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Table of Contents

Lead Story

The evolving online 'lendscape'

News

Industry Update

Gravity Payments resets minimum wage

Conflicting decisions on surcharging emerge in state courts

White House gets tough on cyber crime

NACHA finds ACH payments grew 5 percent in 2014

SEAA hosts Transaction Cardi Gras in New Orleans

Features

The long road leading to media mania

Will spam-free mobile prevail?

Selling Prepaid

Prepaid cards trump checks for payroll

Views

Bank account ownership expands worldwide

Patti Murphy
ProScribes Inc

The Gravity Payments pay bump: Can it work for the long haul?

Ken Musante
Eureka Payments LLC

Preparing the future of banking, payments

Brandes Elitch
CrossCheck Inc.

Education

Street SmartsSM:
Big data analytics for SMB merchants

Jeffrey I. Shavitz
Affinity Solutions Inc.

Face fears before changing course

Jeff Fortney
Clearent LLC

Make tax season easier next year

Vicki M. Daughdrill
Small Business Resources LLC

Company Profile

CardFlight Inc.

Direct Connect

New Products

Cloud-based analytics platform for SMB merchants

Insightics
First Data Corp.

ePayment made simple, flexible, convenient

Xpress-pay
Systems East Inc.

Inspiration

Recycle, reuse, reduce

Departments

Readers Speak

Resource Guide

Datebook

Skyscraper Ad

The Green Sheet Online Edition

May 11, 2015  •  Issue 15:05:01

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Street SmartsSM

Big data analytics for SMB merchants

By Jeffrey I. Shavitz

As our industry becomes more competitive, it is the goal of merchant level salespeople (MLSs) to continuously identify new trends, services and products for our small to midsize (SMB) merchants. It's hard to do. It's difficult to become proficient in selling multiple services, but that's why it's called work.

One subject gaining popularity within the industry and being marketed aggressively to merchants is offering data analytics, trends research and marketing campaigns derived from data. This information, dubbed "big data," provides business owners with metrics for more informed decision-making, a better understanding of customers, and the opportunity to discern a variety of other concrete facts so they can run their businesses based on factual data rather than gut feelings.

Interesting question: do you run your ISO and your business on fact, fiction or a combination of both? And wouldn't it be great to have the truth clarified with objective information to help better achieve your business goals?

As J. Wanamaker eloquently stated in the early 1900s, "Half the money I spend on advertising is wasted; the trouble is I don't know which half." With this profound statement, a responsibility of today's MLSs is to offer new value-added services to our merchants in addition to the gift and loyalty, cash advance and other valuable programs that are not the focus of this article.

Big data is not only for big companies; it is for organizations of all sizes. And this secure, scalable and predictive data provides a management tool of enormous value to our treasured merchant base. Whether you are a local neighborhood retailer or a large Fortune 500 company, using data to better manage your business has become critical.

A search for actionable results

Entrepreneurs who run SMBs are looking for analytics, but more importantly, they want to know how to use these numbers to provide actionable results. Data helps businesses identify problems, recognize patterns and gain meaningful insights to answer key questions like what ultimately drives sales, which deals are likely to close, how to make employees happy, and more.

There is the expression "analysis paralysis." That is not what we want to provide to SMBs; rather, we want to give them the opportunity to offer solid insights to merchants, which could mean the difference between closing and not closing processing deals. The ability to provide a turnkey solution with precision-targeted, performance-based campaigns supported by merchant processing is the ideal way to "sell" the SMB.

Selling is a funny word. Too many MLSs sell too hard, thinking, "If they build it, they will come" (as stated in Kevin Costner's film Field of Dreams). Merchants are thirsty for the next great solution to help build their businesses – and there are many programs and services you can align with. But do so soon because our industry is evolving at lightning speed, and the sales paradigm of five or 10 years ago no longer exists.

The payments ecosystem has changed. We all need to work together including the financial institutions, the acquirers, issuers, digital publishers, POS companies and mobile applications companies – all of us in the payments business. Using the technology and core competencies of each channel partner provides valuable information to merchants.

An opportunity, not just a challenge

This new big data world is not only about identifying problems faster, but also about solving problems that were not solvable before. When you put the right analytics to work on your big data problems, you can stop thinking of big data as only a challenge and start seeing big data as an opportunity.

But a look past the technical jargon will reveal that big data is about opportunity – the opportunity to learn from your company's data to make smarter business decisions. Larger companies have embraced big data for decades, and this newfound efficiency of larger competitors has been a very real threat to the sustainability of SMBs, but data analytics companies are now embracing the SMB marketplace with very robust programs.

If you're the owner of a small business, your ability to succeed in the face of larger competitors has likely been driven by your personal intuition and ability to provide a superior service. But big data is changing the business landscape.

Forward thinking business owners are starting to employ analytics and targeted marketing using data to drive new revenue. Some SMBs, whether retailers or online companies, are using big data to enhance product quality, improve marketing operations and further customer relationships. But what if you could help your merchants do the same?

What if you could offer a small retailer the ability to analyze the relationship between social-media conversations and buying trends to quickly capitalize on emerging sales opportunities? How about understanding how a merchant's pizza shop is doing relative to other pizza shops within a five-mile or 25-mile radius, or versus other pizza parlors nationally? What about category spend within a region, competitive performance comparisons, trends over a specific month, seasonality trends, spending profiles, target audiences, gross margin of best selling products, or knowing which days of the week are most profitable? I think you get the point.

A changing marketplace

Some believe big-data analytics projects are too costly and complex for a small business to take on. It's true that some legacy analytics solutions on the market were built for larger enterprises, but this is all changing. The SMB market, our marketplace, is ready for data analytics. As jgarza stated in GS Online's MLS Forum, "The way analytics are being sold now is negative to our industry because most of the time, the merchants do not understand analytics, trends demographics, modeling, psychographics and other items needed to truly leverage data."

Or what if, when launching a new online service, you were able to analyze your site's visitors and track how they move from page to page so as to understand what engages them? What if you could determine the things that turn them off and detect promotional and cross-selling opportunities?

As Empire posted on the MLS Forum, "I find that using tools to help a merchant better understand their business is invaluable for them. From a practical application – if you are a merchant in Southern California and learned 80 percent of your customers are traveling from the LA area to visit your store, you might target ads in the market where your customers are coming from to increase sales. Or you might consider expanding into that area with a new store."

Empire further stated, "Yes! The more information you can offer your merchants about their customers, the better engaged they will be, driving sales up and making your residual grow. Especially with an owner-operator that isn't always at the register, understand[ing] the teens hit up your store more than the twenty-somethings could come as a surprise and perhaps encourage you to carry a new product with a higher margin. The possibilities are endless."

Data is becoming increasingly visible with the growth of the Internet and social media and social networks. Ensuring up-to-date listings across relevant directories, directory updates and continuous monitoring of merchants' online reputations via top review sites is critical to the livelihoods of your merchants. The problem is that SMB merchants don't have the time or infrastructure to manage these processes.

Offering these types of analytic programs benefits ISOs and MLSs as an added-value service; a door opener to engage SMB prospects with a new story before discussing merchant processing; a way to form sticky relationships; and a new revenue stream source.

What to look for

It is critical that whatever program or service you choose to sell your merchant include the following attributes:

  1. Simplicity: A big-data solution for small businesses should be easy to deploy and use and take nominal time and limited brain power to employ – not several months. SMBs do not have a large group of specialized personnel to develop and analyze these programs. It must be the KISS (Keep It Simple Stupid) model. All the capabilities of the system should work together seamlessly.

    In addition, the system should not require staffers to undergo a lot of training and should include self-service capabilities so a broader audience of analysts and business users can use it without the need to involve the IT department.

  2. Affordability: A data solution for SMBs must be priced right. Customers should be able to pay for only the capabilities they need, and the licensing strategy should allow them to start small and scale up as the need for analytics increases.

    This approach is particularly useful for a rapidly growing SMB, where it's critical for the cost and capabilities of software investments to align with the rate of growth and expansion of the operation. And in some cases, a performance-based system will be employed whereby the merchant only pays based on success stories instead of a set monthly fee.

  3. Actionability: It's great to have all this solid, informative data – but what do you do with it? As a small business owner myself, this is where the rubber meets the road. Information is generated to reveal intelligence for myriad purposes. Identify a product or service solution that will result in an actionable proactive response for your merchants. If you can make this happen, your attrition will decrease exponentially, and you will provide real value to your customer.

Resources for SMBs

Remember, big data isn't just for big businesses with even bigger budgets. Today, small business, too, can reap the benefits of the massive amounts of online and offline information to make wise, data-driven decisions to grow their businesses. Although most big data discussions concern enterprises that have ample resources to hire data scientists and research firms, if you know where to look, there are several ways that a small business can gather, analyze and make sense of data it already has.

You don't need fancy, expensive software to begin gathering data. It can start from an asset you already have: your website. Google Analytics, Google's free web-traffic monitoring tool, provides all types of data about website visitors, using a multitude of metrics and traffic sources.

With Google Analytics, you can extract long-term data to reveal trends and other valuable information, so you can make wise, data-driven decisions. For instance, by tracking and analyzing visitor behavior – such as where traffic is coming from, how audiences engage and how long visitors stay on a website – you can make better decisions when striving to meet your website's or online store's goals.

Another example is analyzing social media traffic, which will allow you to make changes to your social media marketing campaigns based on what is and isn't working. Studying mobile visitors can also help you extract information about customers browsing your site using their mobile devices, so you can provide a better mobile experience.

Big data won't just help you make better business decisions. It can help you predict the future developments, spot customer sales trends and use predictive behavioral models to extract valuable information for future marketing campaigns. It can help you discover the most opportune product recommendations and track purchase histories, email behaviors and other metrics that can reveal which customers are profitable and worth reaching out to. Using solid data, businesses can better create personalized offers, track customer responses and launch improved outreach campaigns.

The value of credit card data is critical to the equation. It's no secret that credit card transactions are full of invaluable data. Although access was once limited to companies with significant resources, customer intelligence makes this information available to small businesses – without the big business budget.

Service companies playing in the data world work with merchants and payment systems to extract and analyze proprietary data from credit card purchases. This information can then be used to measure sales performance, evaluate customers and customer segments, improve promotions and loyalty programs, launch more-effective marketing campaigns, write better business plans, and perform other tasks that lead to smarter business decisions.

Increased awareness of big data

More importantly, every organization has an opportunity to leverage big data to its advantage – to drive accurate and timely decisions that can materially affect business and organizational goals. When you tackle big data with big analytics, you quickly realize that big data presents an opportunity for all businesses, large and small.

Big Data, Harnessing A Game Changing Asset, a recent report from the Economist Intelligence Unit sponsored by SAS, included the following highlights: Over the last year, 73 percent of survey respondents said their collection of data has increased either somewhat or significantly.

Companies self-identified as "strategic data managers" tended to financially outperform their competition more than others not so identified – 53 percent, compared with 36 percent.

More than half of the companies in the study indicated they expect analysis of the larger volume of data to help increase operational efficiency, inform strategic directions, improve customer service by understanding key drivers, and identify and develop new products and services.

The world of big data is now ready for SMBs. Introduce the concept to your customers, and you will have a natural segue to merchant processing and thereby create solid, long-term relationships with your merchants.

Jeffrey I. Shavitz is the founder of Charge Card Systems Inc., which was sold in 2012 to Card Connect. In addition to managing Alternative Merchant Processing, a high risk processing company, he is currently involved in many facets of the payments industry including consulting as Managing Director for Affinity Solutions Inc. and its Navigator product, which gives merchants the insights needed using targeted consumer and merchant data to drive new customer acquisition. For more information, contact jshavitz@affinitysolutions.com or 800-878-4100.

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

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