Why every small business should know about the Limit Test
This experiment shows what happens when you give people the freedom to pay the way they want to
1/9Photograph: Joshua Morris
2/9Photograph: Joshua Morris
3/9Photograph: Joshua Morris
4/9Photograph: Joshua Morris
5/9Photograph: Joshua Morris
6/9Photograph: Joshua Morris
7/9Photograph: Joshua Morris
8/9Photograph: Joshua Morris
9/9Photograph: Joshua Morris
By Sponsored Content|
On a sunny Tuesday morning, Martin Sciberras, owner of Sydney Coffees, set up two identical coffee carts at the University of New South Wales. Each cart was serving up freshly brewed Giancarlo beans at the same price, with one key difference. One cart had a zero minimum spend on card, the other had a $10 minimum.
Sciberras was hired by Mastercard for "their experiment with cards and cash", the Limit Test. The aim was to see just how big a difference having no minimum can make for a small transaction business. "The zero minimum on cards coffee cart has been more popular," Sciberras says. "The other one has a $10 limit, and people aren't using that cart."
At the end of the day, that difference was clear: the cart with no minimum made $240, while the cart with a $10 limit made just $21.
Belinda, a UNSW student who purchased from the zero minimum cart, says: "Usually I'll pay by card if there's no minimum. Normally there's a $10 minimum, but if there's not I'll always pay by card."
Meanwhile Michael, who is also a student at UNSW, says: "I don't want to bring cash around – I hardly carry it. Card is so much easier, you can just tap it. If I know I can pay by card, I'll always come [to that vendor]."
As is often the way, some business attracts more business, and even students who paid by cash ended up visiting the zero minimum cart. "I picked this one because there were people there," another student named Michael, who paid with coins, tells us.
Sydney Coffees carts never usually have a minimum spend, but Sciberras is still taken aback by the results of the experiment. "I'm surprised to a certain point. I thought they would both be pretty much equal, but the zero minimum cart outweighs the other."