A Thing
The Green SheetGreen Sheet

The Green Sheet Online Edition

July 13, 2009 • Issue 09:07:01

Vertical market virtues - Part I

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:

  1. What are the pros and cons of pursuing vertical markets as opposed to being more of a generalist?

  2. How do you evaluate which markets are best to pursue during an economic downturn? What factors do you consider in determining which markets are worth pursuing? Which verticals do you think are hot right now?

  3. Which vertical markets does your company pursue right now? Why did you choose these types of businesses, and which ones have brought you the greatest success? Are there other markets you have your eye on for the near future? Have you ever met with failure in attempting to break into a market you thought would be ideal?

  4. 4. What advice do you have for MLSs who want to break into new verticals? Are there certain things they absolutely should and shouldn't do?

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.

Adam Atlas
Attorney at Law

    1. Focusing on a specific vertical is a common method of achieving success in our industry. In focusing on one type of merchant, a sales organization is able to tailor its pricing, sales methods and service to that type of merchant.

    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.

Sam Chanin
Tribul Merchant Services LLC

    1. More than ever before we're finding market expertise matters. Merchants are relating to ISOs that really understand their business issues rather than salespeople whose knowledge is mostly about the services and products being offered.

    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.

Matt Golis
YapStone Inc.

    1. Pursuing vertical markets allows specialization so you can differentiate yourself from others in the industry. The business needs of that vertical may require a specific solution or understanding of software integration, which does create an additional responsibility from a merchant support standpoint.

    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.

Curt Hensley
CSH Consulting Inc.

    1. As you get to know a specific vertical better, you know more of the problems and issues that come up for those merchants. Merchants really appreciate that specific knowledge, and it usually makes the deal easier to close because the merchant believes that they will get better, more specialized service from you. We've got clients that do very different verticals, like merchants of a specific ethnicity or culture. This can be very effective, as well, for many of the same reasons. The cons are that you can put a ceiling on the number of merchants you can go after if you specialize in a vertical.

    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.

Lisa Shipley

    1. Pros: There are a lot of merchants/customers out there looking for the right solution just hoping for that right knock on the door. The opportunities in health care, pay at the table, unattended transactions and so forth are huge.

    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.

end of article

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

Prev Next
A Thing