Friday, November 07, 2008

Credit Is A Customer Relationship Tool

I know that talking about credit in a positive way might seem awkward during this credit crisis, but I believe actually it is a good thing to remind people why credit is good and important to our consumer society. Also, I would like to remind you meanwhile that if we are in such a great crisis, it shows how crucial the credit function is fundamental in our occidental countries.

The risks of credits
Most of the time, especially in France, credits are seen in a bad way: If you are getting a crisis to buy a product, whatever it is, that means you will pay more than what you are suppose to, meaning if you would buy it cash. Also, most of the time, people are considering that getting a credit is risky, because when someone is purchasing something with a credit, it often means he did not have enough money to afford it. Actually, a lot of people in the US are in trouble because of that: People are owning big cars and nice houses without a penny in their bank account. About half of US citizens lives from pay check to pay check. This life style is risky, because whatever happen, you lose your job, get sick or have to make an important purchase, you won't be able to face the situation.

Credit as a customer relationship tool
However, credit is most of the time a great customer relationship tool. Indeed, as a retailer, by offering a credit to your customers, you are allowing them to access some goods and products they would not have been able to get without a credit. You are accelerating the ability of someone to own products that will enhance his lifestyle. Retailers are hence delaying their benefits in order to help customers to purchase.

What retailers should be conscious of
However, providing credit possibilities to customers doesn't mean you should blind yourself about the risks your customers might take. A retailer should propose credits according to the financial status of their customers. That is actually one of the main reasons why credits are most of the time becoming bad. Retailers have big responsabilities when they allow their customers to pay big credits. They must take into consideration if the credit won't hurt personal finances.

I believe that credit is one of the main customer relationship tool: a company is helping a customer to access some products in an easy fashion. However, the retailer must make sure the credit won't hurt personal finances, and be responsible of their credit allowance policies.