Customer Experience

1 Out of 3 Customers Ready To Pay Extra for Contactless Services: How To Plan Your Pricing Strategy

Nov 18, 2020

Contactless services are integral to customers' shopping experience, but are they willing to pay more for using these services? Opinions are torn.

Gitanjali MariaSr. Content Analyst
1 Out of 3 Customers Ready To Pay Extra for Contactless Services: How To Plan Your Pricing Strategy

What we'll cover

Demand for contactless technology has soared during the COVID-19 pandemic, as it helps reduce the coronavirus spread by offering customers touch-free payment options. 

According to a GetApp survey of nearly 1,000 U.S.-based consumers, 92% of respondents consider the availability of a contactless experience important right now—i.e., during the pandemic—while 82% say it’ll remain important even after the pandemic is over. 

Not offering contactless services, thus, may put your business at risk of losing customers. But these services will cost you more due to investments in contactless technology, staff training, marketing, etc. Another challenge is deciding whether to pass the extra cost to customers, and if yes, how to divide the expenses.

In this article, we’ve used our survey findings to discuss what customers think about paying the extra cost of a contactless experience. We’ve also shared tips on how you can offset the cost without hurting customer sentiments or your profitability.

What is a contactless transaction?

A contactless transaction is a purchase that doesn’t involve physically touching another person or a shared surface. Some common examples include curbside pickup, home delivery, mobile payment, and a touchless credit card.

Cost isn’t a deal breaker for most customers selecting contactless services

According to our survey results, ease of use—and not cost—is the most important factor customers consider when choosing contactless services. While 50% of respondents opted for ease of use, only 8% selected cost.

Factors in choosing contactless services

Note: Percentages may not add up to 100% due to rounding off.

Though most customers don’t consider cost to be a deal breaker, they may not be very happy if your prices are too high. 

One out of four customers (26%) say higher than anticipated or initially agreed price is a common challenge they face when using contactless tech. 

This is especially true for online food orders. According to reports, restaurant food chains charge customers 15.3% more for delivery than pickup, while food delivery apps often charge as high as 91%

Here’s a list of the additional costs for some contactless services:

Contactless serviceCostWho usually pays
Home delivery* (eCommerce apps)$5-$13 per orderCustomer
Curbside pickup*Up to $5 per orderCustomer
Home delivery (food ordering apps)*7%-91% more than dine-inCustomer
Card payments**1.3%-3.4% of transaction valueRetailer
Digital wallet**Up to 2.9% per transaction or a fixed amount (e.g., $0.10 + standard charges for using Visa)Retailer

*If your bill order is above a certain value, costs are often waived off. Delivery costs and service fee depend on your location and bill amount.

**The percentage differs depending on the card or payment processor, e.g., Visa, Square. 

Nearly two-thirds (68%) of respondents who didn’t have a good experience with contactless services say removing the extra charges can improve their experience.

But, as a business, it’s not always feasible for you to eliminate these costs, as we’ll see in the example below.

Loanry bearing the extra cost of providing contactless services to its customers

Since the pandemic-induced lockdowns began, Loanry, a small financial services company, has partnered with a third-party door-to-door delivery firm to collect documents from its customers. Customers weren’t comfortable sending their financial documents digitally, and the firm wasn’t able to collect them on its own, so it partnered with a delivery company. 

“This service we are now providing our customers isn't cheap but as a company, we prefer to keep our customers happy and we are prepared to cover the costs until the pandemic is over,” says CEO Ethan Taub. Taub expects demand for contactless services to continue even after the pandemic but adds “we won’t be covering the costs ourselves.”    

Paying extra isn’t something everybody likes, but survey results indicate customers are willing to share the extra cost businesses like yours have to incur to provide contactless services. 

1 out of 3 customers is willing to pay more for contactless services

We asked survey participants if they’d be willing to pay more—above the product or service cost—for contactless services. Here are their responses: 35% say they’re willing, 25% say they’re unsure, and 40% say they aren’t willing to pay more.

Willingness to pay

Most customers are willing to pay $5 to $10 more for contactless services

Knowing what is a reasonable amount to charge your customers will help you better frame your pricing strategy. As per our survey results, of the respondents willing to share costs, 39% are ready to pay less than $5, and 43% are ready to pay $5 to $10.

How much extra are customers willing to pay

Keep contactless fee at $5 or less to cater to the preferences of a wider audience. A low fee can also help you convert the 25% of respondents who said they’re “unsure” about paying extra for contactless services.

26% of respondents say higher than anticipated cost is a challenge to using contactless services. To overcome this challenge, clearly communicate to your customers how much extra you’ll be charging them. It’ll also help reduce customer complaints or dissatisfaction after a purchase.

A majority of responding customers (84%) are willing to pay for contactless services even after the pandemic is over. This is another factor that should motivate you to keep charges low and reap benefits in the long run. Low charges will help you maintain a loyal customer base and even expand it, increasing your earning potential. Here’s an example of a fast-food company that grew its customer base by adopting contactless technologies.

Case story: How offering contactless payments helped Leominster Fish Bar grow its customer base

Fast-food restaurant Leominster Fish Bar was a cash-only business until COVID-19 happened. Owner Chris Panteli said, “With the rising cases of COVID and the increased fear and anxiety among customers, providing an alternative (safer) form of payment was becoming increasingly apparent.” He introduced a contactless payment system and started accepting both cash and contactless cards to make ordering convenient for customers.

Panteli’s restaurant has seen a rise in sales since then, also because two of its main competitors don’t offer touchless payments. Panteli says many customers have switched to his business for this reason. He adds his business has been able to offset the additional costs (contactless payment card transaction fees) through the increase in sales and profitability.

Gen Z customers are more likely to pay extra for a contactless experience

Forty-five percent of Gen Z respondents (18-25 years) say they’re willing to pay extra for availing contactless services, the highest among all age categories. This could be because Gen Zers are more familiar with the “touchless” experience, and the cost of contactless services may be something they’re already used to.

Gen graph

Customers willing to pay extra are 3x more likely to switch retailers for better services

Customers willing to pay more for contactless services expect their providers to offer a superior contactless experience. According to our survey, 47% of respondents willing to pay extra also say they’re “very likely” to switch retailers or service providers to avail better services.

Likelihood to swtich

4 tips to reduce the cost of providing contactless services to your customers

Here are the top four tips you, as a business, can follow to reduce the costs of providing a contactless shopping experience to customers.

1. Offer contactless services your customers prefer

For our survey respondents, contactless payments are the most important service (73%), followed by contactless home delivery (67%), curbside pickup (62%), and mobile ordering apps (53%). Prioritize these services to keep your customers happy. You can add to them as your needs increase. 

With contactless payment technology, you won’t have to worry about change or long customer queues. Start with contactless cards and digital wallets, given these payment options are more popular among survey respondents (69% and 46%, respectively). Check our POS software directory to find software tools that can help you implement contactless payment.

Contactless payment methods

2. Implement contactless tech where needed the most

Don’t try to turn your entire operations contactless in one go. You’ll not only end up frustrated but also incur high costs. Find out touchpoints where your customers strongly desire a contactless experience, and implement contactless tech at those points first.

Survey results suggest a majority of customers “strongly prefer” a contactless experience for checkouts and payments. Accordingly, start with prioritizing contactless card payments, in-app purchases, and mobile payment.

Touchpoints where contactless is preferred

3. Inform customers about the availability and cost of contactless services

To help customers make better purchase decisions, inform them beforehand about the contactless options available and their related costs. For instance, educate customers who’re uncomfortable using digital payments about their safety benefits compared to cash payments. This’ll help drive adoption and, as a result, bring down costs for both you and your customers.

4. Use free software tools to reduce your expenses

Free software tools to create websites, eCommerce apps, chatbots, etc., will help you save costs while simultaneously letting you provide contactless services. Free contactless solutions will allow you to test the response of customers to different contactless services without costing anything. As you’ll incur low costs, you won’t have to worry much about passing them to your customers. 

Here are some free software tools you can use to begin your contactless tech journey:

Survey Methodology and Disclaimer

GetApp’s Contactless Customer Experience survey was conducted in September 2020 among 968 adult consumers in the U.S. to understand how they’ve adapted to contactless services in the wake of COVID-19. To ensure participants fully understood the meaning and topic at hand, we defined the term “contactless” in the survey questionnaire.

About the author

Gitanjali Maria

Sr. Content Analyst
Hey there, I’m Gitanjali Maria. I’m a senior content analyst at GetApp. I bring you insights about CRM, sales, customer experience, and data security. I’m an MBA from Loyola College, India, and experienced in tech research. Home base: Gurugram, India. (1-2) things about me: Enjoy reading all genres and making junk art. The [1-2] tech trend[s]/innovation[s] I think you should keep an eye on: Watch out for all the things AI can revolutionize!
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