By Bill Pirtle
MPCT Publishing Co.
In recent articles for this column, I have presented views on many topics ranging from certification and registration to scams and education in the industry. One thing members of GS Online's MLS Forum discuss quite a bit is that profit margins suffer because many untrained (or poorly trained) reps just want to give out "free" terminals to get upfront bonuses - without regard for building profit into the account.
As a result of this margin compression, some merchant level salespeople (MLSs) wonder how they can make better profits.
My post to the forum for this article asked where profit was made outside of credit card processing: "With the margin compression the industry is facing from agents (or ISOs) dropping rates, how are you making money? Do you justify higher rates than others or use low credit card processing fees to sign merchants to the other products you offer?
There are related products like gift cards, check processing, ATMs, leasing/rentals, phone cards, merchant cash advances and the like. Do you use these for higher merchant retention, or do you use them to earn your income while using low processing rates?"
My focus was on products related to credit card processing, but I wanted to see the responses if I left the topic open.
"I earn the majority of my income in residuals," KLINCKPHILIP wrote. "I use some of those products you mentioned. I love placing ATMs in high-volume locations, but that doesn't happen very much. I also do a real estate deal here and there. It's a nice big pop, but by no means does it pay the bills every month."
In addition to selling credit card processing, BANKCARDREP1 places ATMs where he owns and maintains them. To supplement his card and ATM processing income, he also opened a 6,000 square foot, used-furniture store on May 1, 2011. He is not the only rep to have outside interests. NWBC responded with the following: "POS sales and service ... oh, and pizza too."
CLEARENT believes opportunities for profit still exist if they are "packaged and presented differently." He elaborated, stating, "There is still a need for equipment, both new and used. There is still a need for leasing - if done ethically. Some companies [will] only lease their equipment.
"Gift and loyalty cards still play a role, although the role has moved away from gift and more toward loyalty. Check services still serve a purpose for merchants who accept (and potentially have much at risk) checks.
"The key, of course, is education on the opportunities. You can't just sell gift cards, for example, as you will miss out on an equipment opportunity or check opportunity. Just understand how each works. Have the offerings in your toolbox, and you will be ahead of the game. Don't discount one because you don't like it (think leasing). Know the product, and if a merchant wants it, make sure he understands it. But have it available."
DHESSCO offers text messaging via short message service (SMS). "The SMS program we have been selling is super cool," DHESSCO posted. "It is a great stand-alone product as well. Instead of competing rates, free equipment, etc., I can walk in and talk about growing a merchant's business. It's just like the gift cards used to be, but this is so versatile and such a cool concept for merchants. The residuals are the same or better for most of the accounts."
KMUSANTE offered this advice: "I think the additional revenue should stem from your market ... if you are pursuing a retail market, [then] become an expert in gift cards. If you pursue restaurants, then POS systems and merchant cash advance [are the targets]. For me, gateways and wireless terminals [are great products to offer]. You do not make significant revenue from either, but gateway income is recurring, and wireless terminals lead to residuals."
STEVEN_PEISNER gave a tremendous reply that I will show snippets of, but I encourage forum members to review his complete comment from the topic found at www.greensheet.com/forums/viewtopic.php?f=1&t=35429. If you are not a forum member, register on The Green Sheet home page.
"The words that Ken Musante said could not be more true ... 'become an expert,'" STEVEN_PEISNER stated. "At the end of the day ... don't count how much money you can make. Count how many relationships you can make, and the money will follow." He also said, half-jokingly, "What I am actually surprised about is that nobody just came out and said that they were 'Merchant Service Prostitutes.' Everything and anything goes for a price! Where and when should I be there!"
BLUESTAR said his favorite approach is to build customer loyalty. "When executed properly, getting the appointment is easy because merchants understand the value, and they aren't called 10 times a day about the product," he wrote. "Build the value properly in the product and the close takes care of itself." In addition, AGENT, BANKCARDREP1 and BER mentioned the following products and services being offered by some agents:
However, problems are associated with offering such diverse products, including lack of specialization, looking unprofessional to the merchant because it is impossible to represent all areas well and losing out on a great opportunity.
STEVEN_PEISNER, KMUSANTE and CLEARENT summed it up very well. Become an expert in the credit card processing industry. You can study the different options available to make decent money by offering diverse products related to the industry. By asking the right questions, you can present a tailored, packaged solution for a given merchant's problems.
If allowed to do so by your ISO, establish relationships with multiple providers of related products. These may include check processing, gift and loyalty cards, terminals, gateways, and even shopping carts. By providing a complete solution, you not only increase your margins, but you also greatly increase customer retention because your customers are less susceptible to one-trick-pony processing agents.
Imagine receiving a phone call at your office. A salesman offers to save you money on your office supplies. You decline. He persists, saying, "Well I can save you money on your phone systems and security, too." What would your response be? Would you think, "Great, I can save money in a lot of areas" or "This guy needs a job that doesn't include sales"?
I think most people would feel he needs a new job. Diversity only pays off when the products are related. When the items are completely different, you appear to be unprofessional, or worse, desperate to make a sale at any cost.
By lost opportunity, I mean, by offering a smattering of unrelated products and services, you could lose not only customers, but also referral partners. When I interviewed Tim R. Green about his book on referral marketing (see "Referrals: Do you play the numbers game?" The Green Sheet, Feb. 28, 2011, issue 11:02:02), he said you could double your income by finding solid referral partners and cultivating mutually beneficial referral partnerships. Focus on credit card processing and related products, and then find people you do not compete with who target the same market.
Now imagine walking into a merchant and while setting up his account, you discuss Payment Card Industry Data Security Standard requirements. You suggest a lockable file cabinet or safe to protect customer information and recommend a computer security company to the merchant. You have references for both partners on hand and offer personal introductions.
Now picture meeting your referral partners and telling them you have a personal introduction for them, or even a closed deal. In referral groups, it takes time to build trust for card processing or financial managers. Proving you can deliver helps a great deal.
The benefits of such connections are twofold. You become the credit card processing expert that your referral partners can rely on. Further, by being introduced as the expert, you will not have to lead on price savings, but rather on offering quality service and solutions.
Many MLSs believe business owners prefer the idea of cost savings over complete solutions and quality service. That is false. If it were true, there would be no Cadillac, BMW, Mercedes-Benz or Rolls Royce brands, and we'd all shop at the store with the lowest prices.
Just last week, I drove past Nordstrom's department store and saw that the lot was close to full. If you find merchants who want quality service and products, they will expect to pay for it.
Let other agents take turns shaving pennies off statements to get business. As an MLS armed with a complete tool box and who understands how to use it, you will be able to set your pricing to make a fair profit. And you will be able to offer complete solutions to your merchants through referral partners.
Again, the mantra is education. Educate yourself. Join a networking group (you can also begin one or just find a few good referral partners) and begin to cultivate relationships. If you want to learn about the tools, you have choices.
Talk to your ISO, ask questions on the MLS Forum or independently research options on your own by starting with the Advertiser Index in the back of this magazine.
Just as merchants want choices when it comes to pricing and quality of service, you, as a provider, have a choice to make. Do you want to scrape by giving low costs to get deals or do you want to become the local credit card processing expert and better control the deal?
My close of "what you do today determines your tomorrow" is important here. Choose to become the expert starting today, and your tomorrow will be greener.
Bill Pirtle is the President of MPCT Publishing Co. and author of Navigating Through the Risks of Credit Card Processing. He is also a merchant level salesperson for Clearent LLC, Electronic Payments Inc. and Electronic Merchant Systems Inc. Bill's website is www.creditcardprocessingbook.com, and his email address is email@example.com. He welcomes all connections on Facebook and LinkedIn.
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