By Jeff Fortney
When I started in the payments world, March and September were known as merchant retention months. The reason was all to do with interchange. In February, the card brands would announce their interchange adjustments (which were normally increases in some fashion) for April release. The same would occur in August for October release.
In those days, the most common pricing model was tiered or discount. As such, an increase in interchange required an increase in tiered levels. In other words, the merchant's rates would increase. It was also common for some companies to add a little to the rate to increase profits.
The ISOs back then saw these increases as a blessing and a curse. May was seen as a great selling month for new merchants. Merchant level salespeople (MLSs) would "encourage" prospects to review their statements, as there were likely price increases. They would then wonder aloud why the merchants weren't informed. As a result, more merchants were willing to listen to their sales pitch.
To the MLSs, that was a blessing. The curse was that, while they were selling to new merchants, their merchants were being sold to by other agents. To avoid this, it was imperative that they advise their merchant base of what was upcoming, and why. Thus, merchant retention month was born.
Today, the most common merchant pricing is interchange plus. Changes we've seen have normally applied to monthly expenses or small transactional increases. Merchants typically review their statements (when they review them) by determining the effective rate, and the changes in the recent past have had minimal effect on the effective rate.
With the elimination of the Electronic Interchange Reimbursement Fee and standard, and the creation of the new non-qualified category, effective rates can potentially spike as much as 0.85 percent. Yes, March and April are retention months again. But unlike in years past, the rules of engagement have changed.
You have to communicate the changes before they happen in a fashion that leads merchants to listen to you first. You must have a conversation. In the old days, conversations were done face to face or by phone, email, and later texting. Today, I would guess the favored communication line for most merchants would be text followed by email. However, in both of those cases, the tone can't be controlled. The message can be misunderstood – and not in a good way.
There are really two options: the telephone or face to face. Before deciding on what is the best option, begin by rating your merchant base by profit, with the most profitable at the top and the least at the bottom. Notice I didn't say by size. Rate them by the most important matrix: profit.
Identify your top merchants. The number is your call; it could be 10 or even 20. Just know that whoever you identify as your top merchant requires a face-to-face visit (or an alternative such as a Zoom meeting when social distancing mandates due to COVID-19 are in place).
Next, Identify those at the lowest level. These are the merchants who don't generate revenue above your minimum return (yes, you should have a minimum return level). These are the merchants that – if you have time – you will call.
The remaining group need either a phone call or, if social distancing mandates are lifted, a visit. The criteria that will determine whether you call or visit is yours to decide. For example, if the merchant is located near one of your top merchants, a visit may be warranted – as well as convenient. Or if the merchant is a long-time merchant who sends you business, a visit may be wise.
After classifying, prepare for those you are visiting by pulling the most recent statement and identifying where the changes may impact them (if they do). Outline your discussion in advance, remembering that the goal is to explain the changes in layman's terms, and how they may (or may not) affect the merchant. Be honest and clear.
Be prepared to answer questions again in layman's terms. Close with a caveat along these lines: "I want to warn you that in May, agents are going to tell you how much I have raised their costs. When they do, be prepared to tell them that you and I have already talked, and you understand the changes. Don't let them mislead you."
Use the same approach for those you telephone. They may not be able to see the statement, but they can understand the discussion. In all cases, close with the caveat.
By spending March and April retaining your merchants while adding new ones, you will handle fewer calls in May – and fewer merchants lost. You can also then spend May visiting prospects, asking them, "Did you know your rates went up?"
Jeff Fortney is senior vice president of business development and partnerships for TouchSuite LLC, a fintech company providing POS systems, payment processing, SEO solutions, working capital and marketing services to small and midsize businesses. A long-time payments industry professional and mentor, Jeff focuses on strengthening and developing corporate partnerships and evaluating new business to drive strategic growth. He can be reached at firstname.lastname@example.org.
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