The past two profit story articles have been some of my best received
articles to date. I know the approaches I have recommended require
a little more work than fictitiously lowering a merchant’s rate or giving them a FREE terminal that ends up not being free, but it’s surely worth it. This month I’d like to talk about building value with bill payment services.
Bill payment services deviate from what we’re used to selling.
Instead of offering a merchant a way to accept payments, we’re offering the merchant products and services to resell in their store.
So let’s jump right into answering the merchant’s most important question.W.I.I.F.M. (What’s in it for me.)
The answer is twofold; first increased foot traffic into your business, second it’s another thing to sell that’s fairly hassle free. What I mean by hassle free is that it doesn’t take up a lot of counter space, merchants don’t pay for it until it’s sold, they have access to virtually unlimited inventory and they don’t have to check it in or out and it has no expiration date. Merchant’s existing customers will be inclined to make extra visits to pay their bills and new customers will be drawn in because of the additional service.
So let’s start with the profit story. Ask your prospective merchant how many customers come through your store each day? Customer answers 100. Of those 100 customers how many do you think have bills to pay? Customer will answer, ALL. You bet they do, Mr. Merchant!
How many of those customers may pay their bills in your store?
Merchant answers 5 or 10. OK so let’s take 5.
If they price their bill pay competitively at $2.50, the merchant can make up to $1.75 for each bill paid. So let’s take the lower number, Mr. Merchant, and cut it in half so let’s say 3. 3 X $1.75 = $5.25 per day.
Now how many days are you open each month? 30 X $5.25 = $157.50 in monthly earnings.
Now you’ve got 90 people from your existing customers who are paying bills monthly at your store, that’s 3 people per day times 30 days per month.
Of those 90 people if just 5 make an extra trip to your store during the month to pay a second bill you’d make an additional $8.75.
Now let’s talk about additional people that will come into your store to pay their bills once the word starts to spread.
What’s your average sale in your store? Merchant answers $5.00.
What’s your average profit margin? Merchant answer 30%.
OK Mr. Merchant, would you say “being super conservative” that having
this additional service could increase your foot traffic by only 1%.
That’s one additional customer a day paying a bill or 30 X $1.75= $52.50 per month.
Now if 30 new people are coming in here to pay a bill each month, how many do you think may buy something else? Merchant answers half. OK so 15 people will make your average purchase of $5.00. That will bring additional earnings of $75 in monthly gross sales and $22.50 in monthly net profit. That’s if there’s only a 1% increase with only half of them buying a magazine and pack of gum.
So Mr. Merchant, what you’ve told me is that bill payment sales will earn your business $241.25 per month using very conservative numbers. What would you do with an extra $250.00 per month? At this point let them imagine. Then just start filling out the paperwork
and ask for the sale. Now if they have to pay a set up fee or buy a
terminal for $400 or $500 it’s no big deal. Then of course it won’t hurt to process their credit cards thru your new shiny terminal. In addition to matching their current rates (NOT
LOWERING) you’ll even be a nice person and pay half of any cancellation fee.
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