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The Green Sheet Online Edition

February 28, 2011 • Issue 11:02:02

The decreasing primacy of price

By Theodore Svoronos
Merchant University

The payments industry continues to change and evolve, as we all know. For many years, there have been significant changes to the industry related to terminal types and sizes, payment processes, card programs, legislation and security, just to name a few.

It's commonly agreed that all of these changes have been instrumental to the growth of our industry. It's also pretty well known that philosophies on price point selling may also be changing. Until recently, price has been considered the main measurable marker of doing business, but this simplistic approach may not be sufficient to satisfy merchants any longer.

The pros and cons of price point selling

For quite some time, price has been one of the greatest concerns of the merchant services industry. It has been the focus and the deal-maker or -breaker for many ISO-merchant relationships - until now. While price plays an all-important role within our industry, the misuse of pricing structures and the appearance of hidden and unforeseen fees have raised, for merchants, a red flag.

Now it's not just the actual price that matters, but the price structure, validity and value. Price concerns seem to have shifted from pinning down the dollar value to asking, "What are my costs, are these all my costs and how do you justify these prices?"

Now more than ever, providers need to be savvy about pricing. Pricing includes much more than just the cost, so providers and organizations must concentrate on offering a more holistic, value-added approach. All providers are not created equal; therefore, it may be difficult to have the best price in town.

By outlining and clearly explaining the prices, and by standing on a foundation of best practices and fairness, ISOs can help customers and partners understand and accept the reasoning behind the prices.

Transparency creates a certain level of comfort for the customer or partner and can foster a healthy relationship. Price, in and of itself, then fades into the background, and the focus of the relationship shifts to the added value your organization can provide by offering additional products and services. This approach also highlights the fact that you are providing the much-needed mentoring, consultative approach that customers are seeking.

Education that creates greater understanding

As the payment industry has evolved and grown, so has the level of understanding and education of individuals within it. Education is not limited to industry professionals; it is available to anyone with an interest in learning and becoming more proficient. At this point, merchants, salespeople and service providers all have a more fundamental grasp on the industry and also a deeper working knowledge.

This begs the question of whether we know more now than we did 10, five or two years ago. The answer should clearly be yes. It's safe to say that if we, as industry professionals, know more now, so do our clients and partners.

As an industry, we've provided enough information and resources to educate anyone who wants to participate within the payments space. We all know that education and knowledge can, however, provoke more questions, which in turn demand more answers.

The cycle of information is never-ending and has been instrumental in increasing the level of sophistication for clients, who now know not only what questions to ask, but what answers to expect. Fundamentally, customers ask many more questions these days and expect more from their service providers than they did years ago.

I feel it is important to mention again that a terminal and a good price used to be enough to earn the customer's business. This approach simply isn't enough today in light of how the payments industry has evolved.

The market landscape and economic climate have brought about not only price competition, but also an increased interest in value-added offerings. The customers need to know that their providers have the capability to handle all of their needs and can serve as complete, trusted resources for them.

Bundling value-added services

As just mentioned, pricing is now only a piece of the pie that merchants consider; they now place a larger priority on ancillary products and services. So it's beneficial to think beyond price and focus on other ways your business can bring value and success to your merchants.

Depending on the customer and circumstances, pricing matrices may need to become even more competitive so that you can market additional products and services (cross-sell, up-sell) through a bundled fashion. The more products and services you can tie into your customer's needs, the more valuable you become and the more likely you will become a business partner, not just a service provider.

Products and services such as website design, hosting, consulting, education, mobile capabilities, and technology partnerships are excellent examples of areas in which you can contribute value. In today's business environment, mainstream merchant services and payment processing accounts are gained almost by default when offering other added-value and bundled solutions.

Concentrating on and revamping the methodology of your approach to customers is critical in differentiating your organization from the others. You can start by asking what makes your organization different and what you can add in terms of value. Consider these questions every time the industry shifts or evolves. Even better is to obtain a firm understanding of the current market conditions so you can form a forecast of where the industry is headed and what will be needed.

The word "value" is now part of our everyday vocabulary and should be built into everything we do for our customers and partners. With so many options available to merchants, your name should be associated with creating value beyond the norm.

This is accomplished by providing the best service possible and expanding your offerings to your merchants. end of article

Theodore Svoronos, a founder of Merchant University, has been proactive in the payments industry since 2001 and has over 23 years of experience in sales, business development and executive management. He has been responsible for organizational growth, partnerships, education, training, regulatory compliance, security and ISO relationships. This experience is complemented by his IT security, identity theft and fraud prevention background. Honoring values of best practices, security and professionalism, Theodore is a pioneer in forward thinking and pushes for economic growth through industry education. Please contact him at theodore.svoronos@merchantuniversity.org.

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.

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