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The Case of the Missing Merchants

By Lin Fellerman

I have written before about merchant attrition resulting from pricing avarice. Let's consider another angle to the case of the missing merchants: Assume for a moment that top management's attention to detail has something to do with customer erosion. It seems somewhat inconceivable to me that some of the best sales- and marketing-driven companies fail to focus on back-end, post-sale account maintenance, but they do.

The fact that merchant account providers can sign 500 new accounts but lose 150 for a net gain of 350 is a wonderful thing indeed, but over time the impact of those losses is staggering. When everything is here today and gone tomorrow, sales representatives can never depend on reference listings. I can assure you that your departing merchants generally will not pass on glowing recommendations of you to their neighbors, drinking buddies, colleagues or Monday night bowling team (who might very well be your drinking buddies, too).

Wouldn't it be easier, and far more productive, to simply analyze why your customers are leaving? Should they even have been signed in the first place? Was the target-I mean prospective client-too easy a mark for that equipment sale? You covered the costs of the initial sign-up and didn't chew on any chargebacks, so you could argue that nothing was ventured and nothing was gained.

Is merchant attrition just part of the cost of doing business? Sounds more like the cost of not doing business, once they've moved on. But consider all your hard work-you signed them, installed them, trained them and maybe actually serviced them on a regular basis (although this is unlikely, isn't it?).

Or maybe the sales rep got a full-time gig doing something else and was just milking the ISO residual payment stream. Who is servicing the account then? The answer to that question is probably 'no one,' making the "I have left you" outcome inevitable.

"But why did you leave without calling me first?" pleads the salesperson (assuming he or she even knows the account is gone before examining the residual check a year later).

"You didn't call, you didn't write, you didn't love me anymore," replies the merchant (assuming he or she is still in business).

Sales management analyzes the daily new merchant application numbers, the daily equipment sales numbers, sales contest effectiveness, etc. But few take the time to analyze why and when customers leave, let alone how to minimize that impact. When businesses start up, the top echelon of management is usually very hands-on, playing an intensive role in running the business in the beginning. They measure the pulse of the business as events occur on a real-time basis. So what goes wrong?

Growth can be intoxicating and may hide the ill effects of customer attrition that happen over time. Management becomes so focused on the good stuff that the bad stuff is ignored. Perhaps the cost of dealing with it simply outweighs the cost of not dealing with it. Either way, the only one dealing with it is the customer. If you ignore customers whose pricing is too high in relation to your standards or new business pricing, then you can assume simply that those customers will leave; it's only a matter of time.

On the other hand, it's amazing how much attrition can be eliminated by simply lowering the unusually high fee structures on those older books of business. It's also amazing what phone calls from service representatives (yes, from live walking, talking personnel) can do to lower attrition. It isn't always about price. We all preach it, but we don't all practice it.

Unfortunately, I have to point at top management, who bear sole responsibility to ensure the same practices that helped a company become successful on day one are still there on day one thousand.

If the bathtub is emptying out at as fast as it is filling up, that means salespeople are working hard to get tired. Try talking to and servicing your customers on a prearranged timetable based on stratifying your customers into volume ranges. This could work wonders for your bottom line and make sales personnel feel like they are developing relationships for important future referrals and not just equipment sales.

I know those old high-priced customers continue to be attractive and you don't want to forsake that revenue stream going forward. But by not addressing them or without something new to offer-for example, a competitive advantage from innovative solutions beyond dial-up POS terminals or systems integration-you will eventually lose those high-priced relationships.

So where do we go from here? Identify the obvious attrition elements: price (including those unmentionable hidden fees in the fine print); customer service (or lack thereof); chargebacks; rejected claims; speed of authorization; referrals; declines; speed of reimbursement; and equipment support. Prioritize and deal with them. Make yourself and your company stand out from the rest so that you ultimately stand above the rest.

Most important, if you do nothing, then remember that the only things that will change are your customers.

Lin Fellerman is Founder, President and CEO of San Diego-based Secure Payment Systems, a national provider of electronic check and gift card processing services. Prior to founding SPS in 1996 Fellerman was a 20-year employee and 10-year President of Telecredit/Equifax Check Services (now Certegy Check Services). Visit, or send e-mail to him at

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