By Nancy Drexler
SignaPay Ltd.
Now that the merchant acceptance market is saturated and payment processing is a commodity, certain merchant level salespeople (MLSs) have found a new way to generate income. Have you heard? Are you taking advantage?
It's simple. Just find a processor (and there are many) who offers two things: upfront bonuses and merchant contracts without cancellation fees.
Bring all your merchants to that processor, and collect your upfront monies. Then move them to a similar processor and do the same. Repeat as necessary, and you can live quite nicely on your bonus income.
It's happening across the industry. It joins a long list of opportunities - from free terminals to interchange pass-through to 2-cent transactions - to profit by grabbing new merchants at virtually any cost.
It makes it increasingly difficult to provide real value for service without lying, cheating or going broke. And it leaves those who don't want to build a business based on churn and burn with difficult questions and few good answers.
Rather than find ways to undercut price slashing and merchant moving, why not focus on making our merchants impervious to efforts to move them? It's called retention. Loyalty. Reducing attrition.
For straight-shooting businesses, merchant retention has become just as necessary as selling. What good is it to bring business in the door if it just goes right back out? It's far more cost effective to keep a customer than to replace one. And we are all feeling the pinch of sales efforts that yield an increasingly narrow profit margin.
But is it still possible to keep a merchant loyal? I thought I knew the answer to that. I thought I was doing a pretty good job of it, too - until I got an angry telephone call from one of our best ISOs.
"Stop getting involved with my merchants," he said. "Stop calling them. Don't send them newsletters. Cancel those birthday cards." The point, this ISO said, was to stay under the radar. "Things are good when they don't know I exist," he insisted.
"Don't you want to share good, positive things with them?" I asked. Nope. "No good deed goes unpunished," is his mantra.
I needed a reality check. I posted a question on the GS Online's MLS Forum, and sent an email to our SignaPay ISOs. "Do you care about retention?" I asked. "Are you doing anything about it? Is it working?"
It's huge, they told me. Critical. Important in every business, but invaluable when you talk about residual income. Help us, they pleaded. But opinions about who is responsible for retention varied.
"It is really the job of the agent," said Marty Wood, Managing Partner of SignaPay Tennessee. "If a merchant can get good, quick answers from his salesperson, he'll be pretty satisfied. People don't leave you unless there is a problem."
David Arias, Chief Executive Officer of the California ISO Get Bankcard, acknowledged that personal relationships are critical, but he encourages his merchants to develop those relationships with him, rather than with his agents or his processor.
"Every one of my merchants knows who I am and knows how to reach me and knows they can call me at any time," he said. "At the very least, my merchants let me know when someone comes knocking at their door."
Arias is proud of these relationships and considers them critical to his high merchant retention levels. He mentioned a recent phone call he received from one of his larger merchants, who said, "This salesman called and told me you are ripping me off and he's coming to see me on Tuesday at 3 p.m. Can you be here?" Arias was there, and he saved the account.
"Name recognition and reliability is the key," Clearent's Jeff Fortney added. "They need to know you exist, what you do and why you do it. They need to know you can help their friends and neighbors as well."
Are these "touches" enough to keep merchants sticky? Not according to some ISOs. Wood, for instance, encourages agents to upsell, cross sell, resell and sell again. "The more of your products or services the merchant uses, the harder it will be for him to leave," he said.
Others believe it's all about value. Capital Bankcard's Doug Small, for instance, recommends newsletters because of the variety of ways they can be used to add value. Small suggests using newsletters to educate merchants on things like chargebacks, PIN versus signature debit, and new product offerings.
Small noted that a newsletter is also "a good place to talk about competition and some half-truths that your merchants may be hearing, and remind them to contact you before thinking about switching to another provider."
Educating merchants is essential to both sales and retention programs. Merchants are empowering themselves by learning more, fighting for better rates and programs, and complaining loudly to anyone who will listen - using everything from social networking to Better Business Bureau websites.
In today's customer-centric marketing environment, a commitment to education can help a payment business establish itself as a thought leader, boost word-of-mouth sales, and build the kind of trust and respect that, in turn, boosts retention.
Education, however, is part of a process that typically falls in the marketing realm. Some sales agents favor simple, effective touches that focus on the value that they, as individuals, add, not on the value that their company adds.
"You don't want them to feel that you are always trying to sell them something, but are there to help them when they need it," FrontStream Payments' Bruce Dubbert said.
Steve Norell, CEO of US Merchant Services, added, "[M]ake them feel that you are not just taking money from them but also putting money in their pocket as well. If you sell a lot of restaurants, then eat in one of them every week."
Taking a similar approach, Small advised, "Know when their busiest months are and contact them a few weeks beforehand to see if they need supplies or any training for new staff ... merchants will really appreciate that you know their business and are not just another salesman" who will make a sale and then vanish.
Richard Cesario, President of Green Key Fuels LLC believes that "merchants feel abandoned once they are enrolled and their account is active." Cesario recalled the days when he sold merchant processing services.
He sent all new merchants a thank-you card within one week of approval. The card included a certificate that offered a "free six month rate evaluation" to assure that rates were kept competitive, plus a promise of $100 for any written quote he couldn't beat.
Cesario understood that earning loyalty takes time. It starts from the initial sales or marketing contact, and extends even beyond the contract dates. By offering a six-month rate review, Cesario was, in effect, scheduling a retention meeting with each merchant.
With a single communication, he boosted loyalty twice: when the merchant was newly activated and again after six months.
What's more, this single effort communicated a number of loyalty-inducing messages:
2. It acknowledged the major merchant concern: rates. It told them their newly chosen service provider was fluid and flexible, committed to keeping rates low, and confident in its ability to do so.
3. The promise of a rate review let merchants know Cesario intended to be around six months down the road, an important confidence booster for any business relationship.
Many retention programs are time-triggered: the ISO schedules regular calls or visits every so many days, or sends written communications or hosts webinars according to another preset time schedule, be it monthly, quarterly, bi-annually, etc.
Some retention programs are triggered by events, like birthdays. Other events might include when a merchant receives his or her first statement.
Under the guise of helping a merchant understand the statement, the contact helps to relieve fallout from the first reminder of the reality that transaction processing costs money.
Some ISOs even use processing volume as a trigger and touch base with merchants whenever their monthly numbers are unusually weak or strong.
There is no greater trigger than a rate increase or new fee. This is the moment when anger takes hold, and all the newsletters, birthday cards and free terminals merchants have received are forgotten.
While potentially lethal to loyalty, rate changes and fee hikes don't come out of the blue. We all know that at some point during our relationship with every merchant, we are likely to raise their rates or assess a new fee.
Preparing merchants for these changes and preparing yourself for their reaction are integral to the ongoing process of fostering loyalty and retention.
It begins with honesty and transparency. Merchants who leave you as a direct result of a new or boosted rate are leaving out of anger. Some of this acrimony springs from a feeling of being deceived.
Reps who close deals based on rate promises are often making promises they cannot keep. Even if rate assurances are only implied, merchants always perceive them as written in stone.
In the payments industry, we often have to make decisions based on elements outside of our control. It is important that customers understand this from the beginning.
Promising to be honest, fair and transparent is a commitment you can honor; promising to control rates usually is not. While false assurances may help you close a deal, you may be bringing in business you can't afford to have and are not likely to keep.
Preparing customers for rate increases should involve as much advance notice as possible. Often, fee hikes are best introduced in stages. Newsletters, for instance, can report on card company decisions such as annual category reviews or new Payment Card Industry Data Security Standard compliance programs.
You've set the stage for a coming rate adjustment by placing responsibility for it squarely on someone else's shoulders.
Once you are prepared to communicate the specifics of a rate adjustment, do it as clearly, simply and logically as you can.
Your messaging should let customers know: this is what you can expect; this is why it is happening; we recognize your sentiment and feel your pain. This will give you time to gauge the fallout and defray some of it.
The beauty of communicating via an ongoing process rather than with one shot is that you have time to perfect your messaging and responses, and alter misconceptions. Before any communication gets sent, your entire team should be fully briefed and armed with unified responses to questions and issues.
Responses should be based on a clearly understood and accepted answer to the following: at what point are you prepared to reduce or waive a fee in order to retain a merchant?
Clarifying parameters in advance will keep conversations honest and ensure that you don't lose merchants before you've realized how easy and lucrative it would have been to keep them in your portfolio.
Just like a rewarding relationship, loyalty should be based on respect and trust. Fostering loyalty should be mandated, valued and possibly even incented at every level of your business.
Everyone who represents your brand should be responsible for making customers feel recognized and acknowledged. And that means taking responsibility and accepting pain when we make mistakes or fail to act as reasonable partners.
We're all going to lose merchants. Sometimes that can't be avoided. But sometimes it can.
Nancy Drexler is the Vice President, Marketing for SignaPay Ltd., an ISO headquartered in Dallas. Reach her at nancyd@signapay.net.
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