Although not directly related to payments, this is an interesting article and will be even more interesting to see the new guidelines. This is something all online marketers should be aware of.
http://ftcbeat.com/2011/08/21/what-priorities-will-ftc-stress-in-its-impending-online-advertising-guidelines/
Monday, August 22, 2011
Monday, August 1, 2011
Merchant Accounts for Biz Ops ( and ways to help reduce chargebacks)
Anyone who is not familiar with Internet Marketing may ask, what exactly is a biz op? Well as I am sure you can tell, Biz Op refers to “Business Opportunity” and basically a biz op is a program/course that is created by someone to help other make income (usually from the comfort of their own) online. A lot of the biz ops are people who have made a lot of money with affiliate marketing teaching others how do to that exact same thing (and of course charging a fee for it). Some have free trial offers to sign up, then charge a membership fee to continue having access to the backend and the tools there. I have seen some very impressive and sophisticated backend’s with tools that I believe can really help someone.
However, like a lot of other things, a few bad apples ruined the bunch and biz ops have gotten a bad name amongst banks for credit card processing. Why is that? Well excessive chargebacks for one and shady people who are really only out there to make a quick buck.
I have been working with a lot of biz op marketers lately and the guys I work with know what they are doing. They have a sophisticated product, clear terms and good policies and procedures in place to reduce chargebacks.
Some of the strategies that I believe a biz op can put into place that will help them reduce chargebacks are:
1. Have good support channels. Your company should be accessible, communication and an active support forum can be helpful.
2. Methods for success should be clear.
3. Clear Fees. Costs are justified because people understand they can’t expect to earn money without an investment. Costs and Fees will actually legitimize the business because nobody would actually expect to earn money on something that
is free. Membership fees can also be justified if some kind of benefit to
insure your success is made available. It costs money to run a business and in
many cases it takes money to make money. An example would be if the company
hosts websites and/or other promotional aids to help you succeed (a detailed
back office for instance).
4. No Outrageous claims – “Work only two hours a week – No selling – No dealing with customers – Make millions” – No way…
Like I mentioned earlier, sometimes credit card processing/merchant accounts for biz ops are hard to obtain. I work with quite a few banks both domestic and offshore who do work with legitimate biz ops. I have heard horror stories from a lot of clients who were shut down by their previous processor for a variety of reasons and the biggest one I believe is that they just didn’t understand the business. Like any recurring billing, there is a higher risk of chargebacks so not only do you need strategies like the above to help reduce chargebacks but partners who understand the nature of the business to help you ensure that your processing will not go down.
This could include using a chargeback management system, as long as the ROI make sense. Spreading volume between multiple banks, including offshore and domestic. Or just going offshore and having more of a margin to operate in.
What I do is evaluate my client’s current situation (if they aren’t a start-up) and make recommendation and propose solutions. If they are a start-up I look at their marketing plan, where they are getting their traffic from, etc etc and propose a solution that will keep them up and running. A lot of processors won’t take biz op without processing statements, I can help with that.
Of course, like everything, pricing is factor. But any experienced marketer will know that paying a bit more to ensure your merchant account stays up and running ( as opposed to working with a company that offers cheap rates then shuts you down as soon as there is a problem) is worth it.
If you have any questions please do not hesitate to contact me.
However, like a lot of other things, a few bad apples ruined the bunch and biz ops have gotten a bad name amongst banks for credit card processing. Why is that? Well excessive chargebacks for one and shady people who are really only out there to make a quick buck.
I have been working with a lot of biz op marketers lately and the guys I work with know what they are doing. They have a sophisticated product, clear terms and good policies and procedures in place to reduce chargebacks.
Some of the strategies that I believe a biz op can put into place that will help them reduce chargebacks are:
1. Have good support channels. Your company should be accessible, communication and an active support forum can be helpful.
2. Methods for success should be clear.
3. Clear Fees. Costs are justified because people understand they can’t expect to earn money without an investment. Costs and Fees will actually legitimize the business because nobody would actually expect to earn money on something that
is free. Membership fees can also be justified if some kind of benefit to
insure your success is made available. It costs money to run a business and in
many cases it takes money to make money. An example would be if the company
hosts websites and/or other promotional aids to help you succeed (a detailed
back office for instance).
4. No Outrageous claims – “Work only two hours a week – No selling – No dealing with customers – Make millions” – No way…
Like I mentioned earlier, sometimes credit card processing/merchant accounts for biz ops are hard to obtain. I work with quite a few banks both domestic and offshore who do work with legitimate biz ops. I have heard horror stories from a lot of clients who were shut down by their previous processor for a variety of reasons and the biggest one I believe is that they just didn’t understand the business. Like any recurring billing, there is a higher risk of chargebacks so not only do you need strategies like the above to help reduce chargebacks but partners who understand the nature of the business to help you ensure that your processing will not go down.
This could include using a chargeback management system, as long as the ROI make sense. Spreading volume between multiple banks, including offshore and domestic. Or just going offshore and having more of a margin to operate in.
What I do is evaluate my client’s current situation (if they aren’t a start-up) and make recommendation and propose solutions. If they are a start-up I look at their marketing plan, where they are getting their traffic from, etc etc and propose a solution that will keep them up and running. A lot of processors won’t take biz op without processing statements, I can help with that.
Of course, like everything, pricing is factor. But any experienced marketer will know that paying a bit more to ensure your merchant account stays up and running ( as opposed to working with a company that offers cheap rates then shuts you down as soon as there is a problem) is worth it.
If you have any questions please do not hesitate to contact me.
Monday, July 18, 2011
5 ways for online marketers to increase conversions
If you have or have in the past operated any type of ecommerce website then you are probably familiar with low conversion rates and you probably have looked at things like time on page, time on site, cart abandonment, keyword conversions to try and improve those low conversions.
According to a recent study, about 10% of visitors to the average ecom website are actually there to consider making a purchased, and only 2% will actually make that purchase. 2%!!!!!
2% is a very low number for ecommerce (unless that is your chargeback ratio) so what most online marketers will do is try and push even more traffic to the site. The numbers do work, since 2% of 1000 is a lot more sales then 2% of 100. However, what about that 8% that were interested? How can you convert them? Increasing traffic is always important but why not look at some ways to increase the conversions to your site as well.
I believe that improving conversions is not only to look at the actual site, but look at suppliers to your business. Is your credit card processor the best fit? What about your call center?
Here are a five ways I think you can make your site more attractive to potential customers and increase conversions.
1. Look at declines from current Credit Card processor.
Depending on the type of account you have, where your customers are coming from and host of other factors, your decline rates might be way too high. If you have a US merchant account, but a significant portion of your traffic is international, then you may look at opening a international merchant account that you can process international transactions from. I have seen a lot of companies really increase conversions by doing this.
2. List popular items
This is very easy to do my looking at search queries and what is hot on your site. This is clearly what people are looking for the most and if you make it easy to find but putting it right in their face, you will have a better chance at selling it to them.
3. Engage your customer if they are taking too long.
This is great strategy if you see that customers are spending too much time on a certain page or on the checkout. Try and initiate a conversation through online chat to see if there are questions that the customer has.
4. Listen to your customers
Anyone can look at a best practice guide, but the best resource available your customer. Implementing a customer feedback system so you can see what people have issues with AND what they really like. But don’t just listen, it’s very important to take the feedback and address it on your website if you think its valuable.
You can also look at using incentives to get better feedback. Maybe entering customers into a draw of giving a prize if the feedback provided is valid and can be used.
5. Customer Service is Key.
Imagine walking into a store and you have some questions about a product you would like to buy. However, when you look around there is nobody to ask the question to or to help you. If that was me, I would walk out. The same principle applies online. Make sure your customer service is always available and can respond in a very quick manner. When a customer is making an impulse purchase, you need to make sure you address any concerns immediately before they are given the chance to walk away.
Having a great FAQ section, clear pricing shipping and return policies can address a lot of questions upfront, so make sure you have that in place. Also consider adding a live chat service.
In summary, online marketers invest massive amounts of money and effort to get visits. But if your site or service isn’t optimized to convert those visitors then a lot of money is being left on the table.
Tuesday, July 12, 2011
How to be effective when looking at your online merchant account pricing.
As mentioned in a previous post, the pricing quote you receive is not always the price you are going to actually pay. Anyone that's had to deal with online merchant accounts and credit card processing (with the exception of those that process strictly offshore) will tell you that its can be a pretty confusing subject. When you looking for a new merchant account there is a lot of things you need to factor, and although I have stated that price isn’t the only thing and that value is extremely important, you still need to understand exactly how your pricing works. So, when you start looking for a merchant account or would like to evaluate the one you currently have, there is a lot that needs to be taken into consideration. You've need to look at the discount fees, qualification rates, interchange, authorization fees and more. The list of potential charges can go on and on.
One of the biggest dirty secrets in the online payment processing space is to quote a merchant the qualified rate, which sounds great, but not really disclose all of the additional fees that you will pay. This is something that unfortunately has become common practice with too many companies these days (not all) and its something that I hear from merchants I work with all of the time. This is where most of the margin is, and my belief that it’s important to disclose all fees and teach merchants how the pricing work. I think if you are honest with a merchant then it’s much better for you in the long run.
Instead of looking at the big picture, merchants fixate on a single aspect of an account such as the discount rate or the early termination fee (which is a fee I am not a fan of). I completely understand this as I would do the same in a business that I am not familiar with, but what really needs to be looked at is what we call the EFFECTIVE RATE. Once you start looking at the big picture you will see that merchant accounts aren’t that hard to figure out and you will be able to not only accurately forecast your merchant account costs but also compare different quotes you receive.
The term effective rate is used to refer to the percentage of NET sales that a business pays in credit card processing fees.
For example, if a business processes $100,000 in NET credit card sales and its total processing expense is $4290.00, the effective rate of this business's merchant account is 4.29%. The qualified discount rate on this account may only be 2.25%, but surcharges and other fees bring the total cost over a full percentage point higher. This example illustrate perfectly how focusing on a single rate when examining a merchant account can prove to be a costly oversight.
Effective Rate = Total costs/ total sales
You need to make sure you are also looking at all of the possible fees, this can include:
- Discount Rates
- Monthly Service Fees
- Statement Fees
- Batch Total Fees
- PCI/DSS Fees (Data Security)
- Administrative Fees
- Transaction fees
- Any other miscellaneous Fees
In my opinion, when looking at costs the effective rate is the single most important factor when you're comparing merchant accounts. But again, cost shouldn’t be the only factor when deciding on the merchant account.
Calculating the effective rate of a merchant account for an existing business is easier and more accurate than calculating the rate for a new business because figures are based on real processing history rather than forecasts and estimates. Calculating the effective rate of a merchant account for a new business is a little tougher because of the lack of processing history from which to judge how a business's transactions will qualify. Nevertheless, making a conservative estimate of an account's effective rate is still vital.
To calculate the effective rate of a merchant account for a business without processing history you will need to estimate a few figures such as the business's average ticket, processing volume, etc. The actual methods involved in calculating the effective are pretty involved and beyond the scope of this article. Hopefully, these calculations aren't something you should have to worry about. In this case I would work with an experienced consultant of or a processor you can trust
If the effective rate ends up being significantly greater than your qualified discount rate, or the rate you were quoted, it’s time to re-examine your account and make changes. Using the example above, let's say the qualified discount rate for this account is 2.25%. That would mean the effective rate of 5% is more than double the qualified discount rate. In a situation like this, the chances are very good that there are a lot of additional surcharges being applied and you can either have a discussion with you current provider ( but would you want to work with a company that already has been deceitful) or look to work with a new provider.
Any provider that's courting your business should be able to speak with you and request the information they need to offer you a reasonably accurate effective rate. Alot of times this will be in the form of previous processing statements (if available) If they're unable to do this or they don't know what an effective rate is, they're probably not the best choice for your new merchant account provider.
If you need any help with deciphering credit card statements or if you are looking to get an effective rate quote on your business - please do not hesitate to contact me.
Monday, June 20, 2011
"Too many people today know the price of everything and the value of nothing.”
I wanted to write this quick post as alot of the time, especially at this show that I just went to, alot of the merchants were solely concerned with price. I want to point out - My pricing is always competitive and alot of the time I win deals on lower pricing. Now that is out of the way, I think that merchants who look at merchant accounts, gateways and any type of online processing solely on price, are making a big mistake. Instead of pricing, look at VALUE.
There are so many other factors to consider, and I do believe that pricing is important, but in there is a saying "you get what you pay for" and in payments that holds true as well. Questions that should be asked are:
1. Does the technology work for me? What features does it have that can make my life easier? Does it allow for recurring billing? tokenization?
2. How is the reporting? Do the reports help me streamline my business? It it in real time and available online
3. What is the customer service experience? If I have problem is there someone I can call and talk to? will they help me with technical issues? Its important to look at processors that have high merchant retention rates. Savy merchants won't just switch to get a better price unless its drastic and customer service is a very big reason for that.
4. How long will it take to get my money? As we know, cash (flow) is king, and businessess need it to survive - so would you rather pay a bit more and get your money faster, OR pay less and wait to get your money. I had a client who recently switched over because of this very reason even though I had quoted rates that were a bit higher.
So, just like everything in life, when selecting a payment provider, look at the VALUE. Maybe the actual pricing is higher, but the positive effect it can have on you and your business is what should be looked at.
In another post I will explain why you the pricing you are quoted is not always the pricing you get, and why you need to look at the effective rate.
Contact me if you have any questions about the above.
There are so many other factors to consider, and I do believe that pricing is important, but in there is a saying "you get what you pay for" and in payments that holds true as well. Questions that should be asked are:
1. Does the technology work for me? What features does it have that can make my life easier? Does it allow for recurring billing? tokenization?
2. How is the reporting? Do the reports help me streamline my business? It it in real time and available online
3. What is the customer service experience? If I have problem is there someone I can call and talk to? will they help me with technical issues? Its important to look at processors that have high merchant retention rates. Savy merchants won't just switch to get a better price unless its drastic and customer service is a very big reason for that.
4. How long will it take to get my money? As we know, cash (flow) is king, and businessess need it to survive - so would you rather pay a bit more and get your money faster, OR pay less and wait to get your money. I had a client who recently switched over because of this very reason even though I had quoted rates that were a bit higher.
So, just like everything in life, when selecting a payment provider, look at the VALUE. Maybe the actual pricing is higher, but the positive effect it can have on you and your business is what should be looked at.
In another post I will explain why you the pricing you are quoted is not always the pricing you get, and why you need to look at the effective rate.
Contact me if you have any questions about the above.
Internet Retailer 2011 - Review
Last week I was in San Diego for Internet Retailer 2011 - it was my first time going to this show. I go to the usual shows(AdTech, Affiliate Summit) and I wasn't exactly sure what to expect. My initial thoughts are that this is a very good show for certain suppliers to ecommerce but I found that traffic within the actual show floor wasn't as great as I would have liked and it seemed to be concentrated to one end more then the other. I think that alot of the attendees were busy most of the day in sessions and didn't have a huge chance to walk the floor. The people I want to speak to are the online merchants, and there weren't THAT many walking around. It seems it was alot of exhibitors and as much as I love the "maybe we can setup a referral partner" conversation...its not the best for business and I find those conversations don't usually lead anywhere.
I was expecting a completely different crowd, but I did get to see some familiar faces from the other shows I attend and hopefully can do some business with those guys. I also did get a chance to speak to a few new potential clients and I think something can happen there.
The days were very long (9AM- 7PM) so I know that next time I need to wear better shoes. Also, San Diego is a very beautiful city, its clean and from what I can tell very safe. The weather was slighlty colder then I expected, and seemed to get very nice everyday after 12 PM.
All in all, I dont think that this is the best show for the majority of online marketers, maybe a good show for retail companies that are looking to, or already have an online presence which I guess is the type of merchant they are going for considering its called Internet Retailer.....
Some of the exhibitors were Daily Deal companies that were looking for merchants to sign up. I see this as a waste or money. This was not the right show for that.....
All and all a great show, but I am happy to be home now. Travelling is overated sometimes...especially when you have been doing it for a couple of weeks.
I was expecting a completely different crowd, but I did get to see some familiar faces from the other shows I attend and hopefully can do some business with those guys. I also did get a chance to speak to a few new potential clients and I think something can happen there.
The days were very long (9AM- 7PM) so I know that next time I need to wear better shoes. Also, San Diego is a very beautiful city, its clean and from what I can tell very safe. The weather was slighlty colder then I expected, and seemed to get very nice everyday after 12 PM.
All in all, I dont think that this is the best show for the majority of online marketers, maybe a good show for retail companies that are looking to, or already have an online presence which I guess is the type of merchant they are going for considering its called Internet Retailer.....
Some of the exhibitors were Daily Deal companies that were looking for merchants to sign up. I see this as a waste or money. This was not the right show for that.....
All and all a great show, but I am happy to be home now. Travelling is overated sometimes...especially when you have been doing it for a couple of weeks.
Wednesday, June 8, 2011
Merchant Accounts for Online Dating websites and ways to mitigate the risk.
Dating websites do tend to have a significant amount of volume, which in turn equals higher chargeback’s, so you should definitely work with a company that understands this business AND has experience. Issues will come up and having a company that will work with you through the problems and not just shut you down is important.
In its simplest form, online dating is a way for people to make contact and communicate with the entire point of this to get an understanding of each other with the hopes of meeting in real life, if both parties feel comfortable in establishing a sexual or long term relationship. Its estimated that in the US alone, over 600 million is spent yearly on online dating.
So, besides the high volume and high chargeback/refund potential, there is also the possibility of fraudulent activities – which makes online dating processing high risk. Some examples of Fraud that has taken place is prostitution being advertised on the website. Also there are a bunch of scams that are being run, here are some recent examples:
“The woman who used a dating site was contacted by a person claiming to be an American soldier called Lt Brian Rivera.
After engaging in conversations over a month, she sent nearly £4,500 to an address in America, supposedly paying for flights for the soldier to come and visit her in Britain.
However, he failed to arrive and when she re-contacted his ‘site’, another soldier, Lt Troy said that he had been kidnapped and there was a £5,000 ransom.
At this stage the victim realized she had been ‘scammed’. “
I would advise a website to make it a point to tell their customers that sending money to someone they met online, but haven’t actually met in person is a VERY BAD IDEA. You would think that this is common sense, however its clearly something people do quite a bit of. Another example:
“Police say they woman was swindled out of nearly $13,000 by a man from Malaysia, and she's probably not going to get the money back.
The scam was reported to police last weekend.
Police say she met the man through a legitimate online dating service and developed a relationship via emails, text messages and telephone conversations. The man said he was having "financial difficulties" and she wired him money over several months.
Eventually he stopped contacting her and she discovered that his email address and telephone number were no longer in service.”
Prostitution scams are usually straightforward; they put profiles up on dating sites to get business. These profiles are usually recognized by sleazy names but, how do you combat all of this.
Here are some tips:
1. Consider using 3D Secure and AVS. Some people argue that this can decrease conversations and they may be right, but the alternative can be much worse.
2. Work with a 3rd party company that can help you review and moderate profiles on your website – contact me for recommendations.
3. Encourage your members/customers to report any scams or potential fraudulent behavior to you.
4. Work with a processor/company has different risk/threat tools that you can use. For instance IP checking, so you can block potential fraudulent activity based on parameters you set. For instance, a US credit card cannot be used at a Russian IP.
5. Examine your traffic sources and see if you are getting a higher fraud/chargeback rate from any source in particular. Its much better to have good quality traffic that you pay a premium on from a reputable source, then cheap traffic that is causing you a lot of headaches.
As always I am here to help. If you are interested in exploring options for a dating merchant account, have questions or even your own recommendations - contact me.
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