CHICAGO -- ISOs should develop a profound understanding of their merchant portfolios, a speaker said here last week.
They can start with the basics, Mary Winingham, CEO of Mirror Consulting, said in the Field Guide Seminar at the Midwest Acquirers Association 11th Annual Conference.
A portfolios basics include the number of merchants, transactions, batches and new deals per month, she says.
Beyond the basics, ISOs should examine merchant attrition to find out why clients are leaving and how long they stay before leaving, Winingham says.
Call merchants and find out why they left in order to fix the problems, she advises.
And remember that retention doesnt necessarily improve just by doing the opposite of what makes merchants switch processors, Winingham notes.
Instead of relying on that approach alone, ISOs should also figure out what theyre doing right and determine what types of merchants stay in the portfolio, she says.
It also pays to understand new customers and where theyre coming from, Winingham says.
Understanding how rates affect attrition can help with decision-making, she notes, adding that merchants in the middle range of the rate card tend to stay longest.
With a deep knowledge of the portfolio, ISOs can increase its value by retaining the best merchants, Winingham maintains.
The best merchants have the highest lifetime value based on the average value of their sales, the number of transactions they generate and how long they remain in the portfolio, she says.
After identifying the best customers, give salespeople incentives to retain them and to find others like them, Winingham says.
Understanding the portfolio also helps ISOs plot strategy, which could include promoting the right products to merchants, she says.
If the best customers are using prepaid gift cards or rewards, for example, keep promoting those goods and services, Winingham says.
Too many ISOs are missing out on cross-selling opportunities, Winingham says, noting that ISOs earn an average 15% of their revenue from products other than transaction services, while gas stations collect 30% of their revenue from products other than petroleum and car dealers gain 57% of their revenue from activities other than selling automobiles.
Besides all the upside to understanding a portfolio, theres a downside to failing to understanding it, she says.
If an ISO doesnt grasp the nuances of the portfolio, potential partners become less-interested in doing business, Winingham warns.