Marketing Strategies Can Help Lower Merchant-Acquisition Costs for ISOs

How much does it cost to acquire a merchant? On average, $693. That’s the word from Adil Consulting, an Omaha, Neb.-based firm specializing in merchant acquiring.

That figure, as an average, is highly influenced by a number of variables, Adil Moussa, principal, tells Digital Transactions News. Banks, for example, have much lower acquisition costs—usually $150—because so many of their merchant-acquiring customers come to them already for general banking services, he says. “They do not have to prospect or market to acquire these accounts,” Moussa says. Processors, too, especially those that rely on independent sales organizations for their distribution, often have low acquisition costs. Independent software vendors and value-added resellers, which specialize in developing and selling point-of-sale software systems, typically have lower acquisition costs, too, Moussa says.

ISOs, however, may have some of the highest costs, as much as $1,300 in some instances. That’s because they are the ones spending the marketing dollars and making investments in salespeople, he says.

The marketing spend is a major variable in the cost of acquisition, just like the institution type, size of the acquiring-services provider, and sales channels used to find merchants, Moussa says.

While a handful of ISOs and acquirers have developed marketing programs that cater to merchants, most are still not delivering what merchants want, he says. And that is information they can use to help run their businesses. “Whenever a merchant acquirer is asking what merchants want, they always look at it from a payment perspective,” Moussa says, so “they never discover what the merchant wants.”

Those payments companies that are marketing successfully do so by not creating their messages through the payments lens, he says. “They ask about issues that bother merchants.”

Merchant acquirers also can use digital and social media marketing to lower their acquisition costs—less than $100 per account if done right, Moussa says—but that requires creating a clearly defined sales plan and compelling content delivered on a frequent basis.

“The frequency of the content is what builds that trust,” Moussa says. Though there is a cost to creating such a campaign, it usually can be used for two to three years, he adds.