What is Dual Pricing?
Dual pricing refers to a billing strategy primarily used by retailers where they charge their customers differently based on their method of payment. The two payment methods (hence dual) are credit cards and cash.
If the customer prefers to pay via credit cards, they are charged extra for the processing fees that the business has to bear for providing merchant services. The customers pay the additional surcharges in exchange for rewards from their banks.
On the other hand, customers can enjoy a cash discount if they choose to pay via cash.
With the dual pricing definition clear, in this article, let’s take a look at the advantages of a dual pricing program for businesses and customers which will help you improve your business’ pricing model.
Key Benefits of Choosing Dual Pricing
Although the dual pricing model was initially used by gas stations, its benefits encouraged businesses in different domains to follow suit. There are five areas in which a dual pricing system will be beneficial for your business, regardless of its size and industry.
Benefits to businesses
Most businesses add surcharges to invoices at checkout if their customer decides to access their merchant services. Unsurprisingly, this upsets customers as this means they have to pay more than they initially thought.
As a result, customers may find it difficult to trust these businesses and this, in turn, affects their retention rates and lifetime value.
The alternative here is that the business bears the transaction costs each time a customer swipes their credit card on the point-of-sale (POS) system. However, this decreases the overall profits which can hurt business growth in the long run.
A dual pricing strategy helps you regain your edge against aggressive competitors by making your products or services accessible at lower prices.
Benefits to consumers
Your customers don’t want any surprises when they are paying a bill (unless it is a discount). Furthermore, consumers also want to pay in their preferred method.
Dual pricing achieves that in two ways. One, it gives your consumers cash discounts, which is a pleasant surprise. Two, it charges the transaction costs to your consumers in exchange for rewards from their bank such as coupons, points, and discounts.
Consequently, you can avoid setting higher prices to cover the transaction costs for your merchant services when they pay with cash. This increases their satisfaction level leading to higher lifetime values.
Eliminate all processing fees
Your bank will charge you transaction and PCI compliance fees for providing your customers with merchant services and maintaining the credit card network. Here are the most common types of additional fees you might have to pay:
- Interchange fee: This fee directly goes to maintaining and improving the credit card network that facilitates secure transactions between you and your consumers. The interchange fee is capped at 2.4% and you have to disclose this before the transaction.
- POS terminal fees: Your point-of-sale (POS) service provider charges you every time their services are availed by you to process payments via credit and debit cards. These fees could be a lot based on the nature it is levied.
- Foreign currency conversion fee: If you are serving customers across international borders, your bank will deduct the foreign currency conversion fee from your merchant account as taxes.
- Chargeback fee: You will have to pay a chargeback fee to your bank when your customer disputes a payment they made via credit card. It usually results when the expectations of the customer aren’t met.
The above fees are often reflected as surcharges on the itemized invoice your customer receives which can lead to a bad experience.
Dual pricing takes care of that by charging different prices for your products and/or services to your customers based on their payment method. They will enjoy a cash discount if they choose to pay via cash and will get rewards from their bank if they choose to pay by credit card (even though they will be paying the processing fees associated with card payments).
Applicable to all types of businesses
Most businesses don’t even consider a dual pricing strategy because they are under the assumption that it is not feasible for their business. Growing companies, high-risk businesses, and eCommerce businesses in non-traditional domains like CBD and gambling fall in this category.
Even if they do, it is hard for them to find a trustable payment solution and a POS system that will allow them to execute a consumer-friendly but profitable dual pricing program
Fortunately, both the above things are myths. No matter which industry you are in, the risks associated with your business, and the phase of growth you are presently experiencing, there is a solution.
Von Payments offers zero-fee payment processing solutions for businesses of all sizes and in different markets.
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No Worry Over Rising Cost of Accepting Payments
There are two reasons why you are paying more than you have to while accepting payments from your customers:
- Individual transaction fees: We mentioned briefly above how you are being charged by your bank, POS system provider, and payment gateway partner every time you are paid via credit cards. This can add up quickly during busy seasons, for example, during the holidays.
- Fixed service charges: This is a fixed flat rate you have to pay, either monthly or annually for using the financial tools. These could be painful to pay during slow seasons and deactivating them temporarily is impractical because it takes time and effort which can be invested in things with higher ROI.
After the second step in the image below, you are charged on every step.
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The individual transaction fees and fixed service charges put a lot of businesses between a rock and hard place where they have to constantly worry about the rising costs of accepting payments. These fees keep on increasing as you accept payments in more methods.
The ideal solution for this business is a payment processing solution that doesn’t charge for every transaction and has the least fixed service charges. Furthermore, businesses benefit by being able to pass on these transaction fees to their customers.
The good news is, such a solution exists.
Slash Processing Costs with Von Payments
Dual pricing allows businesses to charge their customers differently on the basis of their chosen payment method. Consumers can enjoy a cash discount by making arrangements to pay with cash to avoid taking on additional fees with credit card payments.
This pricing strategy is beneficial for businesses as it passes off various transaction fees and taxes to the customer.
The challenge that businesses might face while adopting this pricing plan is finding a suitable payment processor and/or a POS system. Particularly non-traditional high-risk businesses struggle while searching for a suitable solution.
Until now.
Von Payments offers a zero-cost processing program that enables businesses of all sizes from any sector to adopt a user-friendly and profitable dual pricing plan. Not only can you provide multiple payment options to your customers for zero additional fees, but you can also withdraw cash from your bank within 24 hours to receive payments.
Contact us and we will tailor the perfect payment processing solution for your business.