The Green Sheet Online Edition
July 23, 2007 • Issue 07:07:02
Value-adds: Recipe for success? Part II
Value-added products and services such as gift and loyalty cards, check services, and merchant cash advance programs are key ingredients to the blue-ribbon recipe for customer "stickiness."
But so many programs and options are available, how will ISOs and merchant level salespeople (MLSs) know which ones, if any, are right for their clients and prospects?
We asked members of The Green Sheet Advisory Board the following questions:
- What value-added products should ISOs and merchant level salespeople be able to sell to merchants in order to compete today?
- Is it possible for ISOs and MLSs to have too large a selection of products and services?
- How would you recommend they evaluate value-added programs before offering them to customers?
Last month, we printed insights offered by a portion of GS Advisory Board members. Following are the second (and final) set of responses, in alphabetical order:
John Arato, MagTek Inc.
The key is getting involved and learning about a value-added service before the rest of the market does, especially your competitors.
Being first to market certainly adds value and will help you keep your customers longer and cut down on attrition.
Right now, some of the newest value-added services you can offer your customers are programs like back-office conversion for checks.
This program adds value for your merchants. They can deposit checks electronically and get paid faster.
Also, e-check programs and gift card processing: Both offer merchants valuable options that will add profits to their bottom line.
Jerry M. Julien, Equity Commerce LP
- The best way for any ISO/MLS to know what is the best ancillary product for their merchants is to simply maintain an ongoing, constant working relationship with their merchants.
By staying in touch with your merchants they will tell you what their needs are as their business changes.
Oftentimes, offering the merchant an ancillary product that may help reduce their credit card fees or some other fees may, in the short term, cut into your residual income but will reward you [because] your merchant will have faith that you are looking out for their best interest, and you will actually make more money over the longer period.
I do not believe a good ISO/MLS will determine what is the most important value-added service. They will let the merchant's needs determine this for them, then have the array of products ready and waiting, and have the knowledge, pricing and details ready to discuss on the spot.
- While I don't think it's ever a bad thing to have many value-add-on products and services available, I do feel you need to be careful that you are adequately trained and knowledgeable on these products, or it could backfire on you.
You are ultimately the face of the relationship, and the person the merchant trusts and will turn to in the time of need for questions, comments or concerns.
If your merchant contacts you and all you do is simply refer them to another number or e-mail address, this may cause the merchant to become unsatisfied at the service level and make them look elsewhere or consider other offers.
- Again, I refer back to my answer on No. 1. However, it is the ISO's/MLS's responsibility to keep up with the new product offerings within the marketplace, so when the merchant does inquire or the agent sees an opportunity, they can be prepared to addressit immediately.
Lazaros Kalemis, Alpha Card Services Inc.
When considering which value-added services are important to our customers we take a few steps, as far as our due diligence.
- We constantly analyze the reason for merchant closures to see if there is an underlying reason [and] some type of value-added service [that] would help us retain those merchants.
- We talk to our sales groups to see if their current or prospective merchants are asking about this and if we are losing deals because of it.
- Finally, we take a pooling of our merchant base to see if a certain value-added service would be important to them.
By taking these steps we usually stay ahead of any developing niche, and it enables us to be one of the first to market with these types of services.
I believe the most important value-added service in today's economy is the advance.
With the downturn in the economy and the tightening of loan procedures by the banks, having the ability to offer your merchants cash advances on their future credit card sales really helps them out of binds and creates more loyalty.
In respect to offering too much, … when you give someone too many choices, it usually leads to them not being able to make a choice.
The old sales philosophy KISS (keep it simple, stupid) applies. Before anyone considers adding new products or services, they should do their due diligence and make sure there is a real need, not a perceived need.
Dan Lewis, AmeriBanc National Ltd.
Wow, the best way to answer the question of which value-added service is most important is by saying all of them. The more value-adds you have to offer, the better your chances are of signing up that merchant.
Everyone competes and makes rates the first priority; however, they should concentrate on building value for the merchant.
Showing him or her something different that they probably do not have but use every day at the large retailers, will help you win over an existing merchant.
Ask anyone what all the large retailers ask when you hand them a credit card, and everyone will tell you:credit or debit?
Now, ask the small to medium-sized merchant if he ever asks those same words when they hand him a credit card, and he will say no. Why not?
Showing them the benefit of PIN-based debit instead of just lowering their offline debit rates; that is value-add.
Electronic check processing is another value-added service that benefits the merchant. Again, ask them if they have ever seen the large retailers put a check into an electronic reader. The answer, of course, is yes.
The large retailers are taking that check and converting it into an electronic transaction, thereby eliminating the need to fill out deposit slips and saving the time it takes to drive to the bank and deposit the checks.
What does that mean to the merchant? It saves him time and, in most cases, money. Additionally, many companies will guarantee those checks so that they will never bounce.
What about gift cards? Ask your prospect if they have ever purchased a gift card or had one given to them. Of course they have.
However, if you were to ask where the gift cards were from, you and everyone else would name off the large retailers.
No one would name off the small merchant such as Bob's Grill or Joe's Cleaners. And the question is why? They need them just as much as the big guys do. That is value-add.
How can small to medium-sized merchants get people into their store and spend money in their store? The answer is by offering their customers the same things that they use every day at the large retailers.
For example discussing the new tap-and-go technology with a merchant is a huge advantage because it is something new that most merchants do not have yet.
Those are just a few of the things being offered to our retail storefront merchants. You can look at wireless merchants and MO/TO merchants and come up with many new ways of presenting value-added services without merely talking about rates.
We like to call it the great rate debate. Anything that we can do to discuss value-added services, and the benefits it can have for the merchant is always a better conversation [opener] than "What is your rate?"
Do not get me wrong, rates will always have to be discussed; however, is it not better to show them the benefits of value-added services before discussing rates?
Douglas Mack, Card Payment Systems
Value-added services are definitely important. Knowing which to sell is a matter of experience and asking the right questions. We often run across situations where newbies are selling their "super package deal" because that's what they have been taught to sell.
The merchant may also be new and simply not know any better. This certainly isn't doing them any favors. Let's face it.
Does a night club really need check guarantee? Probably not any more than a divorce attorney needs gift cards. So I guess a little common sense helps, too.
I don't know that I can say any one service is the most important. It does seem check protection services and gift cards are probably the most common.
Solutions that revolve around what you know are most important, in my humble opinion.
Becoming a specialist in long distance or payroll, to me, seems ludicrous. There is a whole other level of expertise required there. I remember when Ameritech/SBC started selling credit card services. That was funny!
Partnerships with specialists in relating industries is a great idea. Ultimately, my advice is to stick to your core: credit, debit, checks, gift, e-commerce and prepaid. And for god's sake, only sell what the client needs.
Jeffrey Shavitz, Charge Card Systems Inc.
At Charge Card Systems, we believe in the "less is more" philosophy. Although we offer a plethora of value-added solutions, we are concentrating only on three for the balance of 2007 and 2008.
- Marketing services. We all know we are in a sales industry, and in this regard, CCS has started a three-, six- or nine-month marketing program that we will implement for our active sales agents.
Our marketing program is industry-specific and includes a combination of direct mail postcards, three-dimensional promotional mailings and trade publication advertising. Using these many touch points of advertising, our sales partners will be receiving incoming sales calls within five to seven weeks from starting the program.
- Lead generation. Using our in-house call center, we will schedule appointments for our agents. We have determined that some salespeople are better at closing deals, and we will do everything in our power to help our closers do just that and not spend time on prospecting new merchants.
There is a real cost to generating active leads, and with this model, we closely monitor their closing ratios to better understand if this value-added service is a win-win for both our agent and CCS.
- Insurance. We believe that offering health insurance is a value-added service to nurturing and maintaining our agent base. Again, we only offer this benefit to our active agents who believe in the spirit and partnership of working with one ISO.
Scott Wagner, Humboldt Merchant Services LP
Great questions. From the perspective of being a mid-sized acquirer and a bank, I have firsthand knowledge of what works well for our merchants.
In another life, when I worked for one of the bigger processors, I always led with the line: "I don't want to interfere with your banking relationship.
"Let your bank handle your checking accounts, CD's, loans, etc. But let a credit card processing company handle your payment processing because, like your bank, we are the expert in our field."
While maybe somewhat accurate at the time, because most banks did not handle their merchant services internally, it most certainly does not apply to my current scenario.
Here at HMS I work on the direct sales team. That means I am a W-2 employee and, in my particular case, work in my bank's corporate headquarters.
The direct sales team, run by long-time industry veteran Pat Ford, has it's presence inside our bank's (First National Bank Holding Co.'s) footprint.
We, like many other MLSs, have an array of value-added services and products from which to choose. Since most have likely already been mentioned in this article, I am not going to list them for you.
I will say that, generically, services and products like equipment, gift cards, gateways, and other vendors represent critical mass for us.
And those partners that support us in the professional manner in which they do make our job that much easier.
However, we have a couple of nontraditional secret weapons. HMS does the lion's share of "customer touch" work in-house. We have an operations facility that is second to none.
From front-end boarding of our merchants, to deployment, to credit, to back-end customer support, to on going risk, it is all done in-house. And done spectacularly I might add.
In addition to HMS, we have our bank partners. This group is invaluable and helps promote our product. For example, the commercial loan department works with me and touts HMS on a daily basis. We are not some hired or independent sales force; we are all part of the same family.
And if it's not our commercial department singing our praises, it's retail or nonprofit, or SBA, or wealth management or another channel.
Specifically, where I live and work, First National Bank of Arizona [part of First National Bank Holding] has been voted Arizona's No. 1 bank two years in a row by Ranking Arizona.
These two value-added services, because I present them as such daily while I am selling, represent reasons why our accounts are as sticky and profitable as they are.
We thank the GS Advisory Board members who responded to our questions. More of their responses are in Part I of this article: "Value-adds: Recipe for success? Part I," The Green Sheet, June 25, 2007, issue 07:06:02.
For more information about this topic, read "Value-added products and services: It's all in the presentation" (GSQ, June 2007, Vol. 10, No. 2).
Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.