What You Need To Know Before You Start a Private Label Credit Program

Catalog marketing executives are always on the lookout for new growth strategies. Even omnichannel powerhouses face soaring challenges, like skyrocketing postage and print costs, plummeting marketing efficiencies and a crowded marketplace.

Private label credit cards can not only boost sales and order frequency, but also foster customer loyalty. Some private label credit card program options are better than others. There are crucial factors to consider before choosing a credit partner. 

In this article, we’ll share key benefits of private label credit cards and key factors marketing leaders need to consider before they pull the trigger. We’ll also share a unique credit business model that most multi-title mailers won’t pursue, but should.

Benefits of Private Label Credit Programs for Direct Marketers

Private label credit cards offer many advantages that make them appealing for direct marketing leaders:

Get Incremental Sales from Existing Customers

Private label credit cards have been proven to serve as a catalyst for incremental sales from your existing customer base. By providing a convenient and attractive payment option, you encourage customers to make more frequent and larger purchases.

Improve Customer Retention

Offering a private label credit program provides an added incentive for customers to stick around. When a credit card with your name on it is in their wallet, it’s an incentive to come back for repeat purchases. You can also tailor special offers to cardholders, fostering a sense of loyalty and making them less likely to take their business elsewhere.

Tap New Customer Segments

Private label credit card programs can be particularly effective in tapping into new customer segments, especially those in the subprime category. When customers don’t have to pay cash or use a debit card, you reduce barriers to purchase. By offering credit to individuals who might not otherwise qualify, you broaden your customer base and open up new avenues for growth.

Reduce Marketing Costs

Most marketing leaders would love to get off the discount merry-go-round, but it often feels like discounts are the only way to spur repeat purchases. However, discounts erode margins. Private label credit cards provide an alternative to marketing costs. With a private label credit card, you have a built-in loyalty tool. You can also create exclusive promotions for cardholders, reducing the need for widespread, margin-eroding marketing efforts.

In-Depth Customer Insights

Having your own private label credit program gives you access to a world of invaluable insights about your customers and their purchasing behavior. You gain a deeper understanding of their preferences, spending patterns, and overall engagement, allowing for more targeted and effective marketing campaigns.

The Credit Business Difference Maker Most Brands Won’t Consider

The well-worn path to having a private label credit program is partnering with a bank or other financial services provider. In this scenario, your brand name is on the credit card and you offer the card to your customers, but the bank owns the credit risk. This traditional method of setting up a private label credit card has its drawbacks, though.

The bank owns the risk, but they also own the credit business revenue that’s produced by the program. What’s more, they have access to the customer data associated with credit card purchases, and can use it to their advantage, including selling the data to other companies, even your competitors. 

Savvy direct marketing brands should consider the full range of options in setting up a credit program. Businesses often overlook the potential to create an entirely new revenue stream. Unlike traditional buy-now-pay-later (BNPL) options or private label credit alternatives, on-balance credit allows you to not only own the debt but also control the revenue generated.

IMS is a proven, experienced partner who provides businesses a unique Buy Now Pay Later (BNPL) solution that allows you to tap into a customer segment that very few, if any, other BNPL or private label credit card providers are able to access. Providing a comprehensive, full service solution that is distinctly different from other BNPL players, IMS has been a trusted provider in the retail credit sector for 30+ years.

The Difference On-Balance Credit Can Make

In comparison to traditional BNPL options, private label credit cards with on-balance credit present a unique advantage. With traditional options, while you may facilitate the sale, the debt is typically owned by a third-party provider. However, with on-balance credit, the debt becomes an asset to your business, allowing you to directly benefit from the interest and fees associated with the credit.

The Proven Results of On-Balance Sheet Credit

Data points and results from successful implementations of on-balance credit are compelling. Businesses that have embraced this model have witnessed increased customer engagement, improved sales, and a notable boost in overall profitability.

If On-Balance Credit Seems Overwhelming

If the prospect of managing your own on-balance credit program appears overwhelming, the good news is that you don’t have to go it alone. Partnering with a company like ZAPFI by IMS that has successfully implemented and managed on-balance sheet private label credit card businesses can provide valuable support. The experience and expertise of the right partner can streamline the process, ensuring a smooth and successful transition into the world of private label credit.

Take the Next Steps

If the idea of creating a whole new revenue stream and reaping the benefits of on-balance credit sounds appealing, take the next step. Book a Demo today to learn more about how catalog leaders have successfully run a profitable growth-oriented business using the power of credit. Our credit business experts can guide you through the process, offering personalized insights and solutions tailored to your business’s unique needs. Don’t miss out on the opportunity to leverage a private label credit program for sustainable growth and increased profitability.