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How I Saved a Merchant $17,000
Every so often, I still get local businesses who call me up and ask for quote. A few days ago, I received an email from an eCommerce business that processes about $80,000 per month in total volume. They were on a particularly expensive version of Tier pricing that I call “Tier plus Surcharges.” In today’s […]
James Shepherd
Dec 15, 2015
Every so often, I still get local businesses who call me up and ask for quote. A few days ago, I received an email from an eCommerce business that processes about $80,000 per month in total volume. They were on a particularly expensive version of Tier pricing that I call “Tier plus Surcharges.” In today’s post, I decided to share my email (after taking out some of the particulars) to them which I drafted last night after creating their proposal which will save them $17,000 per year.
Notice two things about this email to a merchant:
#1 – Notice how I use expertise to build trust. While this merchant may or may not understand all the terminology used in this email, I can assure you that they will come away from reading it with the realization that I am an expert in payment processing. Also, notice how I used “Interchange Consulting” as an added value for them. In this case, I will probably save the merchant around $300 per month, just by helping them eliminate some downgrades.
#2 – Notice the opportunity. This is an amazing industry! I am able to set up a fairly large merchant and still offer them tremendous savings!
A little background on this one. They are an eCommerce / Phone Order merchant processing $80,000 per month. Current fees are close to $4,000 per month. They are already set up with an Authorize.net shopping cart gateway and the person who reached out to me was from their accounting department.
Let’s do something a little different with this post and get some questions from you. Post your questions in the comment section below:
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“Hey (FirstName), I have attached a couple things for you to take a look at. They need a bit of explanation, so I will give you a summary here but we should probably connect on a GTM if you let me know a time tomorrow so I can pull these up on a shared screen to go over them with you. We are looking at some significant savings, but you have a complex processing set up that will require some consulting along the way, see below.
First of all, you are currently on a form of Tier pricing that is especially expensive because it includes “Surcharges.” What this means is that the processor is placing all of your transactions into a “High Tier” because they are eCommerce and then, on top of that, they are adding surcharge fees for certain card types. Your company does far too much volume to be on Tier Pricing. This pricing structure is for small retail and food service businesses doing less than $10,000 per month.
I want to switch you to Interchange Plus pricing. What this means is that your pricing will become much more transparent. You will be able to see what your true costs are on each statement, as well as the mark up from the processor.
The tricky part is creating a proposal to switch you from one cost structure to a completely different one and it did take some research to ensure that I had all the numbers right. The good news is that I found a processing company that will allow you to keep your current authorize.net account (which I am sure your IT team will appreciate) so you don’t really have to make any changes there, just a couple of parameters need changed but the processor’s IT team can work with your IT team on this. It is a very simple process and should not require any significant changes to your existing shopping cart integration with authorize.net.
In addition to keeping your same gateway, you will save approximately $17,000 per year. You will see this number under the processor in the attached analysis form. Let me summarize the numbers for you and again recommend a GTM for us tomorrow to explain a little more in depth.
I started by using a custom application I built which is able to take a merchant on Tier pricing and calculate what their true interchange costs would be. I load in all the transaction data, and this application basically goes to the Visa / MC / Discover and AMEX interchange tables to identify the actual costs. This program came up with $1,907 which you will see I entered at the top of the attached analysis. However, because this produced such a large savings for you, I wanted to double check my work and so I have attached two pages from your statement where I actually went through line by line to check the true costs of each interchange type and then add them up.
This method of manually adding up the interchange fees and checking each one against the official interchange tables online gave me a cost of $1,660 for Interchange which was less even than the $1,907 that my application came up with. The bottom line is that your current processing company is making a fortune on your account. I stuck with the $1907 that my application produced since this is more conservative. A couple things you do need to keep in mind with this quote:
#1 – My guess is that your first statement will show about half of the monthly savings I am projecting here. The reason is that you have a lot of surcharges and because of the way this statement is set up, I have no idea what they are for. Once I get the first statement on Interchange Plus pricing, we will need to have a follow up consultation to see what these extra charges are actually for and make a few operational changes to minimize them. These changes might include asking for some additional information in the shopping cart or even some simple programming / mapping changes. A common issue with growing eCommerce companies is that they do not include an “Order Number” with their Auth.net account. This adds a decent sized surcharge to many card types. There are many other things like this that are very easy to fix and that I will be able to quickly identify and work with you on once you have a month of processing under your belt.
#2 – My recommendation is that we make the initial switch remotely. Most of this transition will simply involve me getting your IT people together with the Processor’s IT team and they will take it from there. However, from there, I would like to schedule an in person meeting with you and at least one person from the IT team approximately 60 days after you switch. This will give me time to get your first statement, review it and consult with the Interchange experts at the processor to identify further cost saving opportunities as a result of small operational changes. I do not charge current clients for interchange consulting, and it usually provides a significant savings in addition to lowering the processing fees.
If you have any questions, feel free to call or email me back. If you could reply with a good time for you tomorrow to do a GTM that would be great…”
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I hope this email has motivated you to learn more about the payment processing industry, so you can present yourself as a true expert! I also hope that you see the potential in this business. There are still many merchants who are need of your help in order to save a significant amount of money. If you would like to learn more about the tools I discuss in this post or how you can join our team to leverage them and our more advanced training for free,
SCHEDULE A CALL with me.
Make it a great day!
James Shepherd
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