Financing for the home improvement industry has become essential in recent years. Inflation in the U.S. continues to dominate the headlines and the cost of home renovations and repairs are increasing, yet consumers are still finding ways to invest in their biggest asset — their homes. These factors, as well as reduced real household income and completed projects, led the Home Improvement Research Institute to forecast that overall consumer market sales will increase by 2.8 percent in 2023 to $382.5 billion. While inflation may be driving short-term purchasing, the reality is that consumers still feel comfortable spending money on improving their homes — by making them smarter, more modern, and more efficient.
Consumers have become savvier over the past few years about the materials they want to use for home improvements. This newly educated consumer has a good understanding of their goals and budget before entering the store or talking with a contractor. However, beyond the project, the consumer still needs to think about how they will pay for the work. When a contractor or sales associate outlines various payment options (different time frames, adjusting to variable income, etc.), consumers may find a financing option that meets their unique needs and gives them greater purchasing power. This type of flexibility can be critical to closing a sale.
Here are four recommendations for contractors and merchants to consider when offering financing options to consumers.
Provide flexible payment options to close sales.
While financing drives much of the purchase process, it is just one part of the consumer's journey. Consumers have a choice when it comes to which contractor or merchant they work with, and the sale must be viewed holistically.
Offering multiple financing options, such as promotional financing or deferred interest, helps consumers purchase what they need and spread the payments out over time. Helping the consumer make informed decisions, based on payment methods or timeframes, increases the odds of closing the sale. This process creates a positive purchase experience for the consumer, which goes a long way toward building brand loyalty.
To put the financing options into perspective, Synchrony’s 2021 Major Purchase Study stated that, when making purchasing decisions for flooring, almost 60 percent of consumers surveyed said financing makes the purchase more affordable. Synchrony cardholders spent almost $5,000 on flooring vs. non-cardholders who spent $2,200.
Our research indicates that Synchrony cardholders spend more on average order value (AOV), to the tune of 115 percent more than without using financing.
Train sales teams on financing options to improve the consumer experience
Contractors and merchants must understand financing options to help close sales. Doing so helps them educate consumers about various forms of financing options.
Providing training programs to partners to teach salespeople about financing options helps them guide consumers through the purchase process. Since consumers know more about products and financing options than ever before, the entire process has become more democratized, empowering consumers to make purchases that meet their financial needs.
Leverage innovation and payment technology to drive purchases
We see headlines about digital transformation everywhere, and the home improvement industry is no exception. With more advanced technology options available each day to help consumers make more informed purchasing decisions, consumers are flocking to merchants and working with contractors to upgrade their homes, leading to larger ticket purchases.
Our pre-qualification technology is a great example of this. Consumers see how much they are approved for before engaging with a contractor or merchant, giving them insights they need before committing to a purchase. Providing this level of transparency helps make the purchase process much easier and more enjoyable.
Promoting innovation and offering new financing options is a terrific way for contractors and merchants to help consumers pay for the work they need while also increasing their own business and revenue. The key is to maximize engagement and educate consumers to make informed decisions.
Choose a financing partner that helps you grow
There are several questions to consider when choosing a financing partner: do they offer flexible payment options, sales training, and innovative payment technologies? It’s critical for merchants to work with financing partners that provide fast settlements, identify the right credit lines, offer sophisticated underwriting processes, and deliver dependable services. These factors all contribute to creating a valuable, enduring partnership and fostering brand loyalty among consumers.
Vince Lowe is the senior vice president and general manager, Home Specialty and Flooring, at Synchrony, a premier consumer financial services company.