It took years to filter down from the big companies, but small businesses are now using high-tech customer relationship management.

About 11% of small businesses with fewer than 100 employees and 35% of midsize businesses with 100 to 1,000 employees use CRM software, according to IDC, a Framingham, Mass.-based research firm.

So, it was only a matter of time before forward-looking ISOs seeking points of differentiation picked up on CRM, including a couple of tech vendors that added transaction processing to their product assortments.

For one of those hybrids, Mindbody Inc., a San Luis Obispo, Calif.-based ISO, CRM is integral to the business management software it provides to almost 20,000 yoga, pilates and spinning studios and to other personal service businesses in 80 countries. Payment processing is an ancillary service, offered to all U.S .clients.

“In the health-and-wellness industry, adoption of CRM software is growing rapidly because these business owners are concerned with building strong client relationships,” says Rick Stollmeyer, Mindbody CEO. “Fitness, beauty and wellness businesses are most effective when clients return on a frequent, consistent basis.”

The CRM software manages customer records – class and appointment schedules, payments and billing information – and creates customer indices for targeted marketing and automated email communications. The software also enables consumers to sign up and pay for exercise sessions online.

Mindbody Processing services take advantage of CRM’s commerce capabilities, including online stores, online payments for classes or appointments, and credit card transactions at the point of sale, Stollmeyer says.

Mindbody software users may choose another card processor, but nearly two-thirds of those in the U.S. choose to establish a merchant account and process payments through Mindbody, he says.

The company became an ISO to offer clients a competitive merchant account processing service tied into their customer accounts, eliminating the need to process payments and reconcile accounts in multiple systems, Stollmeyer says.

Since becoming an ISO, the company has seen a consistent increase in the number of clients who add merchant account processing services to their core Mindbody systems, he adds.

“By becoming an ISO, we are able to be more than just a software vendor or just a processing vendor for our clients,” Stollmeyer says. “We are able to be their business partner, helping them navigate the hurdles of running a business.”

The CRM-first sales effort at Mindbody seems to spur the ISO’s success with the CRM-processing package, and offering CRM and payments as a package could work for other ISOs, suggests Ed Lawrence, director at Auriemma Consulting Group in New York.

“Smaller and mid-sized businesses are often very price sensitive and may not be seeking CRM ... as a standalone product but might be receptive to it as part of a broader acquiring relationship,” says Lawrence.

Moreover, Mindbody is not alone. CRM software developer Epicor Software Corp. of Dublin, Calif., was a CRM company first and an ISO later, too.

In 2011, Epicor merged with ISO Activant Solutions, also a retail POS software company. Now known as Epicor Payment Exchange, the ISO seeks to “enhance the payment and POS” features of Epicor’s integrated software (POS, mobile payment, CRM, back office and operations) among Tier 3 and Tier 4 merchants, says Matt Mullen, head of product management and marketing for Epicor and general manager of Epicor Payment Exchange.

Payment processing is bundled with Epicor software, lowering the cost of connectivity for clients who choose Epicor Payment Exchange.

“Payment will be controlled for the next decade at the point of sale,” Mullen says, even if consumers present a mobile device instead of a plastic card to close a transaction.

CRM should become part of the process of collecting customer data, and the system should connect the information with customer records to deliver offers at the point of sale that encourage customer loyalty, he says.

Even more compelling to the merchant, CRM, combined with sophisticated POS software and an educated ISO, enables merchants to reward consumers for using a particular payment type, such as a debit card instead of a credit card. That can help save the merchant money on interchange and present consumers with a perk that works, as evidenced by data on that shopper in the CRM system and available at the point of sale, says Mullen.

“The Durbin amendment (to the Dodd-Frank Act), with its split between credit and debit pricing, put a stake in the ground,” he says. “There is now material benefit for the merchant to influence payment type.”

The savings can be significant for the retailer and the consumer as well, Mullen says.

A loyal Nordstrom shopper looking to pay for a $500 transaction with a United Mileage Plus cobranded credit card who can be persuaded to put the purchase on a debit card for a discount will still put the merchant ahead in what is saved on interchange — 250 basis points per $100 on the cobranded card versus no more than 24 cents on debit, he says.

CRM adoption and integration helps merchants manage payments, Mullen says. “Retail is going to shift in that direction,” he contends. “Ignoring it is significantly a peril for retail.”

Loyalty rewards are inextricably bound in this equation because they will help merchants drive customers to the cheapest payment type per transaction, choices that will grow and fund retailers’ retention efforts, observers agree.

An expanded version of this article appeared in the September-October print edition of ISO&Agent.

 

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