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ISOs can differentiate themselves–or at least keep up with the competition–by offering merchants value-added business-to-business services that track payroll, inventory and marketing. B2B services sometimes earn ISOs a profit, but often they serve as loss leaders.

Either way, they attract and help retain clients in what is increasingly a commodity market for credit and debit card processing with increasingly thin margins, observers say.

“That’s becoming the modern way of doing business,” Hiram Hernandez Sr., president of First Capital Payments, says of B2B service offerings.

The Rochester, N.Y.-based ISO, which has offered such services for about three years and considers them a profit center, begins by consulting with merchants on strategy and then finds third-party software to fit the retailer’s needs, Hernandez says.

Taking the time to learn the B2B services that would benefit merchants can make the sales call a valuable experience for the merchant instead of a bothersome intrusion, observers say.

An ISO that offers an irrelevant, redundant or outdated service strikes merchants as just another salesperson. But those that offer labor-saving, profitable services can transform themselves into valued consultative partners, observers say.

“You have to be able to add on products and services that the market actually needs,” says Antonio Smith, who operates International Merchant Services Inc., an Atlanta-based ISO. “Find products that hit the hot button for that client.” Smith also wrote “The Sellionaire,” a book on sales and marketing.

‘Hot Button’ Advice

Hernandez takes the “hot button” advice to heart when determining the B2B services that fit a merchant’s retailing category.

Hair salons, for example, could benefit from software that tracks customers’ purchasing habits, Hernandez notes. When a customer has not been in for a while, the system could signal an appropriate time to send a postcard offering a discounted haircut. It also could track customers’ birthdays and other special events, enabling the salon to send e-mails offering timely birthday or gift cards, he says, noting knowing customers also helps with mass mailings announcing promotions.

Related loyalty campaigns could award points to regular customers no matter what payment method they use–cash, card or check–and notify patrons when enough points have accrued for a free haircut, Hernandez adds.

When a salon gets down to the last two bottles of a particular hair gel, inventory software could tell the salon owner that it took a year to sell 24 bottles, so she might order just 12 this time, Hernandez says. Or if she ordered 12 last time and sold them all in a month, the system would alert her of the need to order more.

Inventory-control software and marketing intelligence similarly can prove vital to liquor stores, Hernandez says, noting First Capital offers such software.

Liquor stores carry huge inventories and have only a dim understanding of what they have on their shelves and in the back room, he says. With tracking, a store owner would know when only a few bottles of a certain brand of liquor sell each month, so he could buy one case instead of five next time.

A grasp of what is on hand also helps owners make rational choices when distributors offer specials, such as “buy 10 cases and get one free,” says Hernandez. “That’s a big help in that area,” he says of the inventory-control feature in liquor stores.

And just as hair salons can benefit from customer information, liquor stores can refine their marketing when they scan driver’s licenses and find that wine customers are mostly between 25 and 45 years old or that vodka buyers are concentrated in one ZIP code, Hernandez says.

Customer Retention

World Bankcard Services has gone a step farther by creating its own inventory and payroll software, says Sonny Im, the company’s president. The Fairfax, Va.-based ISO began offering the system in May after two years of development, and more than 300 retailers now use it, Im says.

At about $2,000 per installation, the software undercuts competing offerings that can cost $3,500 to $10,000, but the ISO loses some money on each one it sells, says Im, who claims the same or better functionality of the higher-priced competitors. “We don’t want to make a big profit out of the software,” he says. “We just want to retain customers.”

The software comes with a one-year warranty. Thereafter, users may pay a per-hour charge for maintenance or sign a service contract that requires a monthly fee but covers any eventuality, says Im.

The software comes in three variations, one each for restaurants, dry cleaners and other retailers, Im says. All provide functions tailored to their respective market segments.

The version for cleaners, for example, tracks the numbers used to identify clothing transported around the shop on overhead conveyors and uses them to scan items out when picked up. It performs those tasks plus the typical handling of inventory and payroll duties, Im says. A fourth iteration, for hair and nail salons, is in the works, he adds.

Sales agents that place a software package with a client receive an upfront payment of $500 plus the 50% residual they earn for life for the payments processing, Im says.


Look for a longer version of this article in the November/December issue of ISO&Agent magazine arriving shortly.

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