Research by professors at the University of Notre Dame and Stanford University as well as a data science manager at Nike shows that when consumers feel guilty about a purchase, they’re more likely to pay with cash.
Cash lets customers avoid the paper or electronic trail and, in turn, forget about the purchase. On the other hand, when a purchase is easy to justify, consumers will often pay with credit cards, debit cards, and other trackable methods.
The team performed a study that looked at transaction data from a college bookstore. They found that many consumers used cash to hide purchases they believed to be overpriced or unnecessary. So what can you learn from this as an entrepreneur or small business owner? It’s important to be strategic about the types of payment method you accept.
Do some market research or look at historical data to pinpoint which payment methods your customers prefer.
If you sell cookies, for example, you should allow customers to pay with cash, as many might want to forget their unhealthy purchases. Accepting cash may not benefit you as much if you sell something healthy, like salads.
Here are some factors to consider as you figure what types of payment methods to accept:
- Cost: Some payment methods will charge you a fee. Make sure their benefits outweigh their costs.
- Consumer preferences: Do some market research or look at historical data to pinpoint which payment methods your customers prefer.
- Business model: Accepting cards and electronic methods like PayPal and Venmo is more important for online businesses than for brick-and-mortar retailers.
Even though digital payment methods are the latest and greatest trend, saying no to cash and other traditional ways to pay can do more harm than good for your business. Do your best to match the payment methods you accept to the psychological needs your customers may have.
Read more: [3 Ways to Accept Credit Card Payments]
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