With the cost of doing business going up, merchant fees remain unavoidable for many business owners. Now, more than ever, customers want to use their cards for cash back rewards, mileage, or financial benefits.
However, adding it all up, it takes a real bite out of profit margins. So here are a few options to consider:
Option One:
For anyone using their apps or cards, add a convenience fee to the charge. This provides for an immediate recapture of your expenses.
The downside? Customers may perceive this as insincere. To them, the price should just be the price! People are sick of “hidden fees” that seem to be popping up all over the place! These consumers will argue that your fees should be just part of your cost of doing business in the first place!
In fact, I have several business clients and associates who have sworn they will never return to the popular pickleball locale near the Domain because of this.
Option Two:
Rather than adding a separate convenience fee, assume that the majority of your customers will not necessarily be using cash in the first place. Therefore, adjust your pricing to reflect this. The less frequent cash payments will prevent the burdensome merchant fees; yet, the increased price remains as an added bonus to your bottom line.
The downside? This small bump in cost per transaction may be enough to lose sales.
Option Three:
Rather than charging more for the sale, offer an incentive to customers to refrain from using their apps or cards. Instead, promote an instant “cash back reward” for cash purchases only. This works exceptionally well if there is an ATM nearby!
The downside? Similar to how your customers respond with Option One, your customers may feel that you are discriminating against them for not using cash, believing that “everyone should get the same price” = give me the reward, regardless.
What option would you – or do you choose?
With personal experience from running his own businesses and later advising companies on practical solutions to real issues, John has been able to suggest workarounds to multiple business sectors and industries.