For nearly every sales force in nearly every industry, selling based on price can be a losing game; someone is always willing to sell for less.
The payments industry is no different.
As such, ISOs and sales agents often find themselves faced with the age-old sales dilemma: compete on price in a commoditized world, or find some edge to help pull them away from the pack, be it specific product offerings, higher-quality service or some new trick that everyone else will clamor to copy.
"It's the same old thing. You are competing with all the reps out there who are saying they can lower rates and beat your price," says Brian Jones, executive vice president of sales and marketing for Hampton, N.J.-based United Bank Card Inc.
So with the market saturated with agents willing to drive prices lower, finding a way to stand out from the crowd is crucial.
"A key differentiation is the 'Holy Grail,' something every ISO struggles to find and then not share with others that might then attempt to replicate," says David Leppek president of Newark, Del.-based Transaction Services. "The real challenge is that once you've determined your unique distinction to then target the customers that would consider it valuable."
One promised differentiation many sales pitches include is to deliver the "best customer service." But as merchants hear that promise from a parade of overworked and under-resourced ISOs, satisfaction guarantees begin to ring hollow.
So as the new year is dawning, the challenge many sales agents now face is to find the new idea that will separate them from the crowd.
For some, the winning idea is technology, specifically partnering with larger merchant-services providers to deliver increasingly sophisticated point-of-sale systems and electronic cash registers as part of their standard sales pitches to develop more long-term "sticky" relationships with high-volume merchants.
"The shift into new value-added services has focused on innovations in technology and ways that technology can be adapted and modified to integrate more deeply into the merchants' processes," says David Fish, senior analyst for Maynard, Mass.-based Mercator Advisory Group Inc.
Without those partnerships, many ISOs face a hard sell ahead of them because many other smaller operations have similar product offerings and cost structures.
"To become a bigger player, you will need to do it through technology and innovation and by creating tools and interfaces for merchants to use through your company that tie them in more with your company like integrated" point-of-sale systems, says Jay Vignale, president of Alpharetta, Ga.-based Mainstream Merchant Services Inc.
United Bank Card believes it has hit on just that technology-centered winning formula with its Harbortouch system. Harbortouch is a family of POS systems designed specifically either for the retail or the hospitality/restaurant markets. United Bank Card's sales teams have been including the systems in nearly all of their pitches as a way to grab merchants' attention and then keep them as clients over a longer term.
"With our Harbortouch system, we can go in and talk about the POS system, and we are finding merchants are more receptive to it," Jones says.
Talking to merchants about a POS system instead of merely promising lower prices or the often-promised complaint-free customer service helps sales staff stand out from the crowd, he says.
"The merchants have been beat up four times a week by sales reps promising things, but we have a different message. We are offering something different," Jones says, noting his ISOs can present merchants with a "full offering."
"If you are on a terminal and want to upgrade to a cash register, we can do that. If you want to upgrade to POS, we can do that," Jones says.
The technology offerings have translated to lower merchant attrition, which is the dream of most ISOs, Jones says. "Now the only real attrition we are seeing is if someone is going out of business," he says.
The Right Partners
Many ISOs see the value of those high-tech, value-added deals, but not every sales team has access to such a sophisticated array of offerings.
That is where partnerships become an advantage.
Many small ISOs say they see a rich future in teaming with larger operations that can provide a level of sophistication and product offerings that they could not develop on their own.
Unfortunately, the reality of a competitive sales environment means that even the most sophisticated device is not a guarantee of a long-term relationship, thanks to the nature of universal standards. For systems to work on many platforms, they must comply with standards set by national and international agencies, and that means the data and the systems can be moved to other providers whose systems are built around the same standards.
To push the boundaries even further, ISOs can find another wave of opportunities with new technologies hitting the market that follow novel, and often disruptive, business models, as long as they do not shy away from them.
One example Fish points to is the mobile card readers being developed by San Francisco-based Square Inc. Square enables merchants to download a free app to their Google Inc. Android or Apple Inc. mobile device. Square then ships a free card reader to the merchant, and the merchant can begin accepting payment cards.
Square began as a technology provider and then backed into becoming an ISO, Fish says.
"That kind of disruptive and entrepreneurial mentality isn't following the tried-and-true models we have seen in the past," Fish says. "That is fine because they will have to eventually conform to tried-and-true models if they want sustained, long-term growth. But in the meantime, it is offering the industry some creativity."
That creativity promises to offer growth beyond the greenfields of new business and the saturated markets of existing businesses and entrance into new realms.
For example, Fish points to the opportunities emerging in social media.
"I think probably the ISO community has been slow to embrace social media, and that is something we are looking to as the future," Fish says. "If you are late to that game, it could be detrimental in the long run."
Leveraging social networks and social media and becoming savvy more quickly can help ISOs both from marketing and business perspectives because more businesses are moving into social environments, he says.
"There will need to be payments in the social space. Look at Facebook with Facebook Credits-talk about a huge acquiring play," Fish says. Facebook credits are the virtual currency used on the social media site for games and a number of applications housed on Facebook.
But technology is far from the only route a sales force can take to profitability. Depending on many different factors, some of the established methods and techniques are still returning fine dividends for skilled sales forces.
The trick seems to be identifying each sales team's specific opportunities. In many cases, a successful product or service can be subjective, depending on individual circumstances and business relationships.
"Something I might see as a huge revenue opportunity, someone else with a poor vendor deal might consider worthless," Leppek says. "A majority of the ISOs selling today have figured out ways to leverage their strategic relationships to focus on the product they can deliver at an acceptable margin."
At the same time, others might try to compete or feel obligated to keep up, even though they have not cultivated the same business relationships or volume deals, only to realize they cannot do some at a competitive margin, he says.
A good example of subjective offerings is the wide field of payment options ISOs can make available to merchants.
"Remember, we are in the payments industry, which includes [automated clearinghouse transactions]," Leppek says. "Remote deposit capture products, Check 21, and rumors of same-day NACHA transactions have admittedly never lived up to my expectations. Still, bundled check processing can be a value-added service and make a big difference in the profitability of a portfolio."
And though many talk about it, security and PCI standards still represent product sales growth potential.
"Obviously Level 4 PCI Services have been a huge focus for both security and revenue in these lean years," Leppek says, referring to smaller merchants. "But I've been excited to see various companies give away such services, mostly because their in-house [services] make the certification process easier than those reselling other solutions."
Those giveaways can help set an ISO apart, especially with regard to smaller merchants that prefer to ignore security.
"The wide variety of charges and the poor implementation of PCI fees have left many merchants angry and confused," Leppek says. "They know they need it but wish it wasn't so expensive. By eating this cost, some ISO's have highlighted their emphasis on being secure while getting merchants to jump on board with a perceived savings."
Cash-advance services remain another tested revenue opportunity, though a variety of factors, including the economic downturn, have caused those products to wane a bit in recent years, Fish says.
A Trusted Individual
Still, having the best product means nothing if the wrong sales team is pushing it. Most ISOs agree that merchants like to do business with individuals they trust.
And often when merchants switch vendors it is because they want to do business with the person doing the selling. They may switch to a specific representative and only look at the product offerings as a secondary concern, observers say.
"The agent gets in the door; the product closes the sale," Leppek says. "If the agents lack the tenacity or suave faire to get to the decision-maker, then the quality of the product is of little consequence."
If the salesperson cannot catch the attention of the decision-maker, then it matters little what the product is because the agent the does not have a chance to make the pitch in the first place.
Just like any sales-based industry, the 80-20 rule applies to ISOs-80% of the sales come from 20% of the sales force.
"You have your guys who care and who see this as a career, not a job. The other 80%, well, every now and then they sign a deal," Jones says.
Identifying serious agents is one of the toughest parts of the job for any sales manager. One thing United Bank Card managers look for is initiative, more specifically sales representatives who educate themselves through reading trade magazines and who participate and engage in in-house training programs and opportunities, Jones says.
"Some take the approach to engage in extensive sales training. Others just churn through sales people until they get lucky," Leppek says. "The best ISOs provide their sales reps with relationships that help open the doors of opportunity."
The other key to preventing merchant churn is to support customers after the sale. ISOs may claim to have the "best customer service," but the trick is to prove it. If a sales agent promises 24-hour support but then can only offer a distant call center, the merchant may feel misled or shortchanged.
On the flip side, if a sales team is constantly doing customer-support work in-house, it will have scarce time to make new sales and keep fresh revenues coming in.
The long-term key is to be up front and clear with merchants and let them know the support that is available, and not to oversell or build false expectations. "There definitely has been a shift in the industry toward transparency, and that is happening to the industry's benefit and credit," Fish says.
And because reputation is such a strong element of customer reputation, it is worth the time and effort for sales managers to pay close attention to how their teams are representing the company.
"If your sales are through independent agents, you need to really know them as individuals and understand how they are representing you before you arm them with your logo," Leppek says.
