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The Green Sheet Online Edition

October 08, 2012 • Issue 12:10:01

Avoid the price pitfall, sell on fairness

By Steve Norell
US Merchant Services Inc.

Every day, I read posts from merchant level salespeople that talk about the savings they are proposing to prospective merchants or how much they have had to reduce their pricing in order to keep a merchant. Whether these comments appear on GS Online's MLS Forum, in a blog or at a conference, I encounter the same old tired tune and complaints.

Over my many years in the business, I have constantly been amazed that in an effort to obtain merchants' business, the majority of sales pitches are based on the savings we can offer. Truth be told, I sometimes find myself falling into that same trap, only to regret it later and, moreover, be hurt by it.

Looking for a new strategy

Some years ago, I got tired of playing the rate game and racked my brain for an answer or solution to this nagging problem. What could I say or do to convince a merchant to be my customer, while not giving away my valuable service by using price as the only topic of discussion? I know what you must be thinking: offer service, service, service.

Sure, service is a great way to convince merchants how much they need you and everything you bring to the table. I thought so as well, until one day a merchant said, "Son, service is only as good as the last time you provided it." Also, how could I demonstrate how good my service is before I sign a merchant?

Deploying the fairness doctrine

Then it occurred to me. The selling point should be all about what is fair. That's right: fair, a simple four-letter word with a lot of power and potential. All right, so how does my own fairness doctrine get us out of the rate game? Let me explain.

When you are trying to sell a merchant on doing business with you, tell him or her that your price is a fair one. Not low, not high, not cheap, but fair. In all of my presentations, I make a point of explaining what makes my price and program fair.

I demonstrate to them that we have to answer their phone calls; show up in person in a timely manner to fix the simplest of problems; and keep them apprised of new rules, laws and changes to the processing cycle, as well as of new products and services. These services cost money, and I still need to make a profit. If I can't profit from the services I offer, I sure as heck cannot use or purchase that merchant's products or services.

Getting fed up, but not on filet mignon

I also make a point of turning the tables on merchants. For example, I ask a restauranteur to put himself or herself in my position. I take the menu and point to the filet mignon at $29.95 and ask what it costs the restaurant to put that product on the table.

After receiving a weird look, I chime in and offer that we should use a round number like $10, which means the restaurant owner is going to make $19.95. I then ask when a customer last sat down in the restaurant and, after looking at the menu, asked the waitperson the cost to the restaurant of the filet. The answer is always, never.

Even if customers had never asked such a question, have they ever offered to pay a certain amount over the restaurant's cost? Again, the answer is, never.

So if I were that customer, what would be a fair price for me to pay for the $29.95 filet? Is it $29.95, less, or maybe even more? What makes that price fair?

Walking away when necessary

Those of us in the acquiring industry are much the same. The only difference in this case is that I am actually showing the merchant what my costs and profit are. I do this because I feel that I am offering a valuable service at a fair price.

If merchants do not agree with me, it is time to thank them for the opportunity and wish them luck. On my way out the door, I mention that since I can't make a fair profit, I cannot eat there since I cannot afford it. Moreover, why would I eat at a restaurant that does not offer a fair price?

To me that is how the business world turns. We all are permitted to earn a fair profit so that we can buy what we need, enjoy good restaurants, take vacations or buy new cars. If we all sold at or under cost, then we would all be out of business. Keep in mind that cost is comprised of more than just your buy rates.

Using interchange pass-through

The method of pricing you use is up to you. I choose to use interchange pass-through so that I can be very transparent by revealing my costs and profit. You can do what I do regardless of the price method you choose.

However, always remember that if the merchant can identify with a simple four-letter word like fair, you will be ahead of your competition. And to be honest, wouldn't you rather deal with a merchant who is also a good business person? I know I would, since it makes it that much easier to repulse the competition when they show up with ridiculous claims.

And the truth is that I really want to eat at my favorite restaurant and order its $29.95 filet, which just so happens to be a fair price for what I receive in the way of the dining experience and quality of the product. Give it a shot, and see what happens. I think you will be surprised. end of article

Steve Norell is Director of Sales at US Merchant Services Inc. Based in Port St. Lucie, Fla., he oversees the USMS sales force and maintains the company's bank and processor relationships. You can reach him by email at steven@usmsllc.com or by phone at 772-220-7515.

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