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Table of Contents

Lead Story

Diversification versus specialization: Which is better?

News

Industry Update

NetBank bubble bursts over mortgage loans

Feds propose rules on Internet gambling

Merchants give Congress their take on interchange

Kinks at the QSR drive-thru

Is the PCI DSS pie in the sky? The NRF's Hogan wants to know

Ontario nixes 'use it or lose it' gift cards

Features

The skinny on trade associations

U.K. banks push contactless tech, despite consumer demand for cash

Ron Delnevo
Bank Machine Ltd.

Views

The assault on interchange widens

Patti Murphy
The Takoma Group

Coping with the credit crunch

Biff Matthews
CardWare International

Clich├ęs, monsters and a dog named Spot

Education

Street SmartsSM:
Next stop: Tradeshows

Dee Karawadra
Impact PaySystem

Using e-mail effectively: Managing lists

Nancy Drexler
Marketing Moguls

Don't let security slide

Steve Schwimmer
Renaissance Merchant Services

PCI DSS implementation: A concise review

Robert Heinrich
Alpha Card Services Inc.

Dam spam with secure e-mail

Michael Petitti
Trustwave

The next ISO widow could be yours

Adam Atlas
Attorney at Law

Company Profile

Comstar Interactive

New Products

PIN protection for online purchases

PIN Debit Service
ATM Direct

A payment plug-in quick as a hare

Skipjack Payment Plug-in
Skipjack Financial Services, Inc.

Inspiration

Optimism is an inside job

Miscellaneous

POScript

Departments

Forum

Resource Guide

Datebook

Skyscraper Ad

The Green Sheet Online Edition

October 22, 2007  •  Issue 07:10:02

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Diversification versus specialization: Which is better?

For many, the mantra for sales success in this industry has been specialize, specialize, specialize. Mining one narrow niche allows you to market your expertise, offer added value and earn referrals. But sometimes the mantra is entirely different: diversify, diversify, diversify.

Don't bet your entire future on one horse, diversification proponents say. Enterprising merchant level salespeople (MLSs) prosper; adaptability is what counts. Offering a range of products makes you more valuable to your customers and can make smaller clients more profitable.

There is also the reality that you can specialize in one way and diversify in others and vice versa. For example, you could focus all of your efforts on the petroleum market but offer gasoline retailers all manner of value-added products.

Thus you would be specialized in terms of the market segment you serve, but you would be diversified in terms of your product mix. Or, you could offer only one state-of-the-art wireless POS system and transaction processing package to a range of businesses large and small.

With so many paths to success, what do you do?

Follow your own beat

According to Linda Finkle, Chief Executive Officer of the Incedo Group, an executive coaching firm, staying true to yourself is key.

"There are many roads to success, and many factors that determine which road to take," she said. "Some salespeople would rather go deep within an industry or product/service area, and others like the variety of selling to many industries or a variety of products.

"Ask yourself what keeps you excited. Personally, I get bored really easily, so if I had to specialize in one industry or one product I'd pull my hair out. So having variety keeps me jazzed."

There are other conditions to consider in the business equation. Finkle suggested MLSs ask themselves the following:

Work within parameters

Finkle noted that factors besides personality can also come into play. "Sometimes the economy factors into the decision, or your sales territory," she said. "If you have a defined territory, you may want to diversify in order to open up more possibilities.

"If on the other hand your territory is wide open ... you may want to specialize. How much support you get with administration and product learning can have an effect as well. If you have lots of administrative areas to cover yourself, you may want to limit diversification."

An argument can be made that with some careful thought, you can try to do both: specialize in one market niche, but diversify your product line.

But many sales experts passionately choose an end of the spectrum and agree that an MLS can't be simultaneously indecisive as well as successful. Pick a side, or pick mediocrity, they challenge.

Roll call for specialization

First, let's hear from some professionals who favor specialization:

Mary Cantando

Mary Cantando, author of The Woman's Advantage: 20 Women Entrepreneurs Show You What it Takes to Grow Your Business, said by moving from diversification to specialization, she increased rates and revenue by 100% in a single year.

"I'm working the same hours but my revenues have doubled," she said. "I had targeted privately held companies and decided to focus exclusively on women business owners. I rebranded my company to WomanBusinessOwner.com and it started raining clients.

"The key is to identify an overlooked market and then spread the word that you focus exclusively on that market."

Aaron Bills

Aaron Bills, CEO of 3Delta Systems Inc, suggests that picking a niche like business-to-business (B2B) is not only more profitable, but more interesting.

"Selling processing into retail has become a commodity or price-based business," he said. "B2B requires more of a consulting or solution oriented sales approach.

"It takes more knowledge of your customers business, and your presentation will cover more than price and points, but these skills can be adapted to more complex sales.

"And I believe most ISOs and MLSs will find that this area is simply far less crowded. It is more complex, but a more interesting sale."

Bills added that defining the niche even further -government purchasing office, for instance - can lead to referrals from customers themselves.

"I'd never counsel anyone to throw everything in one basket," Bills said. "To be a jack of all trades but a master of none wouldn't be my recommendation, either.

"If you find a rich and vibrant opportunity like B2B, and it is a good fit for you personally, then you have what you need to be successful."

Matt Hoskins

Matt Hoskins, CEO of Payment Processing Technologies LLC, suggested that a niche like e-commerce could prove a wise choice, too. He said e-commerce has higher margin, growth potential, lower attrition and less competition. "Very few even call on e-commerce," he said.

Hoskins said there are "multiple facets to selling e-commerce versus retail. I would certainly say that a part-timer would have difficulty providing the proper solution for his merchant."

Zale Tabakman

Zale Tabakman, a motivational speaker whose most popular presentation is "Successfully Growing Your Revenues by 25% Annually," said to always specialize.

"The way to achieve success to have some short term goals," he said. "You know who the companies are. People can refer you because they know exactly who you are looking for. When you are totally focused, you don't spend time deciding if the client is right or wrong for you. You know exactly who they are."

Jeffrey Shavitz

Jeffrey Shavitz, Executive Vice President of Charge Card Systems Inc., agreed.

"As the merchant services industry becomes more competitive, ISOs and agents have a true competitive advantage if they are a specialist or expert in a particular vertical niche," he said.

For example, Shavitz said CCS has created a division called CCS Medical where it works exclusively with hospitals, health care companies and medical practices to help develop more efficient credit card programs.

Many ISOs believe credit card processing is the same whether you are working with a B2B merchant or Internet account, but it's not.

According to Shavitz, there are specific industry variables - insurance verification programs, medical cost center identification and technology programs - that will help a hospital administrator run a facility more efficiently.

Shavitz said merchants like to work with processors who have an understanding of their industry and can explain case studies from prior experience.

As the credit card industry becomes more complex, he encouraged specialization.

Terence Van Horn

But what to specialize in? Terence Van Horn, Merchant Advocate for the Van Horn Group, an ISO, suggested looking back over successful sales in the past few months to find a pattern.

"Was it restaurant, medical, auto repair, new car dealerships, small grocers or sanitation?" he asked. "Is there a certain environment that you really enjoy being in?

"Do you just love walking into those beauty salons with your suit and tie on, being the entrepreneur that you are? ... It's good to sell in a setting that you will find comfortable, just makes your job much easier."

Van Horn encourages MLSs to ask themselves what products or services they would want. "You must fall in love with what you are offering to your client, then they will feel comfortable believing that you really care about them," he said.

"When a client knows or feels that you care, the guards will go down, and they will be more receptive to listen to what you are saying to them."

Roll call for diversification

Now, let's hear from those in favor of diversification.

Jeff Fortney

Jeff Fortney, Director at Clearent LLC, suggested those who start out being generalists will automatically drift toward specialization over time.

"Even doctors first learn the basics before they specialize," he said. Fortney said it is hard to specialize in the beginning, but a niche will be found later.

"I see too many people in the industry who try to specialize in one type of merchant only, and have nothing to help them penetrate that type," he said. "By being a generalist at the beginning, your specialization will ultimately develop."

Finding your niche, your specialty, so to speak, will also depend on your processing partner, Fortney said. With hard work and concentration, the areas of interest to you will become obvious.

Henry Helgeson

Henry Helgeson, President of Merchant Warehouse, agreed. "I think it's important for an MLS to have a good general understanding of every aspect of the business before trying to specialize in one particular niche," he said.

To Helgeson, it seems the most common businesses are picked over and the margins have gone to nearly zero.

But, he added, "If an MLS can find the right niche to specialize in they may be able to not only reduce the number of competitors they have to face, but they may also be able to regain some margin in their accounts." Alan Weiss "Always diversify," said Alan Weiss Ph.D., President of Summit Consulting Group. He pointed out that specialization has these drawbacks:

David A. Fields

Expertise of the MLS is not necessarily a sales feature for the customer. "There are no famous hammer salesmen," David A. Fields, Managing Director of Ascendant Consulting, said.

"To the extremely specialized salesperson, every customer's problem looks like a nail which their 'hammer solution' can hit. But that adds little value for most customers, which is why the best salespeople aren't specialists."

Fields mentioned that the size of the sale is perfectly balanced when adding or deleting one product decreases the overall value to the customers, taking into account the salesperson's knowledge about each product, the customers' real need for knowledge and the benefits of a broader portfolio.

It appears that the advocates of diversification and those in favor of specialization all have strong arguments, and no clear winning viewpoint has emerged through this exploration.

It's all about what helps you get deals signed day by day. Which path are you going to follow?

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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