Does customer service in our business have value? Simply put, the answer is yes, of course it does. There’s no question that a merchant who cannot get a service rep on the phone in a reasonable period of time is a vulnerable merchant. Further, if the service rep can’t solve the merchant’s problem quickly and effectively, then the merchant is vulnerable.
Acknowledging that service capability is a necessity is the easy part of this discussion. The trickier, more subtle question is: what’s that worth? Or, to put it differently, what value does service create? For purposes of this article, I am going to assume that the word ‘service’ actually means good service, and that whatever definition of service your organization uses, is in fact what’s happening day-to-day.
The reason service has value is that it stems attrition. Attrition has two root causes: merchants going out of business and competitive forces. This last cause has two parts: price competition and service competition. Your organization can win on price and lose on service, And over the long haul you won’t keep the merchants you worked so hard to get. It’s relatively easier to get a merchant to sign a low- price contract than it is to keep that same merchant happy with efficient effective service over time.
So, whatever your attrition rate is, I figure that half is due to merchant failure, and the other half is due to price or service competition in equal measure. That means bad or no service accounts for 25% of your attrition rate. If your attrition rate is 1.5% per month, then .375% of your merchants are leaving due to bad/no service.
If you have 1,000 merchants, a 1.5% attrition rate equates to 15 merchant cancellations per month, with between 3 and 4 of them (25%) being due to service. This measurement gives you at least a handle on the value of service – or to look at it another way, the cost of no service.
What is a merchant worth to you? $500? $1,000? Well, it depends on the replacement cost of that merchant. Not all merchants are created equal of course, and the ones who are more sensitive to poor service are the ones who will leave first. Take a look at your cost to replace the merchants you are losing to know what they are really worth.
Let’s assume they are worth $1,000 each. That means you have about $4,000 per month leaving the business due to preventable causes.
Therefore, you also have a $4,000 per month budget to apply to service to stop this hemorrhage and you can still break-even on the proposition.
Service should not only react to customer needs, but, when done correctly, it should also anticipate them. Ask yourself what are the key points at which a merchant leaves your portfolio. A change of ownership at the merchant is one that I see regularly affecting our attrition. This is the most frustrating reason to lose a merchant because it’s not due to competition or bad service. It just happens.
But this seems predictable to me.
The service reps should be in contact with merchants once every so often and they should ask if the owner is considering a sale of the business. If so, the merchant should be put on a watch list or other management regime which is designed to result in a continuation on service with your company instead of the new owner finding another provider.
There are other predictable turning points in a merchant’s life which have a strong correlation to change in the processing provider such as hiring a controller or accountant, change in managers or opening a new location.
Defining these events is important, training your staff to recognize them and act on them is much harder. Usually, ISO employees are trained and rewarded for making the next sale. But shouldn’t they be rewarded for saving a customer as well? Aren’t those two events (a sale and a save) really the same thing?
To get to that point takes good reporting, data management and a clear definition of a customer save and the rewards available to the staff doing the job. What tools do they have to save a customer? What measurements count in saves?
This is a murky prospect since what might be a save to one employee is not to another. A sale is a clear event that can be measured and compensated. It has a well articulated beginning, middle and end. A save is more vague by its very nature, but no less important.
Thinking through the value of service and the means by which to support and reward it is going to be a key marker of success in our business in coming years. More and more, I hear people talking about conserving merchants in their customer base rather than selling new ones. The emphasis is shifting and our companies need to shift with it.
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