Cash discount programs are a solid way to lower your costs and encourage cash payments from customers for many businesses, but they’re not a universal benefit to every company. There are a lot of factors that determine how well a discount program for cash payments will work out, including customer age, average ticket size, and the type of business you run. If you’re thinking about setting this kind of program up, it’s also worth contacting your POS provider about what they can do to support a move to cash discount credit card processing.
Do Your Customers Carry Cash?
The first thing to consider when offering a cash discount is whether you have a customer base that regularly carries cash. In general, the older your core customer base, the more likely they are to carry cash at all times. Many younger adults and teens have become more comfortable managing a constellation of electronic payment options, and they are less likely to feel they need cash on them to cover their expenses in an emergency because of the range of those options. Younger customers are also more likely to frequent businesses that have online payment models that make cash payments difficult to collect.
How Much Is Your Average Ticket?
Setting age aside as a consideration, the average ticket value of your receipts can also be a good indicator of success for a cash discount program. Knowledgeable point of sale resellers that work with companies who set up cash discount programs will tell you the average ticket price for a cash transaction is around $20. Depending on the industry, it can be as low as $16 or as high as $30, but the Federal Reserve Bank of Boston calculated in 2016 that the average across retail industries was just about $22.
What does that mean for your business? It means that if your average sale is at or below that average, even customers who would usually prefer to pay with credit are more likely to have cash on hand. That means they have options to easily avoid extra fees, and they’ll be less likely to rethink a purchase if it comes with an additional cost. This is important because once your average ticket goes above $100, a cash discount program can wind up costing you enough customers to offset the fee savings. That means it might be a better policy for someone looking to trim expenses at a gas station than for someone in the market for a POS for veterinarians.
Does Your Business Rely on Impulse Spending?
The last question to consider is whether you rely on customers making an impulse purchase to increase your ticket values. If so, you might find a cash discount discourages the upcharges you are trying to get customers to go for. If your business relies on a regular need or you provide essential services and your customers typically plan for the expense, a cash discount program might be more workable on high-ticket items. This is something to keep in mind if you’re in an industry that provides such a service and searching for a point of sale solution that suits you.
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