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6
THE
MUSIC TRADE
REVIEW
MARCH S, 1924
Collecting Interest on Instalments
A System Used by an Ohio Merchant Which Means That the Buyer Always Pays Full Interest on the
Outstanding Balances of His Lease—Three Dates of Payments Monthly Simplify the Work
of the Collection Department—A Collection Plan That Eliminates Collectors
H I L E many piano merchants in offering
instalment terms to their customers take
great care to avoid the mention of in-
terest on deferred payments either by quoting
a flat price for instalment sales and allowing a
discount for cash from a fixed marked price,
or by dividing the cash price, plus interest, into
an equal number of monthly payments, there
is one piano merchant in Ohio who makes it
a practice to emphasize the fact that the cus-
tomer is expected to pay interest and to insist
that the interest charges be met promptly re-
gardless of how payments may lapse tem-
porarily on actual contract price.
For those who regard such a procedure as
suicidal from a business standpoint in the belief
that it will discourage many prospective cus-
tomers, this particular dealer declares that he
has not lost a single sale as a result of the
ruling and that, what is more important, for
several years past he has realized considerably
more from his interest charges than was paid
to banks for discounting necessary quantities
of instalment paper.
This dealer, when, despite his efforts, interest
charges have accumulated, still collects them,
even those on some accounts they may exceed
one of the monthly payments in amount. He
cites one instance where the customer had kept
up on his payments but had not paid the cur-
rent interest. The result was that, on checking
up, he owed $14.25 interest, while his monthly
payment was only $15. The dealer himself took
charge of the case with the result that he took
the $15 intended for the payment, charged it
off on the interest account, gave the customer
his change, and then informed him that the
monthly payment against the instrument of $15
was still due. Naturally, the situation required
explanation, but those explanations were made
courteously and the business sense of the pur-
chaser told him that they were proper.
Collecting the Interest
W
Another important factor in connection with
the system is that the interest charges on the
entire contract are not divided by the months
on a pro rata basis, but, as each month's pay-
ment is due the full interest charge on the out-
standing balance is added to the amount of
the payment and collected. The result of this
is twofold. As the customer cleans up his ac-
count he finds the interest charges decreasing
steadily. If he makes payments more rapidly
than the contract calls for he realizes an im-
mediate reward in interest saved. From the
dealer's angle the plan has the advantage of
bringing in the most substantial amounts during
the early months of the lease, which gives the
customer a very substantial equity in his in-
strument and discourages him from allowing
the contract to lapse and the instrument to be
repossessed.
The collection plan of this dealer has worked
so successfully that, although a most substantial
business is done, it has not yet been found
necessary to hire a collector. As a matter of
fact, there are two brothers in the firm and,
when the occasion warrants a personal visit, one
of the brothers himself calls on the delinquent.
By this plan the customer is flattered in re-
ceiving the attention of the head of the house
and is at the same time impressed with the
fact that the merchant himself considers the
O
N
matter of sufficient importance to warrant his
time in making the call.
Another point is that the head of the piano
house can size up the situation himself and
accept full responsibility for any drastic de-
mands made or any leniency shown. This gets
away from the liability of having the over-
zealous collector offend an honest and valuable
customer or of having a careless collector trip
up on the account while leading his employers
to believe that he was fully cognizant of all the
details.
Three Dates of Payment
This piano house, some years ago, fixed three
definite dates in the month when instalment
payments become due in the belief that this
system, with only three checking up periods
necessary during the month, was much more
efficient than the plan that calls for collections
to be made on the day of the month corre-
sponding with the original purchase.
Under this plan the fifth, fifteenth and twenty-
fifth of each month are the collection dates and
the customer is so informed. If an instrument,
for instance, is purchased on the ninth of the
month, not only is the down payment collected
but the dealer also demands and receives that
proportion of the agreed monthly payment with
interest covering the six-day period between the
ninth and the next fixed payment day, in this
case the fifteenth.
The three fixed payment dates naturally sim-
plify the work of checking up by the office force.
When the contract is made a collection card
is inserted in the drawer provided for all in-
stalment cards of that collection date. On the
first, tenth and twentieth of each month a state-
ment is sent due on the next collection day,
together with the interest charges.
No exception is made to this rule, for as the
retailer wisely puts it, the big business man
with good credit, plenty of money and both the
ability and desire to pay promptly, requires a
reminder of his obligation just as much as does
the clerk who may have to set aside a part of
his weekly salaryto meet his payments follow-
ing the receipt of the notice. The statements
naturally cause no offense, since they are busi-
nesslike in character and compare with those
sent out by other classes of business concerns,
including gas, electric light and telephone com-
panies. No mention is made on the statement
of the price of the instrument or the balance
due; it simply carries a reminder of the monthly
payment and interest due.
The Second Statement
Immediately after the fixed collection day
the customer receives a second statement of
the amount due, plus interest, should the neces-
sary payment not be made, this being distinctly
marked "Second Statement."
In the cases
where this second notice is riot acknowledged
two letters follow at short intervals and then
the telephone and personal calls are resorted
to in an effort to bring the account up-to-date.
It is admitted by this dealer that even that
system does not eliminate past due accounts
entirely, but it does cut them down to a mini-
mum, and the fact that the house has a smaller
percentage of such accounts than others in the
same city employing paid collectors testifies to
its success. If the heads of a business can find
time in between piano sales, and they make
K £ B
many of them, to call personally upon delin-
quent customers, the number of such customers
must indeed be small.
The success of the whole plan, however,
according to the dealer, is in the original de-
mand for interest and the insistence that it
must be paid regularly and in full. He declares
that on more than one occasion a wavering
customer who has slipped up a month or so
on payments has been brought into line with
a jerk by the demand for increased interest on
the unpaid balance for a two months' period.
Perhaps the increase may be only fifty cents,
but added to a two months' charge on a $300
or $400 balance it helps to make an impressive
amount.
A Success
The peculiar thing is that this demand for
interest has been carried out successfully in the
face of competition from other dealers who ad-
vertise no interest, although they are few, and
furniture dealers who often follow the same
policy. The same dealer declares, however, that
selling automobiles on instalments with the sub-
stantial monthly payment and interest de-
manded has helped the instalment business in
pianos even though it may have killed some
sales outright.
E
Baldwin Piano Go. Donates
Piano for New Cruiser
President George W. Armstrong, of Baldwin
Co., Gives Instrument to Local Committee
for Presentation to U. S. S. Cincinnati
CINCINNATI, O., March 3.—The city of Cincin-
nati will be represented on the new United
States cruiser Cincinnati by a Cincinnati-made
piano, costing $1,400.
The piano is the gift of the Baldwin Piano
Co. The Chamber of Commerce committee, of
which Charles E. Tudor is chairman, was in
session at the Chamber Wednesday planning
how to raise enough additional money to pur-
chase an instrument, when Philip Wyman an-
nounced, on behalf of George W. Armstrong,
president of the Baldwin Co., that the com-
pany was prepared to make a gift of a player-
piano to the cruiser. The committee adopted
a resolution accepting the gift and thanking the
Baldwin company. Arrangements were made
for the prompt delivery of the piano to the
cruiser.
Mrs. Charles E. Tudor, who carried a bottle
of Ohio River water to the Pacific Coast to
christen the cruiser and who has been a leader
in the raising of the fund, said that the Chamber
of Commerce committee had collected about
$200 and that this, together with any other
donations that may be added, would be turned
over to Captain Charles Nelson of the cruiser
as a music fund.
Music House Chartered
NEWARK, N. J., March 1.—The Broad & East
Jersey Music Co., 130 Market street, was issued
a charter here last week to manufacture and
deal in musical instruments and sheet music.
The company will have a capital stock of
$100,000.
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