By Steve Norell
US Merchant Services Inc.
How many times have you called one of your competitors and asked to meet in person? The answer is most likely never. Let me describe a type of incident we've all experienced and been frustrated by repeatedly.
You're working in your chosen market area and doing quite well. Business is growing, merchants are happy and revenue is increasing. Then, without warning, bang! A merchant calls saying she switched to a new company because the company's merchant level salesperson (MLS) saved her $1,500 a year. No warning, no opportunity to respond and no come back.
The next week, another merchant calls with the same story, and it becomes a recurring theme. Even worse, it appears the same person, Joe MLS, is taking all your business. What do you do?
The usual answer is that you visit with your former merchants and try to save the accounts, which is a waste of time since they've purchased new terminals on a lease and have contracts with the new company. Or you can use Plan B: find out all you can about Joe MLS and his company.
Over the years, this has happened to me numerous times, and I've kept in mind how strongly a former employer emphasized the importance of knowing your competition. It's essential to keep competitive information on hand, so when the time is right, you can produce it to your advantage.
Here are steps I take when dealing with a competitor in my backyard:
Here's an example of how I used this method to respond to the competitive threat. Merchants started to cancel and were switching to the same company. Often, it was the same MLS. I met with a merchant who had already moved and obtained a copy of the app, the competitor's marketing material and the name of the MLS.
The MLS was quoting a flat rate pricing, which is not uncommon, but it was under cost. It doesn't take a genius to know that not only will this not work, but it will also most likely change. The app showed just one rate, and the only other fees were an annual fee and a PCI fee. Other than that, it was 1.85 percent. We waited two months to see what was on the statement, and the merchant was being charged exactly what was on the app. At this point, all I could do was say good luck, and if anything changes, call me.
About six months later, I received a call from another former merchant who had switched to this ISO and wanted to come back, claiming he'd been misled by this ISO. I was able to obtain the app, current statement and marketing program information. Everything was the same except for the statement. The rates were significantly higher than the rates on the app.
The merchant asked the ISO why the statement rates were higher than those on the app. The answer was Visa and Mastercard had enacted rate increases in April and in October, which allowed the ISO to increase rates despite the fact that neither card brand increase pertained to this merchant. The merchant also asked why he was being charged fees unrelated to Visa and Mastercard, and the company said the merchant was sent a letter announcing fee changes.
So what did I achieve from this exercise? I now knew how this ISO worked and what the company's weak points were for use in the future. My company then provided each of our MLSs a copy of the competitor's marketing material, copy of the app (merchant name blacked out) and copy of the statement showing the discrepancy in the rates. (I did call one of the competing MLSs to have lunch, but the rep declined.)
Whether or not you want to use any of my suggestions is up to you but consider this. When I started in this business in 1995, few MLSs were in the market. Most, MLSs did not pursue existing merchants in an effort to move them. That's because at best only 60 percent of merchants were taking credit cards. A huge untapped market of merchants wanted to take cards and buy or lease a terminal. That was where the money was.
In addition, the pricing was simple and concise. There were nowhere near the fees that have been added over the years. Thus, we all made far more money with little competition, including the banks, which wouldn't even take card-not-present merchants.
Today the industry has flipped 180 degrees, and if you don't know your competition and are not willing to use the information you have compiled on them to your advantage, the odds are you will continue to lose merchants at an alarming rate.
Steve Norell is director of sales at US Merchant Services Inc. Based in Port St. Lucie, Fla., he oversees the USMS sales force and maintains the company's bank and processor relationships. You can reach him by email at firstname.lastname@example.org or by phone at 772-220-7515.
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