A general approach to marketing for ISOs seeking new clients is more likely to fail than would a campaign that targets specific merchant segments and generates referrals, some observers believe.
“A lot of ISOs fail, and they spend a lot of time and a lot of money in marketing that is ineffective,” says Philip J. Philliou, a partner at Philliou Selwanes Partners LLC, a New York-based consulting firm. “Marketing that is generic, purely price-based and scattershot in approach is rarely successful.”
Such marketing tactics solely work to create an overall market awareness of a business, but they do not help to acquire new accounts, notes Philliou.
ISOs instead should educate their sales staffs about
specific merchant categories, such as health care, and target the categories with tailored marketing campaigns that address each segment’s specific payment needs, he says.
ISOs should have a marketing approach that is distinct from competitors’ because merchants receive multiple solicitations from service providers each week, says Michael Mattos, president and CEO of enCards Inc., an Aliso Viejo, Calif.-based ISO. “If it’s a retail merchant, they are solicited all the time,” he says.
Simply cold calling merchants within a segment without developing an understanding of their business will lead to failure, says Philliou. “If you don’t know their language, you will fail. You will lose the call and the prospect in the first five minutes,” he says.
An ISO’s conversation with a prospective client in a specific segment never should begin with price, says Philliou. Instead it should begin with a topic important to that merchant. For health care, the conversation may be about how many uncollectible funds the merchant has annually, he says.
Recommendations Helpful
ISOs should develop strategies for understanding and penetrating a merchant segment before approaching the market, says Philliou. “If you are an ISO that understand health care enough to a least connect with a health care provider, they often will recommend you to someone else,” he says.
Recommendations to potential clients from existing ones and from retail associations often are the most effective type of marketing an ISO can have, note observers.
Referral recommendations from clients and retail associations accounts for roughly one-third of merchant acquisitions, says Adil Moussa, an analyst with Aite Group LLC, a Boston-based consulting firm.
Referrals are responsible for 29% of merchant acquisitions overall, with 19% of new accounts coming from association and value-added reseller referrals and 10% coming from other merchants, according to “Merchant Acquiring in 2010,” an Aite report released in November.
The marketing efforts responsible for acquiring the least amount of merchants are telemarketing at 6%, cold calling at 4% and direct-mail campaigns at 1%, according to the report.
EnCards has “dabbled in many types of marketing techniques” but achieved unreliable results with most methods, says Mattos.
Most of the ISO’s business comes from referrals. Because of this, enCards is deliberate in providing customer support and asking for referrals, he says.
ISOs should be aware of their reputations because of the effect positive referrals can have in gaining additional clients, notes Moussa.
“A lot of ISOs are not really paying attention to what’s being said about them, to the image they have,” Moussa says. ISOs should respond to online feedback about their business and increase satisfaction in their customer service to raise their chances of receiving positive referrals, he says.
