One of the Largest Direct Response Companies in the US Implemented a Surcharge. Here’s What Happened.

Posted on June 24, 2019 at 09:01 AM

Direct Response AB Surcharge Test

Surcharging, the practice of passing credit card processing fees onto customers is still a relatively new concept in the United States. Like all new ideas, there are a lot of misconceptions about it.

One of the most common reasons merchants are hesitant to implement a surcharge fee is the fear that they will lose customers.

Does Surcharging Scare Away Customers?

SurchX CEO Robert Maynard states, “It’s understandable that merchants would worry about losing sales, but extensive research has shown that surcharging doesn’t cause that.”

SurchX relationship manager Devin Foster adds, “We hear it all the time. Nobody wants to scare off their loyal customers. And we get it! We don’t want that either.”

Live Testing Period

This is why we offer a live testing period for all our merchants. They can give us a try with zero commitment. Test a surcharge for a week, a month, however long you like. See if you lose customers. If you see a drastic drop in sales, simply remove the surcharge. Be sure to pay attention to how much you’re recovering in fees, however. You may find that the ROI is greater than a slight drop off in sales.

You are given complete control over when to surcharge and when not to. Most business who test out surcharging on their platform are typically so pleased with the result, they decide to continue the practice.

SurchX wouldn’t be in business if consumers jumped ship at the site of a small transaction fee. To prove this, we conducted several scientific tests to see how customers react to transaction fees and alleviate the worries of hesitant merchants.

Here are the result of one of those case studies

One of the largest direct response companies in the United States allowed SurchX to test surcharging on one of their as-seen-on-TV product sites.

60K visitors went through the test

For a one-week period, our client, along with the assistance of SurchX, set up an A/B test, tracking their conversion rates with and without a surcharge.

During testing, our client reported a total of 60,000 site visitors. Of those who completed a purchase, half were presented with a surcharge on the checkout page and half were not.

12k Transactions

After a total of 1,200 sales, SurchX found the difference in the conversion rate between the test with a surcharge and without a surcharge was just six sales, which is within a typical margin of error.

6 visitors chose not to purchase

That means that there was no material difference between how often a customer completed a purchase with a surcharge applied versus without.

The average monetary transaction was around $285. The average transaction fee was $7.25.

Return on Opportunity was over 3000%

Results

The result of this test was that the added surcharge had no material effect on the conversion rate beyond a normal margin error, while the return on opportunity was over 3000%.

Our client reported zero customer complaints regarding the surcharge.

Thinking about applying a surcharge?

If you’re on the fence about applying a surcharge, consider the following.

  • Would you like to recover credit card processing fees? Many merchants consider credit card processing fees to be just a part of doing business. By definition, a cost of doing business is unavoidable. We live in an ever-evolving economic infrastructure; with the combination of innovative technology and evolving regulation, credit card processing fees are no longer a cost of doing business but rather an outdated business practice.
  • Are you hesitant because of fear? In today’s eCommerce atmosphere, things are changing fast. New merchants are selling their goods and services online every day. Credit card processing fees could be holding your company back.
  • Do you worry you’ll have to change platforms? While other surcharging entities do require special equipment, changes to shopping carts, or changes to eCommerce platforms, SurchX is a fully compliant, completely agnostic credit card surcharging solution that seamlessly integrates with most shopping carts and payment processors. You don’t have to change a thing. SurchX walks merchants through the integration process and helps every step of the way, so there is absolutely zero interruption with your shopping cart/ transactions as you implement SurchX into your checkout process. We make it as seamless as possible.
  • Would you like for your customers to have options? If you’re not currently accepting credit cards because you know you can’t afford the processing fees, surcharging could be a solution. Many consumers prefer to use their credit cards to make purchases simply to get their rewards, so you could be missing out on sales if you don’t offer the option. When a surcharge is enabled, Consumers can avoid paying a transaction fee by using any other payment method, including debit cards, some government-issued credit cards, cash, checks, or electronic payments such as Automated Clearing House (ACH) if offered as an option.
  • Do you think surcharging isn’t fair to the consumer? Though the norm has been to consider credit card processing fees “part of doing business” mostly due to U.S. regulations, surcharging is actually the fairest way to deal with the merchant credit card processing fee.  Without surcharging the fees, many merchants bake the credit card processing fee into the price of their products and services, no matter the payment method. That means that customers that pay with alternative free payment methods such as cash, debit cards or even ACH, are subsidizing credit card payers by also paying the fees when in reality they shouldn’t necessarily be. By surcharging the fees, customers know up front that if they choose to pay by credit card, let’s say because they want the points with a particular card which ultimately costs the merchant higher rates, that they will have to pay the transaction fees associated with the card they choose.

The best way to decide if surcharging is an option for your business is to take a quick audit of your net profit, net margin, and the average monthly amount you’re paying in credit card processing fees. Then speak to one of our surcharging specialists to learn how much you could recover.

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