knowing they can return a purchase, cost and hassle-free, they will likely take a risk in ordering it.
We are all familiar with the last reason why extending credit boosts sales: it is human nature to want to keep hard-earned dollars in our possession for as long as possible. When customers do not have to pay bills immediately, they have opportunities to use their money in more profitable ways. Cust- omers will choose to do business with you over other businesses that do not offer comparable payment plans.
You've redesigned your marketing strategy. You've changed your sales pitch. You've launched a product promotion campaign that should wildly entice even the most ambivalent customers. Yet, sales are still stagnating at 1994 levels. What else can you do?
Extending credit works in your favor in a variety of ways. One, it increases customer loyalty. Taking a financial risk for your customers demonstrates you trust them and are willing to accommodate them. Your clients will appreciate your professional service and respond amicably to this treatment. By garnering customer loyalty, you will have the opportunity to establish long term business relationships.
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