How to Sell Point of Sale (POS) Systems to Small Business OwnersApr 27
Too often those involved in a particular industry are afraid to confront reality about the future of that industry. Credit card processing is becoming more and more of a commodity every day. A Commodity as defined in Wikipedia, is a product or service with significant demand that the market treats as “equivalent or nearly so no matter who produces it.”
More specifically, a commodity is something that has almost universal demand (everyone needs it) but, it is difficult to differentiate one service from another. Electricity is a commodity. When it was first introduced, it was a novelty and very expensive to have installed and serviced. The up front costs and the differentiation between providers was enormous. The contracts for service were long term and the government regulation was non-existent. Today, it usually costs nothing to get electricity hooked up and started, there is never a long term commitment involved and the government highly regulates the industry. That is what inevitably happens to a service that has universal demand with service needed only in emergency situations.
When the credit card processing industry was born, there was a high up front cost for equipment, long term contracts and no government involvement or regulations. Today, most processors give the equipment out for free, require no long term contract and with the Durbin Amendment, the government has taken its first stab at regulating portions of our industry. Add to this the experience of most agents in the field and you will learn that merchant’s today are motivated to buy primarily because of cost. There are many other things that go into the sales process but, most of these are simply to obtain enough trust from the merchant to get them to trust that you are telling the truth when you say, “My service is cheaper.”
I believe it will be 5 or 10 years before our industry takes a serious turn towards regulation or commoditization but, I want to start preparing for this change now! How can we add value and differentiate ourselves from the competition in this industry? What services would add value to our clients and keep them from switching to another provider based only on price? I believe POS System sales is the future for independent agents selling credit card processing. If you have ever tried to switch a client over from another service provider that had set up their POS System, you know just how difficult that can be. POS Systems provide a realistic way for us to provide true value to our clients and over the next few months I will be rolling out some new training resources and partnerships that you can participate in (if you are on my sales team) to offer POS Solutions to your client base. In the mean time, here are some action steps for you to take:
1. Get as many Credit Card Processing Clients as you can while we are still able to differentiate ourselves based on price and local service over the next 5 years+. The more clients you have, the more powerful your position will be in the future as we offer added beneficial services to our client base.
2. Start to familiarize yourself with the way POS Systems work. Go on www.google.com and search for POS Systems or POS Software and look at our competition. I personally like posnation.com, Micros and Quickbooks POS, to name a few that I have used in the past.
3. Be prepared to fully engage in new training resources and change what you are doing now over the next few years to include value added products and services to help you differentiate from the competition.
One last side note. There are some processors who are or who are thinking about offering POS Systems for free to clients who use their processing services. I personally think this is a huge mistake and I do not recommend that you participate in a programs like this. I was very close to making a deal with such a company and after further consideration, I realized how illogical this would be.
It would be like the electric company telling you that they wanted to charge you more for your electrical service but, in exchange, they would provide you with light bulbs, a microwave and an electric water heater. It just doesn’t make sense. Why would we offer the most valuable part of the equation for free? As merchant’s gain a better understanding of credit card processing, they will learn how to lower our margins to the bare minimum and that is inevitable but, POS Systems that provide inventory management, accounting, advanced reports, off site access and other valuable features should be presented as the most valuable part of the deal and therefore should make up most of the profit. The credit card processing service should be only one part of a more complex and profitable deal. Something we provide so cheap that they would never want to switch (which we already do without offering POS Systems). Keep in mind that as an independent agent, you can offer enormous value to the merchant by learning your different POS Systems and offering on site training and technical support. We will present you with an opportunity to charge for these services and make a completely separate stream of residual and up front compensation from the sale, installation and service of the POS Systems themselves.
Please post comments below with any feedback or thoughts you have.