by Meridith Levinson

The Value Of Plastic

Jul 20, 20072 mins
Business Intelligence

Credit cards: To accept them at Wendy’s restaurants or not to accept them?

That was the question facing executives in early 2003. Sure, customers would appreciate the convenience of being able to pull out the plastic when they were short on cash to purchase a value meal, but would such an option be a losing proposition? Executives decided to test the impact that credit cards would have on sales by accepting them in select stores.

The company used its business intelligence system to determine how a credit card purchase affects sales and speed of service, and to measure the amount of cannibalization from credit cards—in other words, the number of transactions that would have been in cash but that are now on credit because it’s an available option.

To their surprise, executives learned that people who use credit cards spend more and buy more than they would if they were using cash. People who pay cash tend to buy value meals, which, while good for consumers’ pockets, are less profitable for Wendy’s.

By contrast, consumers who pay with plastic tend to order à la carte, which tallies up to a larger tab. Indeed, the average check paid for by credit card was 35 percent higher than checks paid for in cash. With sales numbers like that, Wendy’s introduced credit card readers nationally in June 2003.