How to Close The Understanding Gap With Merchants

For acquirers, high attrition and slow growth are symptoms of misunderstanding merchants’ real needs, says Adil Moussa. Here’s how to remedy the problem.

Most marketing in merchant acquiring is bad because it misses one—sometimes all three—of the cornerstones of good marketing.

Both the relatively slow organic growth that most acquirers experience and the significantly high level of merchant attrition they sustain are a reflection of an understanding gap between the acquiring industry and merchants.

I discovered this gap while being a merchant and still working in the payments world. Many independent sales organizations and acquirers sent offers. The more offers I saw, the more proof of the gap I saw. I will share with you three real-life observations and show you how to close that gap.

1. Payment Goggles Distort Opportunity Discernment

Working in the payments industry, our perspective is payment-industry tainted. We look at our clients not as entrepreneurs and small-business owners but as merchants with their assigned merchant-identification numbers that become statistics in one of the many spreadsheets and dashboards we keep track of. This systematized numbering adds yet another layer of obfuscation that prevents an accurate view of the prospect.

Even our research is payments-biased. I have administered dozens and dozens of surveys of merchants, either for me or for clients, and every time the questionnaire’s bias has tilted towards payments. For example, there are questions like these:

– What challenges do you have with your payments provider?

– How likely are you to accept Bitcoin in the next six months? (scale: 1 not at all likely to 5 very likely.)

While these questions are important to our immediate decision-making process in the payments world, merchants’ answers are usually disappointing. Most merchants don’t have challenges with their payments providers, and most merchants who say they are likely to accept Bitcoin never sign up for it!

Market players that understand that real opportunities reside outside of merchant acquiring ask more salient questions, like these:

– What are your top five priorities?

– What are your top five challenges?

Questions like these reveal the pain that merchants are going through. They also uncover market opportunities.

That is why Intuit Inc. is offering a product suite that includes accounting, merchant processing, Web-site hosting, payroll, invoicing, and so on. That is why Heartland Payment Systems is offering queue management and other restaurant-focused products that their customers need and want.

Both of these companies are in the vertical enablement business, not merchant acquiring. And that’s what ISOs and acquirers should aspire to do: Enable verticals by first going deep in a vertical and then expanding horizontally to opportunities outside of merchant acquiring.

2. The B2B Myth, Or How To Communicate Ineffectively With Your Customers

Business-to-business (B2B) may be a way to classify customers. It may also affect reporting and taxes, and, admittedly, it serves some administrative functions.

However, in marketing, there is no such thing as B2B, even though your ad agencies are happy to charge you a hefty fee for B2B marketing.

Businesses don’t buy anything. People in businesses buy solutions and products using the same brain and buying-decision pattern they use when they purchase anything outside of work as a consumer. That means that the more “corporate” the message is, the less effective it is in creating a response.

Getting a response to your communication requires the same winning principles used successfully in consumer marketing.

3. Marketing Misses The Target

Most marketing in merchant acquiring is bad. Really bad. It is bad because it misses one—sometimes all three—of the cornerstones of good marketing: message, media, and market.

Message: It needs to have a purpose. It needs to get one specific response from the target market. It also needs to have an offer that is compelling enough to make that merchant want to follow up with you.

Media: It needs to correspond with the media that merchants are using. Should you be on everything under the sun? Twitter, Instagram, Facebook, LinkedIn, own Web site, paper, TV, Internet, direct mail, email … etc.? The answer is no. If your target audience is not into it, don’t waste your time on it. The secret to effective media is understanding where your target audience hangs out and reaching them there with a very compelling offer and message.

Market: Whom are we talking to? Doctors, dentists, plumbers? Each merchant thinks he has a unique business. He is tuned to anything that seems vertical-specialized. So the more specific your message is to a business vertical, the higher the response rate will be.

Why is the majority of the marketing so bad? Because most people imitate other companies’ marketing without understanding why these companies are using it.

Nike’s “Just Do It” and Coke’s “Choose Happiness” are slogans serving the positioning of their brands. These two companies sell to 7 billion customers. Merchant acquirers are at most selling to 1.5 million customers in any one year (merchants changing processors and new merchants on the market).

ISOs and acquirers should avoid spending their marketing dollars trying to position their slogans. Marketing dollars should be spent on direct-response marketing because it allows you to have a finger on the pulse of your message: how many people respond to it and how many people buy it. By tweaking it and challenging the control, you can constantly increase the efficacy of the message.

In today’s acquiring world, the average response rate is below 1%. Top performers are achieving 3% to 4%, and even 7%, by closing that understanding gap that separates them from their merchants. There is really no magic behind their performance. In fact, the fundamentals are the same and follow a very deliberate and proven formula.

The problem is that only three or four companies (out of 67 I’ve studied) follow that formula.

Adil Moussa is the founder of Acquiring Strategies.com and principal at Adil Consulting LLC, Omaha, Neb. Reach him at amoussa@adilconsuting.com.