How to Sell Cash Discounting

Please read the article and/or watch the video posted yesterday which answers the question, “What is Cash Discounting?” After understanding what it is, let’s discuss why and how you should sell cash discounting.

How to Sell Merchant Services in 6 Steps

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Cash discounting gives a lot more profit margin. As an example, a quick service restaurant is doing $10,000 in volume and paying $300 in fees. Traditionally, to make the sale, you would say, “Instead of $300, I can offer a deal with $250.” You must reduce the profitability of the account. The account now makes $50 a month in profit rather than $100 since you had to reduce the fees by $50 to get their business. When offering cash discounting you say, “I’m going to take the fees from $300 a month to zero (or almost zero.) We’re going to give a discount to your customers who pay cash while those paying with a card will pay more. Therefore, we are going to take that difference – the extra money they are paying.”

Consider this specific example: A store sells hats all at the price of $10 each. A sign on the door says, “We offer a discount for cash payment. All pricing in the store represents that discount.” Thus, when customers pay with a card, they must pay $10.50. Since the processor charges 50 cents for the transaction, that equals zero processing. Consider again the merchant doing $10,000 per month in volume, paying $300 in fees. Ordinarily, a sales professional would go down to $250. However, with cash discounting he/she would actually go up to $400. The sales professional might say, “We’ll do a four percent cash discount, which is the maximum amount allowed.” Then the merchant would be paying $400 but, also, collecting $400 from the customers. Cash discounting is a way to increase the margin. The business owner isn’t concerned with the amount being charged in credit card processing fees since that charge is just passed on to the customers; that gives you a higher margin.

There are not many processors who have the programming capabilities to do cash discounting. Therefore, the sales rep usually needs to specially program equipment for cash discounting. So, to include a terminal lease or rental fee is possible in these instances. To program an Ingenico terminal to do cash discounting is more difficult than you might think. This would justify the sales rep in saying, “This terminal does cash discounting, so I’m going to charge ____ for the terminal.” I’m not talking about a ridiculous deal such as $99 a month for 60-month lease on a VX-520, but you can do a reasonable lease since the terminals are more difficult to program. Since the merchant who was paying $400 a month will pay zero, you can justify adding $29.95 a month in rental or lease fee for equipment.

How to sell cash discounting is more tricky. The number one ingredient is to believe in it before trying to sell it. Study it and make sure you understand cash discounting. You can’t sell something you don’t believe in. My own personal opinion is not in favor of cash discounting. However, I readily admit I may be wrong in that philosophy. I know of many reps who are killing it with cash discounting. They think it’s a great idea! You can do other things such as sell Poynt terminals, Clover, flat rate, and many other options to differentiate. But if you believe in cash discounting, then you can sell cash discounting.

You must decide what model you’re going to use with different business types. For sit-down restaurants where the customer gets a receipt and adds on tips, cash discounts become very difficult. A pizza shop with a big line going out the door would not be a good candidate for cash discounting explanations. However, for many other retail businesses it does make sense. You can say, “We have a new program which basically takes your processing fees down to zero. We help you set up a cash discount program which provides a discount to your customers who pay with cash. However, it’s not a discount which lowers your current prices. Rather, instead of charging you credit card processing fees, we charge your customers those fees. The discount is your current price; credit card users pay more. This enables customers to save you money by using cash or cost you nothing extra by using a card.”

That is the way to sell cash discounting. Just remember you’ve got to believe in it to sell it, as always!

My name is James Shepherd. Thanks for reading!

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What is Cash Discounting?

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