Establishing a niche in one or more vertical markets is said to be an excellent way for an ISO or merchant level salesperson (MLS) to expand a merchant portfolio during any type of economy. We thought it would be valuable to seek perspectives on this topic from our esteemed advisory board. Thus, we asked them to answer the following questions:
This article contains the first portion of their responses. The remaining responses will be published in The Green Sheet, July 27, 2009, issue 09:07:02.
Attorney at Law
The sales organization can also achieve a certain reputation and momentum within the vertical by attending tradeshows, advising the trade association and networking with organizers within the community of merchants. A single vertical also allows the sales organization to compete effectively against generalists who have no particular knowledge or value added to the specific kind of merchant.
On the down side, selling into one vertical makes for an unbalanced portfolio and exposes the portfolio of merchants to excessive ups and downs of a single industry. Many of the most valuable sales organizations I have seen draw on a variety of merchants to build their portfolios. However, they may have offices that focus on a single vertical as part of a larger aggregated portfolio.
2. One market that might be worth looking at is people who are starting businesses because they lost their jobs. Many of these businesses will fail, but if you can identify and properly underwrite the promising ones, there might be an opportunity for you. Low-ticket merchants are probably a better bet these days than high-ticket merchants.
3. This question does not apply to me; I am not a sales office.
4. One way into a new vertical is to start by closing one or two accounts; then study the business through those accounts. You might even use a merchant in the vertical as an agent to refer other accounts in the same vertical. Study the marketplace. There is a wealth of information on the Internet on each vertical - including government statistics that might help you define your sales target.
Tribul Merchant Services LLC
Whether it's helping the merchant better compete or simply to stay alive in the troubled economy, the highest performing salespeople seem to be those who are really tuned in to their (prospective) customer base.
Recognizing this trend, we've expanded the classic definition of vertical markets beyond the traditional SIC [standard industrial classification] code to include other demographic data. Convinced this market is currently being driven by in-depth understanding of a merchant's business, I'm still not entirely sure if it will stay this way once the economy rebounds.
So while we are encouraging our sales professionals to become vertically focused, we are also cautioning them against becoming too narrowly focused.
2. An economic downturn tends to be the best reminder that fundamentals always rule. Sometimes we lose sight of that when things are going well. One of the sales fundamentals is prospects will always become customers and customers will always become long-term clients when there is a compelling need that is met by the sales organization.
To be compelling the offering has to be relevant to a merchant's current and anticipated future business situation, as well as superbly and consistently delivered through service execution. Given this view, the best markets are those that are either underserved or where there is intense pressure to get better results.
We're experiencing a great deal of growth in our business-to-business segment, something we hadn't really emphasized until rather recently. Before entering or expanding in any sector, we do direct and indirect market analysis, consider the cost of capital and projected return, construct a game plan and then execute it through Tribul's sales executives.
3. Tribul has an excellent and deep research team (we consider this to be one of our greatest company assets and competitive advantages) and they are constantly evaluating market opportunities. We have several high-potential segments in pre-launch or initial launch stages right now. We're not afraid to try new things, especially when there are strong analytics, but clearly not every vertical strategy has generated the ROI [return on investment] we were looking for. However, even verticals we've abandoned have been helpful, so I can't call any of these initiatives failures.
4. Knowledge, excellent listening skills and market empathy comprise the critical success factors for any vertical approach in my view.
As a generalist, you face more competition for traditional merchants, but there are more opportunities to close business. It also gives you a hedge if the economy turns sour on the vertical markets where you have previously found traction.
2. We focus on very specific markets where we can apply a technology-differentiated solution that will not require a new investment by the merchant. We evaluate markets by size, fragmentation and how antiquated the existing method of card acceptance is for the merchant.
What is "hot" varies by geography and demographics - certain industries have proven to have more demand than others in different parts of the country.
3. YapStone has made its name as a leader in processing for property management companies. We have expanded in various real estate-related markets, but property management has been our core market for the past 10 years. As large a market as property management is (as a vertical), it took seven years to fully build out our technology platform and establishing credibility with clients to reach profitability.
Successful selling into a vertical does not happen quickly; it requires understanding the merchant's business needs, and at times it is their first time accepting electronic payments. Certain verticals have proven to be more difficult because the sales cycle can take multiple years, layers of bureaucracy and education to prove the viability of transitioning to electronic payments from paper-based methods.
4. Breaking into new verticals is a full-time commitment. As an ISO, you need to decide if you are 100 percent vertically focused or if you want to go with the generalist approach (it is hard to just spend a portion of your time on a vertical and add new merchants consistently in that vertical).
Since many verticals require much more than simply a card-swipe terminal, understanding the reporting and accounting software integration requirements is paramount to giving the client what they are looking for in a processor.
Vertically focused sales can become more like enterprise, software-type sales calls where an MLS has to know all the technologies and accounting needs of a market instead of just deploying a card-present terminal or payment gateway.
CSH Consulting Inc.
2. Going after verticals that are booming during downturns or at least unaffected seems to be the best way to go. The most important factors are the margins you can get and the final profitability on deals in that vertical. Companies like collection agencies, specific medical niches, insurance and credit restoration companies are some that we are seeing do very well in this economic downturn.
3. As a recruiting firm our niche is merchant services organizations. It's a strong, growing industry whose growth has proven to be recession proof. We're looking at other related financial services markets that are as healthy as merchant services. We've never met with failure to this point.
4. Go with a vertical whose bottom-line is very healthy. Look for areas where you can add much more value by focusing on that particular vertical.
The difficulty in pursuing these markets is twofold. First, find the right hardware solutions and partner with the right POS vendor for these solutions. Second, spend the time to learn the new payment solutions, and partner with companies that can help you gain entrance into these markets.
2. Health care is hot. They are feeling the pressure from the economy, as like the retail channel, and there are budgets here to be tapped. Also, security is the top concern for all major retailers. While hardware budgets may be tight, security budgets are overflowing. Target this market with "security" solutions at the POS, and you will hit a home run.
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