Over the years, many customers have grown accustomed to using credit and debit cards to pay for goods and services. From gas stations to restaurants, customers would rather pay merchants with a credit card than with cash. Generally, this payment system is swift, but the service fee that payment processors deduct hurts merchants over time.
Technology has become a huge part of sales, and paying with cash seems old-fashioned. However, as a retailer, this particular payment system is bad for your business. This is because the service fee that payment processors charge as an additional fee affects profit.
For Bodegas, profit is one of the moving parts of the business. So, if you want to stay ahead of the system, you must find a way to save money and increase revenue. One way to do this is by convincing your customers to pay cash when making a purchase. To achieve this, you can implement cash discounts for customers.
A cash discount program for Bodegas simply allows you to redirect the service fee that would otherwise go to a payment processing provider. Basically, you offer customers a discount that reduces their bills when they pay in cash. Cash transactions offset the cost of paying with a credit card and give your bodega more profit.
This article is the ultimate guide to the cash discount program for Bodegas. Here, we give you all the details on cash discounts -what the program is about, how to implement it, and the effects it will have on your Bodega business.
What Is a Cash Discount Program?
Cash discount programs offer benefits to customers who pay with cash by reducing the posted price of the goods or services. Meanwhile, customers who pay with a credit or debit card pay higher, including the bill for payment processing fees.
So, for example, if a customer wants to initiate a card transaction, they’ll pay the posted price and more. However, a customer who makes a cash transaction will spend less than the posted price. Some businesses, like restaurants and wine shops, give customers discounts for cash purchases.
Cash discount programs aim to offset payment processing bills and increase the number of cash-paying customers. The costs associated with credit card processing can be anywhere between 1.5% to 3.5%, and the store owner bears this cost. Bearing payment processing costs over a long period results in losses that will, in turn, affect growth.
So, a cash discount program is the best way for merchants to make more cash sales. That way, customers can decide to bear the card processing costs or get an incentive for paying with cash.
Benefits of Cash Discounts
As a merchant, cash discounts offer benefits that would make all the difference in the daily operations of the Bodega. The following are the benefits of cash discounts for merchants in the Bodega service and other businesses.
Consistent Sales Profits
Implementing cash discount services is one of the fastest ways to grow profits. As a merchant, you don’t only make profits from sale purchases. Another way to grow profits is to remove any service fee that hurts the store more than it helps. When you implement cash discounting, you encourage customers to ditch their credit cards when making purchases. As a result, you redirect funds to your merchant savings account.
Besides helping the store save money, another advantage of this service is that you can predict your profits. Planning becomes difficult when you are uncertain about your monthly or yearly profits. One way to stay ahead is to know your profit margins, which is easy when profit is consistent. Cash discounts allow you to predict and, somehow, control the profit margins.
No Credit Card Processing Fees
This program’s greatest benefit is reducing and removing credit card processing fees. More often than not, that 1.5% to 3.5% processing fee makes all the difference to your business.
Cash discounting removes the payment cost that credit card processing incurs. When customers make card transactions, credit card companies shift the cost to the retailer. From restaurants to wine shops to bodegas, the additional fee affects the overall profit of businesses.
So, a cash discount system transfers the burden to the customers instead of the merchant. That way, merchants can save funds to reinvest in their operations.
Multiple Transaction Options
Cash discounts give businesses multiple options for customers to make a transaction. So, the money paid will benefit the business, whether it is a cash or credit card transaction. With the abundance of technology, most customers appreciate it when they are presented with various bill payment options. Consumers will likely go for a more convenient method that allows them to spend less. In this case, a cash discount seems like the more favorable option. You are not at a loss even if they eventually pay with a credit card. Either way, the funds will not elude the business.
Availability of Cash
Another benefit of cash discounting is that it generates a high income daily. Cash flow is a very important dynamic, especially with stores like Bodegas. You can easily attend to pressing issues without stress when you have access to large funds daily.
The advancement of technology makes it seem like having cash is old-fashioned. However, this is not true because the availability of cash allows you to avoid the cost of processing withdrawals. Instead, you always have funds to settle bills while growing your business.
Easy Implementation
The technology used in a cash discount program is seamless. Implementation is easy because all you have to do is sync the program with your daily operations. It works like a POS system and does not necessarily need technical knowledge. Whether for a restaurant, winery, or bodega, the system does a great job of processing payments. All you have to do is register with a cash discount program, and they will help you set up.
Challenges of the Bodega Industry
Many challenges disrupt the smooth running of stores in the retail market, bodegas inclusive. Below, we examine some of these factors in detail.
Absence of Marketing
Sadly, most merchants in the retail market ignore the advantages of marketing their stores. One of the biggest ways to achieve growth retention is by mapping out strategic marketing plans. The absence of marketing in bodegas has caused a steady decline in the purchase of goods, even though the store is close in proximity.
People only buy products that are beneficial to them and help them save funds. This is why most markets present features as benefits when marketing. Also, marketing campaigns promote discounts to attract customers. With the increase in online sales, consumers will only buy from physical stores if they have no choice. Your marketing efforts give them a reason to buy from you even when they have other choices.
Shortage of Human Labor
The shortage of human labor is becoming a problem in the retail industry, and this, in turn, affects customer satisfaction. With the increased demand for hourly jobs, employees often work at places that offer them the highest value. So, the competition among bodegas has caused a decline in employee retention. In most bodegas, there are often not enough workers to effectively cater to customers’ needs. As a result, there is a decline in customer service quality.
Increment in Credit Card Fees
Another outstanding challenge is the constant increase in credit card processing fees. When businesses like bodegas, restaurants, wine shops, and others accept credit card payments, they bear the service fee. Credit card fees are mostly not fixed and vary based on the industry and total purchase amount. These charges result in profit uncertainty and accumulated loss for small business owners.
Low Customer Satisfaction
Bodega is a people-based service, so the consumers contribute to the growth of the business. Hence, there is a need to maintain high customer satisfaction in the market. Most customers often complain of bad customer service in bodegas, which could result from inadequate staff training.
Is a Cash Discount Program What Your Business Needs?
Using a cash discount program in restaurants where the aim is to serve food differs from doing the same in Bodegas. First, these are two industries that do not provide the same service. Before adopting the discount program, ensure it is the right fit for your business. To do this, ask yourself the following questions.
Who Are Your Regular Customers?
Identify your regular customers to know if a cash discount program is what your business needs. The reason is to know how they prefer to make payments – is it with cash or credit cards? Regulars are the ones who make the most purchases, so it is ideal to use a system that works for them.
The good news is that the cash discount program offers a dual pricing system, so your regular customers should not have a problem.
Can the Business Manage Large Funds?
Another factor to consider is your store’s ability to manage vast amounts of funds every day. Cash discounts aim to promote more cash payments, so your business should be able to process payments efficiently. Develop a system that allows the register to collect and collate funds in the best possible way.
How to Get Started With Cash Discount Programs
Getting started with the program is a straightforward process. We recommend this program because it blends with your everyday operations.
To start using the discount program, follow the steps below.
- Contact a cash discount merchant service
- Discuss the details of your business with the expert to see where the program fits
- Sign up to open an account with the merchant service
- Select the point of sale system that aligns with your day-to-day operations
- Take the device to your bodega and let the representative install it
- Conduct a test run to ensure that the equipment works perfectly
- Place a banner in the store to notify your customers of the program
- Start implementing the program
Note that registration is free, and the risk of recording losses is at an all-time low.
What Do Bodegas Need for Cash Discount Programs?
Ensure that your chosen program suits your store’s needs and can be integrated into your daily operations. Also, ensure that your chosen program complies with federal and state law. That way, you will avoid issues that may arise from non-compliance. Legislations like the Durbin amendment support cash discounts
In addition, put up a banner notice that informs your customers of the discount program. You shouldn’t wait until you’ve set up the program to install the banner. The notice should be advertised during the application and installation.
You will also need to train the register or any other employee who manages the device. The device works like regular POS equipment, making the process easy to understand. Training the employee helps them understand how discounts work to avoid disagreements with customers.
Alternatives to Cash Discount Programs
Other alternatives are available for you to reduce credit card processing costs. Below are some of these alternatives
Price Increment: One way to cover the cost of card processing is to increase the prices of goods. Increasing the prices of your goods or services allows you to bear the cost without suffering a loss. Before increasing your prices, ensure to calculate your monthly sales volume. The price you add should reflect a percentage of the sales volume to be fair and effective.
Convenience Fee Charges: Another alternative you can explore is to impose a convenience fee on card transactions. So, when customers pay with a credit card, they pay a fixed sum that covers the cost of card processing. That way, you can maintain your profit margin without losing to credit card companies.
Customer Reviews About Cash Discount Programs
Few customers may be skeptical about the discount programs, but with time, they will adjust. Customers tend to be more welcoming of discounts when they see that it benefits them.
From experience, most customers prefer cash discount programs because of the dual pricing system. Apart from helping them save more, it gives them multiple options when paying for goods.
Final Thoughts: Is a Cash Discount Program Worth It?
At this point, we assume you know the many advantages of using cash discount programs. The benefits are vast, from removing card processing fees to increasing profits. Effects may differ with stores in gas stations and those in commercial areas, so the key is knowing what works for you. As a Bodega owner, you are eligible to apply for cash discount programs for free.
So, you are good to go as long as you put up a notice to inform your customers and train your staff. It may help for them also to have access to other resources on payment processing here.
Paul Martinez is the founder of EcomSidekick.com. He is an expert in the areas of finance, real estate, eCommerce, traffic and conversion.
Join him on EcomSidekick.com to learn how to improve your financial life and excel in these areas. Before starting this media site, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.