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Payment Methods And Their Effect On Conversions
Posted 31 August 2006 - 06:26 AM
I read an article by someone saying that since he started offering 'other payment methods' [than Paypal] he saw his conversions increase dramatically, unfortunately he didn't specify what he meant by 'other payment methods'.
We currently offer Paypal (integrated into the site) plus mail payments of cheque/postalorder/cash, and we've been discussing the potential addition of a 'proper' credit card payment system.
I know there are a number of people who are put off by Paypal, either by reputation or unfamiliarity, but I have no idea what percentage (if any) of our visitors don't buy for this reason. Any ideas? Any research done on this topic?
Thanks in advance
Posted 31 August 2006 - 06:52 AM
So it's better than it was.
That said, I'm all for offering as many options as possible, so long as you don't end up making it too confusing for customers. It will help you pick up some customers that you might otherwise lose.
Personally, I offer a credit card/debit card option (MC, Visa, AMEX and Discover even though the last two cost me a bit more to accept when sitting up my merchant account), online check payment (purchased a little package for like $80 to do drafts), the ability to mail in a check and also a toll free number for people to call who don't feel comfortable purchasing online. I also accept Purchase Orders on those sites that are B2B, especially the sites that target the School/Education market since that's how they do things. I also have the ability to accept Paypal, but don't list it on most of my sites since at this point it's redundant and possibly confusing. Plus the fact that Paypal takes a bigger chunk of the profits than does any other method. We do however offer it as an option if people write in asking for help. Most of them simply end up calling.
The check payment and online checks are a bit more difficult to deal with. Especially if you're dealing with shipping a product. Your customer has to be willing to allow time for either of these to clear. The same is true of Purchase Orders. They just take longer. Luckily, I do mostly services so can open up access immediately on a good faith basis and have these accounts be automatically disabled if we haven't received payment a month down the road.
Just my personal take. There are lots of ways to approach it.
Posted 31 August 2006 - 08:40 AM
On the sites where you offer Paypal and other card payment options do you find one to be significantly more popular than another?
Posted 31 August 2006 - 08:53 AM
Posted 31 August 2006 - 09:04 AM
MaKa: It really depends. Upon a lot of factors. Beginning with how much the merchant account is going to cost you up front and then what the per transaction and any monthly fees are. Not to mention any real costs you may have in order to convert from one to the other.
We've got an old (really old!) thread around here somewhere that gives a lot of opinions. I'll try to find it, but not sure if I'll be able to or not. It's that old.
What I did way back when was get the costs of getting a merchant account and then calculated what percentage of my profits were going to what I was currently using. When I hit break even I made the switch, knowing that monthly volumes would continue to increase. For me, I think it was around $2,000 per month when it made sense. But that's going to be different for everybody.
<edit to add>
I'd rather be lucky than good any day!
There's this tread from a year ago that discusses the same topic. Lo and behold I had a post in the above thread that links to some of the older threads that go back to 2003.
One caution: Don't rely too much on the set up cost and other rate numbers. The threads are old enough now that I would hazard to guess most of those have changed at least a little bit. Lots of merchant solution suggestions though. So you should be able to get the current rates directly from the horse's mouth.
Edited by Randy, 31 August 2006 - 09:12 AM.
Posted 31 August 2006 - 09:32 AM
Posted 31 August 2006 - 02:56 PM
When I started my sites a couple of years ago, I only offered PayPal. (In those days you had to set up an account to use it.) Didn't make a single sale. And people were visiting the site and going to the shopping cart, but were then abandoning it. so I knew I was going to have to offer credit card options. I got a merchant account, accepting the major ccs + Discover + AmEx. I also accept POs from educational institutions. Wallah! I started getting orders!
So I definitely recommend having a merchant account where you can accept ccs instead of just PayPal. As Randy said, the PayPal option also costs more than the other ccs, so I no longer offer PayPal. (I figure if people are able to use PayPal, they can certainly use the ccs I accept - so the PayPal is redundant and it costs more). I have been a bit leery about accepting check payments, so I still don't do that.
Bottom line: Having the merchant account to process credit cards made a HUGE difference in my business.
Hope this helps.
Posted 01 September 2006 - 04:41 AM
Posted 01 September 2006 - 08:29 AM
When I shop online and only have PayPal as my payment option, I'm often one of those who abandon the cart. I don't know why exactly, but it just seems to me that accepting CCs directly is a credibility indicator. So I set up my merchant account before launching. I do offer PayPal as an option however because I only have agreements currently for Visa & MC, as Randy said the Amex & Discover cost more, and PayPal covers those who wish to use them. In my experience, those who have Discover or Amex may prefer to use them, but usually have either a Visa or MC as well and will use them if that's what the merchant accepts. It could be that I'm missing out on orders because of this assumption however, and I plan to offer Amex & Discover by next spring. I don't know whether I'll bother to setup e-checks, and though I offer an order by mail + personal check option, no one has ever used it.
Without looking at my stats, and again my volume is pretty modest, I'd say maybe 10% of my orders use PayPal, and 10% are actually phone orders. Often the phone orders are more due to specific questions and requests for recommendations rather than discomfort w/ paying online, but some do call because they just don't trust giving out their CC numbers via a website. (BTW the phone orders are great for feedback, and often point out holes in product descriptions or ways I can improve info on my site).
FYI, my merchant account cost me ~$40 a month plus their per-order charges. I think $40 is a pretty modest business expense for the credibility it lends your site, and especially if that means I'd be losing 80 - 90% of my potential orders without ... well, seems like a good idea to me.
Edited by arlen, 01 September 2006 - 08:56 AM.
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