Affirm’s Plan To “AMP” Retailer Margins And Conversions

You’ve heard the old story: If brick-and-mortar merchants watched 75 percent of their customers walk in their stores and then walk out without having purchased a single thing, sirens would be screaming. But that’s precisely the situation with online commerce – three out of every four consumers who load their cart, don’t buy what’s in that cart.

And, of course, those are only the consumers who navigated the other frictions along the way.

It’s also something that Chip Overstreet, VP of Affirm, told Karen Webster that online merchants don’t have to accept as a "fait accompli" of doing business online.

Overstreet told Webster that data on cart abandonment shows many reasons why consumers don’t end up making a purchase, but three of the top four come down to price. Maybe it’s because that consumer thinks she can get a better deal somewhere else, or perhaps she puts the items she wants in the cart and then waits for the next big 30 percent off promo code to buy them cheaper – or it could be that consumer simply suffers from sticker shock when she sees how much those items really cost.

In all cases, 75 percent of those consumers leave without buying a thing.

But as Overstreet pointed out, that doesn't mean the retailer can’t entice them to come back to the site and buy the things they originally saw and loved.

That’s the essence of the new retail partner program that Affirm is formally launching today, called AMP.

AMP is integrated with seven of the top email service providers that online merchants use to market to consumers. Thee integrations give online merchants a new way to nudge a consumer into making that purchase by offering the ability to pay in installments, using Affirm. Retailers using any of those email providers are able to drag and drop the Affirm “as low as" pricing offer into any of their email templates, and then use it as a mechanism to convert abandoned carts.

“We want to give retailers a new way to follow up,” Overstreet said. “Instead of just showing their consumer the same $400 loveseat that they decided not to buy a day or a week ago, the consumer gets a prompt letting them know they can buy that $400 loveseat for little as $35 a month.”

Making The Prompt Less About Price

Retailers, Overstreet said, can expect some number of consumers to return and buy without a prompt. But data shows that putting an abandoned cart remarketing program into place that touches that consumer – within a few hours or even a few days of that abandonment – improves conversion significantly.

Today, Overstreet said, those email remarketing promotions typically come in a few flavors.

They remind the consumer that they left their cart abandoned – but the consumer already knows that. A reminder, alone, doesn’t move many conversion needles.

They suggest that inventory is running out – but savvy consumers have caught on that many of those programs are more hype than reality, and if that retailer runs out, there are others to shop.

Or, they offer a discount to get the consumer to convert at a discounted price. Although that’s a conversion, it's a margin-eroding one, particularly since that retailer has spent so much time and money to acquire that customer.

But, Overstreet pointed out, those are all things that merchants have trained consumers to expect. “A lot of consumers have been trained to throw something in their cart and sit and wait for seven days, knowing that something ‘good’ will happen at the end of that.”

Affirm’s AMP program offers retailers a high-margin cart converting alternative: the opportunity to sell an item that the consumer liked enough to put in their cart, at the same price that they originally saw, but breaking the payment into 12 or 18 small installments.

“We believe that adding those ‘as low as’ monthly payments to merchant retargeting offers will drive those conversions even higher,” Overstreet emphasized.

The Early Results

According to Overstreet, the logic is simple: A customer who balked at the price might feel differently when given an email reminder that they have the option to spread out the price over equal monthly payments without resorting to tricky hidden fees. Twelve payments of $35 each seem more palatable than one $400 hit to a credit or debit card.

Overstreet said that so far, the results of early A/B testing – where one group of customers got an Affirm-enriched email and another did not – look promising. Most of the clients doing A/B tests are seeing double-digit increases, although he cautioned that it’s still very early days.

“We are seeing that it helps to tell consumers that there’s an honest way to pay for the item that they really wanted to buy – a way to pay where the customer knows exactly what they are getting charged, when and why," said Overstreet.

The Changing Strategy

Max Levchin, Affirm’s founder and CEO, said that he’s seeing some of the savviest retailers leverage honest credit as a marketing and payment tool both at the top and bottom of the funnel, resulting in 20+ percent increases in conversion rates.

“Considering 75 percent of shoppers are abandoning their carts primarily because of pricing reasons, leveraging honest credit translates into significant recovered revenue for retailers,” Levchin said, adding that retailers – particularly in fashion and apparel – are reporting increased brand value and customer loyalty by offering Affirm.

Levchin says that these results are consistent with their own numbers, which show that 55 percent of consumers think less favorably of a brand that offers financial products that are known to harm some consumers, and nearly 90 percent (89.39 percent) feel more positively about a brand because they were offered the ability to pay for their purchase over several months, without using or applying for a credit card.

It’s a sentiment that Overstreet said will only strengthen in a post-Equifax world, where even consumers with cards don’t want to use them online. These security-conscious consumers appreciate having Affirm as an intermediary that doesn’t require them to hand over card data or personal information in order to obtain credit.

“What is fascinating to me about Affirm is that we have clients who call us two or three weeks after they go live with our service, asking why they didn’t do this a year ago, because their conversions have gone up so much," said Overstreet.



About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.