Last year COVID-19 slowed down businesses forcing entrepreneurs to find new strategies in a bid to stay afloat. For instance, they introduced Cash Discount Programs to attract clients and boost sales without chasing away customers.
Discounting your goods/services may sound like a wrong approach, but it makes sense if you have a well-thought-out strategy?
Cash Discount Program: How Does it Work?
A cash discount program is a short-term payment plan that merchants organize to lure customers to their products.
Merchants who participate in cash discount programs give discounts to customers who pay with cash. These cash discount programs can be advertised as cash discounts, cash rebates, cash incentives, etc.
Furthermore, these discount programs may apply to all customers or a subset of customers. Depending on how merchants set the cash discount program, buyers get discounts when they buy products when they purchase specific products or spend a certain amount.
In essence, most of these programs are a win-win for the entrepreneur and the customer. The customer enjoys discounts while the business owner maintains a competitive edge through flexible pricing.
The Advantages & Downsides
Like all strategies, a cash discount program has its advantages and downsides.
1. Get rid of credit card processing fees
First, you get rid of all costs related to credit card processing. This can have a significant impact on your financial standing.
2. Maintain a competitive edge through flexible pricing
Another positive impact is it helps a business owner maintain a competitive advantage through flexible pricing.
1. You disadvantage cash-using customers
Cash discount programs may not favor customers who prefer other digital payment avenues like credit cards.
2. Security concerns
Security is also a primary concern. Some businesses do not feel safe handling a large volume of cash.
Final Words on Cash Discount Programs
Despite the ongoing shift to digital payment methods, business owners still use cash discounts to encourage sales and compete better against their counterparts. Though we can’t consider it the next force in marketing or payments, entrepreneurs can use it time and again to re-establish their bottom line.