The Green Sheet Online Edition
May 12, 2014 • Issue 14:05:01
Improve merchant retention: Five quick steps
Recently, ePay Consulting Services contacted The Green Sheet to share results from its latest survey of acquirers and to offer tips on how payment businesses can be more effective in retaining their merchant customers.
According to ePay's report on the survey, titled Merchant Acquiring: Leading Practices in Retention Management, attrition is a growing concern for the payments industry. "As many as 50 percent of respondents are facing rising attrition of their merchant business with attrition rates ranging from 20 to 25 percent," the consultancy found after surveying a cross-section of ISOs and acquirers that had "collectively transacted $550 billion in bankcard sales for more than 1 million merchants."
In addition, ePay stated that in an effort "to stem rising attrition rates, more than 60 percent say they have changed the type of offers presented to merchants today compared to three years ago." However, ePay found that such offers are focused on price, and ePay believes this "is clearly contributing to the price wars" and not aiding with retention.
The consultancy endorses a more proactive approach, claiming that those who implement a proactive strategy focused on improved execution and timing experience an attrition rate that is 2 percent lower than those whose approach is merely reactive. It goes without saying that having a retention team is crucial. In addition, ePay provided five steps designed to shape such a team to become maximally proactive.
Excerpted, with permission, from materials provided by ePay, the five steps are:
- Identify at risk customers: Narrow your focus to only those merchants with a high propensity to attrite by applying a data-driven approach. While only few companies in the industry have begun to leverage predictive analytics and scoring methodologies to manage retention, most likely due to limited resources and capabilities in this area, the survey results showed there is significant interest in using this type of approach in 2014 and beyond.
For less investment and therefore less sophisticated tactics, internal triggers and analysis such as impending contract expirations, call history analysis and sales volume alerts can be leveraged to help identify at risk merchants. However, there are drawbacks with using less sophisticated tactics which can lead to too much noise in the data, inefficiencies and what some refer to as the risk of "waking up a sleeping giant."
- Determine resource capacity: Most retention operations balance resources between inbound and outbound retention campaigns and can encounter constraints to allocated resources to other campaigns.
Management should consider the capacity requirements to optimize workflow management of its proactive retention campaign (for example, we have five reps available that can contact 30 merchants each per week). In cases where there are resource constraints, consider leveraging digital channels, statement messaging and email campaigns to target lower priority merchants.
- Prioritize target customers: Once the business has a view into its resource capacity and other channels as part of its proactive retention campaign, the target list described in step 1 should be prioritized and segmented based on key factors and thresholds to yield better and faster results (for example, top priority merchants are based on defined revenue and score thresholds, if applicable, and should be contacted by a rep).
- Conduct pre-work: Often times, retention teams may need to gather information and conduct analysis upfront in order to know more about the customer and identify opportunities that will help the merchant before making the initial contact.
Some examples of pre-work activities may include scanning the prioritized list of target merchants for business exclusions, current account status, recent call history, last rate review and rate changes, analysis of current rates and fees, downgrade history, current equipment and account set-up, and potential cross-sell opportunities. As a result, reps may find that an offer can be made without negatively impacting margins and, in some cases, add new net revenue.
- Determine best offer and execute: Based on the outcome of the pre-work, retention representatives should then be able to assign the best fit offer available to specific merchants and be prepared to deliver consultative services to merchants. Some companies experience lower attrition rates and organic growth with fewer "give backs" when using a well designed proactive campaign.
For a full copy of the report, please visit www.epayconsulting.com.
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