Buy Now, Pay Later: How it Works and Ways to Use Paid Search to Promote It

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Buy Now, Pay Later (BNPL) has become a hot topic in the ecommerce world. A recent study by The Ascent states 55.8% of consumers have used a Buy Now, Pay Later service, up from 37.65% in July 2020. These installment loans allow shoppers to purchase items from their favorite retailers, receive their orders immediately, and pay them off later – typically over a series of four payments. Consumers relied on Buy Now, Pay Later options during the peak of the pandemic and holiday seasons, which fueled its popularity. 

There are several providers retailers can use, and customers can choose from different options depending on the plans available and their financial situation. If you’re a retailer looking to offer a BNPL option to your customers, it’s essential to understand first how Buy Now, Pay Later works, ways retailers and customers benefit, and how to use paid search to promote it.

How Does “Buy Now, Pay Later” Work?

A Buy Now, Pay Later solution is a payment option that allows customers to pay for products in bi-weekly or monthly payments at the time of checkout. Some Buy Now, Pay Later solutions, like Sezzle, are interest-free, while others charge varying interest rates depending on the chosen payment plan. 

This digital payment solution is impactful for many reasons from the customer’s perspective. It enables shoppers to buy what they need now and pay later without risk to the merchant. That’s because BNPL solutions, including Sezzle, assume all credit risk, which means merchants get paid in full immediately.

On top of that, adding a BNPL to an ecommerce store instantly supercharges a store’s performance, drives new customers, and turns shoppers into repeat buyers who spend more. Besides increasing sales, BNPL solutions allow merchants to boost their lifecycle marketing. In other words, brands can attract customers at different stages of the buyer’s journey. From enterprise merchants to small businesses, it’s no wonder BNPL has garnered high adoption rates. 

Who Benefits from “Buy Now, Pay Later”?

BNPL gives both merchants and shoppers a leg up. Offering payment flexibility over time is empowering for the customer and positions brands as secure and trustworthy. This is especially so for younger generations who want financial freedom and stability but don’t necessarily have the credit. As Millennials and Gen Z-ers move into the next stage of their lives and start making bigger purchases, consider how their shopping behavior differs from earlier generations. 

Buy Now, Pay Later payment methods that offer credit-building capabilities give younger customers the ability to establish a good credit score and take control of their finances. Choosing a BNPL solution like Sezzle—the first and only B-Corp in the payments space—means businesses can positively impact the lives of their customers and help the community as well.

Support “Buy Now, Pay Later” with Paid Search

Supporting Buy Now, Pay Later on Paid Search can be as simple as adding ad variations and callouts highlighting the feature, or a site link to a BNPL info page on the website. One strategic method is to focus on high-AOV (Average Order Value) products, where consumers are more likely to use BNPL. If possible, it’s helpful to analyze customer data and see which products drive the most BNPL orders. 

Even if this data is unavailable, a bit of reasoning can estimate a price point threshold where people are more likely to use BNPL (for example, products above $200). Once these products are segmented, the corresponding keywords could be given targeted ad copy and extensions promoting BNPL with some additional budget.

For example, say you want to drive more BNPL orders focusing on high-AOV products. Taking all the products that have driven at least one order in the last four weeks, you find that the average AOV is $50. You then see a large spread of price points, from 99 cents to $3K, and isolate the products that are at least $200. 

Sorting these products by top revenue, you find three product categories driving 10% of revenue on Search. Therefore, you apply BNPL ad copy and extensions to these campaigns to:

1. Draw customers who are already looking for BNPL and
2. Show customers the option of BNPL, which they may not have known or considered

After running this for a few weeks, you could analyze the performance of BNPL Responsive Search Ad (RSA) variations versus evergreen variations. As well as extension performance and measure any lift in BNPL orders, especially on the targeted products.

Conclusion

Taking a step back, it’s worth considering both the legal and social responsibilities we have as retailers and agencies. BNPL is popular, especially among young users, who can be tempted to use this feature unwisely. We highly encourage transparency in BNPL policy, laying out the expectations clearly and advising users to consider all the factors before making a BNPL purchase. It is better to caution people from rushing into a purchase rather than pushing the benefits of BNPL too hard.

Although this may seem unintuitive, there are two positive impacts: retailers and BNPL companies can avoid the consequences from users struggling to make payments, and they can brand themselves as companies with consumers’ interest in mind and integrity.

If you’re a retailer considering a Buy Now, Pay Later solution, or looking to improve performance with Paid Search, schedule some time to talk with our team!

Rigel Kim

Rigel is an Account Manager at Adlucent with a penchant for creating a story from data and statistical analysis. She has years of experience across various clients and marketing channels (from ecommerce to in-store, B2C to B2B, Search to Display to Video), combining irreplaceable human insights with increasing Martech and automation.