The Green Sheet Online Edition

July 7, 2010 • 10:07:02

Merchant retention, taking the initiative - Part 2

We all know it's cheaper to hang onto existing customers than to acquire new ones. So, as ISOs and their partners struggle with economic uncertainties and changing consumer payment habits, customer stickiness becomes more important than ever. To find out what some of the best minds in our industry are doing to address this, we asked members of our advisory board the following:

1. What kind of initiatives are you taking at your organization to keep clients happy and loyal?
2. How critical are value-added services to this process?
3. What types of value-added services do you feel merchants need/desire these days, and why?
4. Are their wish lists realistic?

Following is the second, and final, portion of their responses. The first segment was published in The Green Sheet, July 12, 2010, issue 10:07:01.

Tim McWeeney
WAY Systems Inc.

WAY Systems owns the recurring model that all of our merchants are a part of. We have taken a very aggressive path with our ISOs, agents, banks and financial institutions in upgrading them from the old 15xx base to the new multi-application way5000.

We know the details of our merchants' processing environments. We offer a severely discounted trade-up price to merchants who exchange any 15xx series model for a new, fully compliant terminal. Happy, compliant merchants equal longer-term merchant accounts for our ISO, agent and banking partners.

Additionally, as we continue with our market launch of the way5000, we have deliberately kept our prices low on new equipment through our distributor partners, relying more on the long-term relationships they've established with customers, which provides the success for our model.

Larger merchants require data that is meaningful in growing their businesses. Trending on where spending is growing and declining is essential to them. WAY offers data mining for these merchants as well as for the ISOs and others who sell to them. By having every active terminal on our server, we can extrapolate macro- and micro-data. Our larger clients find this type of information invaluable. It's included at no charge in our value-added model.

I have yet to run across a request from a customer that could not be fulfilled with the right resources. The challenge is to prioritize requests and blend them into availability for the larger market.

If one customer has a unique wish list, that does not make it unrealistic, it makes it a challenge. There's an old saying: If it's "difficult" we'll do it now. If it's "impossible" it may take us five minutes longer.

We have definitely noticed an unusually high number of long-term merchants calling for rate reviews. In these hard economic times merchants are searching for any way to save a buck. Unfortunately, merchant service companies are often the target for cost-cutting missions.

We have implemented several programs to help merchants increase sales and help us retain their business. We created a spreadsheet with specific variables that qualify merchants for incentives, such as free gift cards, free point of sale equipment or other products that we offer.

In some cases, we will combine the incentive with a rate reduction. Qualifying factors include how long a given merchant has been a client, type of industry and profitability.

We have had great success with this program. This has definitely helped retain merchants that would have otherwise gone shopping. The types of value-added services merchants need today are gift and loyalty cards. It is imperative for retailers to offer some type of gift or loyalty program because the advantages are so great. It not only brings in new customers but repeat customers as well.

Merchants desire cash advance during these tough times. Banks are saying no more often than in the past, so merchants are forced to weather the storm with cash advance. The problem is that cash advance money is expensive.

Merchants generally go back and forth between the angel on one shoulder and the devil on the other. More often than not, the devil wins. They take the money because they either need it for an opportunity or to stay afloat.

Today's merchants are looking for the best deal possible, but their demands are often unrealistic. On the one hand they want to be served well and have instant access to sales representatives.

They also want to be priced like a Wal-Mart. And finally they want free equipment and supplies. This type of relationship doesn't work, and something usually has to give. There is a sweet spot, and that's where Elite Merchant Solutions sets up camp.

"Merchant retention," "attrition" and "account longevity" have all become very significant buzzwords when evaluating the health of your merchant portfolio. As our industry becomes increasingly competitive, merchants are leaving one processor and joining another to save money on fees and basis points.

When was the last time you "touched" your merchant? If it has been over three to six months, the odds of that merchant giving you the opportunity to "match" a competitive bid become almost nonexistent.

Charge Card Systems, in cooperation with our sales partners, is establishing dedicated programs to maintain the merchant relationship (even if that means just a simple phone call, direct mail and/or email communication).

The issue we are experiencing with our portfolio, as an aggregate, is that when we do experience attrition, we are losing our more profitable merchants (ones that were converted six or seven years ago) and replacing them with interchange plus or deals placed at much more competitive margins. In essence, it takes us almost two deals to make the same profit as a single deal did just less than a decade ago.

How can we maintain our valuable portfolios?

• Provide continuous communication with merchants as previously mentioned
• Become the leader in a vertical market and offer additional value-added services that bundle into the merchant services program
• Win the endorsements of associations, franchisers and buying groups where, similar to number two, our service is part of an integrated approach

Like others, we have tried to "save" an account after receiving the cancellation and/or termination letter. Although we do give it a real effort, our winning percentage at this point is very small. Once they convert to a new processor, it is too late to earn back that account. I hear from lost accounts that the owner plans to monitor fees and contact us if the fees and respective savings are not what the salesperson disclosed. But this rarely happens.

One final comment that I believe is worth mentioning. Some accounts are not worth maintaining, and at CCS we have been in bidding wars over a $10,000 per month merchant who claims he has interchange plus 10 basis points, no transaction fee, no statement fee and no other fees.

My response to that merchant is - good luck. We will continue to charge enough so we can have a fair profit for our value-added service.

It has always been critical at Exec-Links that expectations are made very clear. For example, there must be total agreement on contracts, position profiles/job descriptions, candidates' characteristics, preferred attributes and so forth.

Having been in the search industry since the early 1980s, I quickly learned that there are always three sides to every story: theirs, ours and (to me, the most critical) how our conversations are being interpreted. It did not take long for me to learn that everything coming out of my mouth was not always being absorbed or heard in exactly the manner that I thought it was.

Think about everyday conversations. Are you really listening or are you already thinking about a response before the other party has completely finished his or her thought? Human nature dictates the latter.

We establish our clients' expectations upfront, fine-tuning the process as the search process unfolds and constantly checking to make sure we are adhering to the parameters agreed upon with our clients. Additionally, clients are updated weekly on the status of the searches we are engaged in on their behalf. We have found that the few minutes this takes prevent anyone or anything from falling through the cracks.

There is a proven scientific phenomenon referred to as "spaced repetition" that is often used by marketing departments. Basically, by sending out information about your organization at least six times per year, your company and/or product will become better known.

Clients get used to relationships that include a consistent work ethic. Our clients will tell you that we respond to their requests literally within minutes.

We work very long hours. Candidates and clients of ours will often see emails from us between three o'clock in the morning and ten o'clock at night, including weekends. Immediate follow-up is another hallmark of Exec-Links.

In any type of business, it's imperative to differentiate yourself from the competition. It's also important to be flexible, to a point, and present a realistic response supported by provable facts. Everyone would prefer to be driving around in a Lexus for the cost of a Volkswagen, but keep in mind what's realistic.

We recently stepped up our quality assurance program and retention systems. By calling on our merchants before they have a problem, we find that we're able to address other needs by suggesting a new type of service or equipment. Merchants appreciate the attentiveness. Remember, by the time the issue becomes a problem, most merchants will leave or switch rather than call to resolve the issue.

Merchants today are struggling just to survive, which means they are searching for new ways to cut their costs and processes. In doing so, good communication with the ISO or agent can lead to an up-sell or a value-added service that will make a big difference.

Periodic review of merchant processing statements can lead to a change in rate structure, as well as increased efficiency and effectiveness with product support or integration. Many times a system solution creates a cost reduction without the need to lower any rates. When merchants are given solutions to deal with employee fraud, or the streamlining of a system, they really feel that they have found a partner in you.

And even if the competition comes in offering lower rates, they know from past experience they will lose the value-add of your quality service. For pennies on the dollar, for most merchants, it isn't worth switching.

This is a very relevant topic and quite likely near and dear to the hearts of all ISOs and merchant level salespeople (MLSs). Many of us, including those who contribute articles to The Green Sheet as well as readers, know how very competitive our great business is.

Merchants have become savvy, so our daily jargon is no longer Greek to our audience. Moreover, we are no longer "shooting fish in a barrel" (the majority of you know exactly what I am referring to). On the contrary, our industry has seen extreme margin compression.

And lastly, it sure does seem like merchant services has gone viral. Everyone from Uncle Bob and Aunt Betty and their kids are all now payments industry experts. Add up all of these factors and we have a very combustible situation.

Good grief, what are we to do? The Green Sheet asks: What initiatives are we implementing? What value added services are we adding to our arsenal? What are we doing to add stickiness to our portfolio?

First, we wouldn't be doing our job if we didn't keep current with merchants' needs and wants. We have all the traditional (and some not so traditional) value-added services like gift cards, payroll processing, automated clearing house, and a variety of mobile/text marketing and processing options available.

We are all familiar with the adage that the more products we can sell, the stickier merchants become. True enough. However, after doing this for 20 years, I have learned from so many great mentors, and I'm still learning. One of the single most valuable lessons I ever learned is one of the most basic: be honest.

We all know life can be difficult and that nothing is ever perfect in the merchant services world. Every MLS is going to run into issues. The question is what are you going to do about it?

Run and hide because you already made a couple of upfront bucks and heck you didn't really know the merchant anyhow? Or are you going to roll up your sleeves, attack the problem, fix it, gain a happy merchant and ask for referrals? Obviously we prefer the later and seek to turn disgruntled customers into our biggest fans.

In a scene from the movie The Hunt for Red October, one of the submarine pilots turns his boat directly into the path of the oncoming torpedoes. Those torpedoes didn't have time to arm and bounced harmlessly off the submarine. I hope you can see how clearly that scene translates to our business - every day.

At the end of the day we can all sell lots of sizzle, and to some degree it is important. But when an employee, partner or merchant has a problem, we must face the music. Do you want to speak with the GO Direct president? Call me. Do you need an issue addressed? Call us and we will endeavor to fix what ails.

Our merchants are sticky because of simple solutions. Our merchants and partners know they can reach us whenever they need to. Being upfront, being present, being reachable, not running from any issues and doing the little things - it seems pretty easy.

At GO Direct, it is part of our culture; it is what makes us unique. Something as elementary as being honest and available for merchants and partners is what creates true stickiness.

Notice to readers: These are archived articles. Contact information, links and other details may be out of date. We regret any inconvenience.

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