Recently I received an angry phone call from the manager of a merchant services sales organization. The call, though disturbing, was enlightening. I’d like to tell you about it, but first let me give you some background.
I’m currently assisting a client with the development and nationwide launch of a high-end brand and line of products. Simple Business Solutions is responsible for the design and development of the client’s eCommerce website. As development neared completion, Simple began soliciting proposals from merchant services providers for credit card processing services.
We contacted several providers, relayed our requirements for the online payment gateway and shared the following information about the merchant with each provider:
- Method of processing [eCommerce]
- Estimated value of the average sale
- Estimated annual sales volume processed on credit cards
During each conversation, we explained that we’re developing the eCommerce site as well as assisting our client with the procurement of a merchant account. After receiving proposals from several of these providers we still had questions so we followed up for more information.
The Phone Call
Now, let’s get into the details of the call. Phone rings. I answer. A gentleman who provides only his first name begins asking questions. Do you build eCommerce websites? I told him yes. Do you help your clients get set up with credit card processing? Again, I said yes.
Within minutes, accusations start flying. He claims we are lying, that we aren’t really who we said we are. He said that we represented ourselves as web designers. True, as this is one of the services we happily provide to our clients. He states that we didn’t tell him that we also perform cost reduction analysis and a host of marketing services.
As I sat listening, I couldn’t understand what bearing this had on the needs of our client.
His original proposal was based on tiered pricing. During the call he said that he used this particular model for small merchants, and that those with larger volume might qualify for Interchange Plus. He said that for a small home-based startup like this one, it would be tiered pricing.
I asked why he thought it was a home-based business and he said, “Because it’s a startup.” Indeed it is a startup. Remember, we gave this information to each provider that we contacted.
He made the incorrect assumption that this was a small-time, home-based business not a well-funded startup led by an experienced, successful entrepreneur. Although during the initial conversation we communicated the estimated value of the average sale and the annual sales volume that would be processed on credit cards, somehow he missed these details.
He said, “I’ve been on your website and I’ve seen your articles about credit card processing. You didn’t tell me that you know about credit card processing, and that’s misleading.”
First, how is that misleading? Second, what does my knowledge of credit card processing have to do with the needs of my client and the manager’s ability to deliver a proposal?
He went on to say, “You know, we all pay the same wholesale rates for credit card transactions.”
That’s only partially correct – interchange, dues, fees and assessments are the only non-negotiable items where all pay the same. I have analyzed several different programs and found that the costs that merchant level sales people work with vary greatly from provider to provider. The key difference is at what price these merchant level salespeople are willing to sell the service (meaning, how much or how little profit they are willing to make).
The Aha Moment
Eventually, the purpose of his call became clear when he said, “Well I really don’t care to get in a piddling (paraphrased for cleanliness) contest with a bunch of other credit card processors to try and win a deal.”
TRANSLATION: I don’t like to compete. I prefer to work with buyers who aren’t knowledgeable about credit card processing fees and who don’t seek competitive bids.
And why should he? His profit margin will be much higher if he works with uneducated folks than if he negotiates with a buyer who has done his or her research.
This prompted the realization that unfortunately, some in the merchant services industry appear to be driven by fear. Fear that their businesses will decline as more business owners become knowledgeable buyers. Fear that more competition will exist for each potential new deal as business owners engage in a competitive bidding process (or work with a cost reduction consultant like myself). Fear that current business owners will take a closer look at their merchant statements and realize that they could be paying far less.
The Thank You
The intensity with which said manager handled this situation only serves to confirm how important it is for me to educate business owners about merchant services. So, sir, thank you for your phone call. Our conversation has left me motivated, energized and ready to do more to elevate the level of knowledge of business owners.
Simple Business Solutions was established to help business owners break out of the vicious cash flow crunch, and to reclaim then repurpose cash flow for investment in profit generating activities. When businesses increase cash flow they expand, hire and contribute (charitably and through taxes) to the betterment of our community.
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