The availability of means of payment can influence consumer and seller behavior and therefore is an integral component of the marketing mix. However, sellers and consumers alike usually take the payments aspect of a transaction for granted, acknowledging its importance only when payment restrictions become an obstacle. In fact, the payments mechanism does affect the exchange process, and in some transactions, can be a deciding factor. Consequently, the marketing framework should incorporate information about payment options and their effects on marketing decisions.
In this chapter, we begin by discussing the exchange process and show how modern payment forms are more efficient than barter. We then survey the various modern means of payment -- showing that certain of their characteristics, such as risk of default, technological sophistication, and familiarity, influence the marketing process. Our discussion reveals how the relative power of sellers and buyers influences the choice of payment. It also explains why the view that a cashless society is just over the horizon is very likely only a myth. The information in this chapter can be useful in determining the marketing mix, including segmentation influenced by payment options.
An understanding of the exchange process is essential to appreciating the marketing implications of the various forms and uses of current means of payment. Fundamental to an exchange, say between Party A and Party B, is the existence of a double coincidence of wants; that is, Party A must have something that Party B wants, and vice versa. If both parties are willing participants, such voluntary exchanges increase market efficiency, since both parties must believe that they will be better off after the exchange; otherwise the transaction would not occur. (See Houston and Gassenheimer 1987, 5-6 for a discussion of the prerequisites for exchange.)
Early exchanges routinely involved the swap of one good or service for another good or service, that is, a barter transaction. However, barter is costly