The Green Sheet Online Edition
March 12, 2012 • Issue 12:03:01
When warm leads become elephants
At some point, one of your colleagues or merchant customers has probably given you an "in" with a major merchant by saying something like, "I can get you an appointment with X, the chief executive officer of Y. They sell millions each year. You can probably help them."
Initially, it sounds like an exciting opportunity. It would be a major signing, and - of course - at your price, it would be very profitable. It's like a warm referral, right? After all, the merchant will be more likely to sign with you because you have an inside contact, right?
Your contact even sets up the appointment, and you expect the merchant to sign. However, when it comes to landing high-volume merchants, expectations and reality are often far apart.
Here's how the conversation with the CEO usually plays out:
Merchant: "I understand you know my friend. He suggested we talk."
You: "Yes, he and I work together, and he felt I could help your company. I am in payment processing."
Merchant: "That's great. Let me get you in touch with Steve, my executive who handles these types of negotiations. I am sure he would be glad to talk with you. Oh, and tell my friend hi when you see him again." He then walks you to the executive in charge, introduces you and says, "I will leave you two to talk."
The elephant hunt
Steve doesn't know you or your friend. He knows his boss introduced you, but he has little idea why. He likely isn't thinking about payment processing and has other items on his desk.
Your task is to convince him to consider changing payment processors and to get him to provide enough information so you can determine how to price the opportunity. To him you're just another salesperson, and the process for this warm referral has transitioned from quick to lengthy.
I'm not saying elephants are impossible to sign, nor am I suggesting you chase them. However, if you do consider chasing an elephant, even one that came from a warm referral, you must first fully consider the necessary commitment, your expectations and the potential cost of the effort.
Chasing an elephant requires a significant commitment of both time and energy. High-volume merchants never close with just one call, and in some cases, the sales cycle lasts as long as nine months.
You will need to attend multiple meetings, make various presentations and spend time analyzing and preparing a proposal. (Yes, most elephants will insist on a proposal.)
Your time commitment alone will be extensive. Remember, this is time you won't be able to get back. Plus you'll be pulled away from your other selling activities.
Elephants are all about margin. In essence, don't expect the same return that you receive from an average merchant in your portfolio.
Most who will consider moving their processing relationships will want to go through a full request-for-proposal process as well. This also holds true for publicly traded companies.
When chasing an elephant, you'll find the ultimate decision is more about price than friendship. In other words, you must be competitive on price even if it's your brother's or sister's company.
When deciding to embark on an elephant hunt, you're also making a commitment that will take you away from the bread and butter of your business. That's why it's important to determine if the journey is worth your investment. Here's how you can see if it's worth your time and energy:
- Calculate your average close rate for a typical merchant.
- Calculate how many calls you can make in an hour.
Consider the following example. If you close two out of every 10 calls, and you make five calls an hour, that means you generally close two deals every two hours. Now calculate the time commitment for your elephant, and include the time necessary for research and documentation. That will tell you the cost of the hunt.
If the value of your lost sales time is less than the return you can make from the elephant, the hunt might be worth your effort. However, one very critical component isn't addressed in this calculation: not all elephants sign. In fact, the majority will not sign with you. This means that even after all of your time and effort, the reward may go to someone else. There is no second-place ribbon. It's an all or nothing investment.
Before you jump in, ask yourself if you can afford an investment that may likely generate no return whatsoever. Sadly, I've known many who didn't ask this question, and all they had to show for their efforts nine months later was an impressive, but useless, bound presentation.
If you find you're not prepared for such an exhaustive commitment after being walked down the hall to meet "the man in charge," don't be afraid to say so.
Jeff Fortney is Vice President, ISO Channel Management with Clearent LLC. He has more than 17 years' experience in the payments industry. Contact him at email@example.com or 972-618-7340. To learn about how Clearent can help you grow faster and go further, visit www.clearent.com.
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