The Green Sheet Online Edition
August 13, 2012 • Issue 12:08:01
The best prospects are in your portfolio
Most companies in the payments industry spend significant time and effort cultivating new business. In addition to focusing on new merchant acquisition activities, it's important to remember the customers who got you to where you are today, especially because it's much easier to drum up additional business from existing merchant customers than it is to find new ones.
A multitude of research studies on selling tout statistics similar to these:
- It's 70 percent easier to make a sale to someone you've sold to in the past.
- It costs six times more to get a new customer than it does to keep an existing one.
- It's 16 times easier to sell to an existing customer than to a new one.
- Acquiring new customers is five to 10 times the expense of retaining an existing one.
- The average spend of a repeat customer is a whopping 67 percent more than a new one.
Regardless of all the studies and the actual numbers, the important message to be gleaned is that your merchant portfolio can and should play a significant role in generating more revenue for your business.
Why is it easy to look for additional revenue from customers you've already won? Because these merchants are already familiar with you; their trust in the credibility of your business is already established. And if you've done your job well and the merchant experience has been a happy one, the likelihood of these merchants doing business with you again is a good bet.
Acquirers, ISOs and merchant level salespeople should never underestimate the potential for new revenue to be found by tapping existing clients.
Cross-selling and up-selling
Since you've already sold merchant services to businesses in your portfolio, you need to look at offering additional solutions and services that your merchants would find valuable. These add-ons to the original sale fall into one of two distinct categories: those for up-selling and those for cross-selling.
And although these terms are often used interchangeably, they are really quite different. Up-selling is getting your customers to spend more money buying a more expensive, more benefit- and feature-rich version of the same product or service they already have.
An example of up-selling is to identify the merchants in your portfolio with old equipment, like the outmoded POS terminals with limited functionality, and trying to move them to the latest Europay/MasterCard/Visa (EMV) equipment, a PC-based all-in-one package, or even one of the new mobile iPhone or iPad solutions.
Cross-selling is getting your merchants to spend more money with you by signing them up for new products and services that are complementary to your basic merchant services offering and that they want and need to improve their businesses. These are commonly called "value-added" products and services, and many are available to choose from in the marketplace.
Here are a few to consider adding to your basic merchant services offering, but know that the list provided is not exhaustive:
- Merchant cash advances
- Gift card programs
- Email and mobile marketing programs
- Check verification and electronification services
- Remote deposit capture
- On-premise ATMs
- Chargeback and data breach insurance
- Loyalty programs
- Payroll services
- Prepaid legal assistance
Exploiting a golden opportunity
The industry as a whole is doing a resoundingly poor job of up-selling and cross-selling. Most merchant portfolios today contain a large number of merchants who have never upgraded the original equipment that was installed when they first started accepting card-based payments. Additionally, portfolio penetration rates for value-added solutions and services remain surprisingly low.
In February 2012, the Electronic Transactions Association released the results of a merchant study conducted in conjunction with Trevelino/Keller. Of merchants surveyed, 78 percent indicated their Merchant Service Providers had sold them nothing but credit and debit card processing alone.
What this means is the opportunity for your business to make more money through up-selling and cross-selling is big. It also means too many ISOs and merchant level salespeople are out there selling on price alone. This adds to the misery of dealing with the spiraling downward pressure on revenue associated with price compression, as well as the lack of any tangible way to strengthen merchant relationships to stave off attrition.
If you assume the merchants in your portfolio are aware of all of the products and services you have to offer and the value they can deliver, think again. It's not their job to assess what they need from what you have to offer; it's yours. Remind your merchants of all the solutions and services your company offers, both new and old, and show them how they can be used to accelerate their businesses.
First and foremost, make sure your sales and customer support staffs know everything you sell inside and out. If not, get them trained and up to speed pronto. Then, include your entire merchant portfolio in all of your outbound sales and marketing efforts, right along with all your prospects. Make sure they're included in your telephone, mail and email campaign lists.
Give your existing merchant customers the opportunity to purchase more by asking for additional business from them again and again. If they're not interested, they'll say so. But when they're included in the same communications and promotions you give to new prospects, they'll know all you have to offer and remember when the time comes to buy.
Make it a priority to stay on the radar screen of current customers by regularly checking in. So much of up-selling or cross-selling success depends on being in tune to the needs and wishes of your merchants.
Keep in touch to identify and understand the business challenges they face by engaging in low-pressure, sales-pitch-free discussions about real business issues and problems. Listen carefully to identify up-selling and cross-selling opportunities consistent with their needs. Then let them know how your products and services can fulfill them.
Value-added solutions are considered bolt-ons or add-ons. They offer desirable, but typically nonessential, functionality beyond your basic merchant services offering. You may want to offer a discount for buying two or three of them at the same time bundled into a package in a "buy two, get one free" scenario to make them more attractive. Your customers will feel they got a deal, while your company will still benefit from the added revenue that multiple products and services can bring - without taking too much of a bite out of your profit margin.
So while your business always needs new merchants, don't forget that the easiest and most predictable source of new revenue is right under your nose. It comes from merchant customers who already know your company. Make an effort to give up-selling and cross-selling a try if you want to make more money from the merchants you already have. You'll be pleasantly surprised when the money starts rolling in.
Peggy Bekavac Olson founded Strategic Marketing, a full-service marketing and communications firm specializing in financial services and electronic payment companies, after serving as Vice President of Marketing and Communications for TSYS. She can be reached at 480-706-0816 or email@example.com. Information about Strategic Marketing can be found at www.smktg.com.
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