A recent article in The Daily Beast, an on line news source says,”the recession has consumers paying with debit cards instead of credit cards. This spring, Visa announced that spending on debit cards increased 4.1% while spending on credit cards sank 14.8%. And the Federal Reserve announced that revolving credit, primarily credit cards, plummeted $6.1 billion or 8% annually in July”.
With more people using debit cards, it tips us off that people are no longer wiling to carry big balances on their cards, but would rather adopt “pay as you go” spending.
It could also be a reaction to high credit card fees that banks have been charging and now, once stung, consumers have moved to using debit cards with lower or no fees.
Is this an opportunity for all of us in the “discretionary income” business? I think so…but with caution. We have seen how consumers can sacrifice and save (savings rates are moving toward 6% – the highest in decades) and also curtail their discretionary spending. After all, its easy to decrease your spending when you don’t have any money or credit to spend!
However; as bad as spending is today, the US Consumer will still spend as much as he did in 2005 and that was a good year!
But the debit card phenomenon lets customers pay with their plastic cash and therefore they receive no MONTHLY bill at the end of the billing cycle. if there is no pain at the end of the month and no bill to stop them next month, maybe slightly higher prices won’t stop them either. After all haven’t your costs increased?
As we move into the colder months, check your pricing. That Pizza Pins N Pop program that you have had at $49.95 forever – maybe by raising it to $54.95 with 4 weeks of $5 bounce backs, delivered via email and press releases to MOMS groups in the area, can generate increased cash flow. That $2.50 shoe rental? Can you get to $2.75? Or better yet; build it into your open play pricing and proclaim “NEVER PAY FOR SHOE RENTALS AGAIN.”
How about the cosmic nights for $13.95 per person or $25.00 per hour? Can you move that to $14.95 and $27.50 an hour; introduced with a series of bounce backs to keep your regular customers coming back and as an offer for new customers.
The secret is and this is one of our FredQuarters Marketing rules: When you raise prices, create an offer that is so enticing that the increased price is tangential and just becomes absorbed into your “new normal”.
Maybe they will even put it on their debit card.