It is much more difficult to be an ISO in the payment processing world than it was even five years ago. Merchants are focused on price and the word “commodity” is often heard. The downturn in the economy hasn’t helped matters either as we’ve seen an increase in attrition and a decrease in new merchant starts. To gain an edge on the competition, many would suggest you should find a niche or a vertical market, become a segment expert and develop strategies to serve that given market. I would agree that vertical segmentation is a great way to add value and move your organization from a commodity provider to a consultant and create profits along the way.
Obviously to excel in a given vertical, you must you must first determine what your focus should be.
As you consider different segments I would suggest some basic fundamentals to consider. Size and profitability are both important factors. A vertical must be sizeable enough so there are enough potential clients to make your business work and margins large enough to generate adequate returns. Evaluate the competitive nature of the market as well as your realistic ability to sell in the segment.
Last, make sure it is a segment that you either know already or are prepared to engross yourself in. You will be spending a lot of time with these businesses, make sure you enjoy it.
A hint that works for many—look at your existing customer base, your best choice vertical focus may be in your existing portfolio. Try and dissect some of these elements in your existing client base.
Next, it is imperative that you get a great (I did not say good) understanding of the needs of the vertical market. You need to know everything about the chosen segment. Spend time with the industry players, businesses and decision makers. Conduct focus groups and spend time in the field. It is important to not only understand the payment processing needs of the segment but the overall business needs and pain-points. You can only be a consultant in a segment if you can walk the walk and talk the talk. Attain a full and total comprehension of the profit models and metrics that make your segment work, understand the top tier organizations and the new technologies and, finally, engage the segment trade associations and networking groups. As Yoda would say, “become one with your potential customers.”
Now that you have a thorough understanding of the segment’s needs, it is time to work on the solutions that fit the segment. Develop a working knowledge of the VARs that service the vertical. Put together solutions that fill some of the needs of the segment. You may decide to partner with VARs, gateways or third parties to put a full package together, but start to build solutions. Test these solutions in the market and tweak them based on customer demand. Remember, the best solution is the one the customer helps create. Inevitably you should become a solution provider, not a payment processor.
Once you have the basic solutions figured out, it is time to market to the segment. You may get add-on sales from adjacent verticals but target your message to your core segment. Advertise in segment specific trade publications. Develop marketing slicks specifically for this vertical market. Tweak your website or create a sub-site specifically for your targeted merchants. Brand your products and your business group to the targeted vertical. Showcase your company as an expert in your chosen market. This also includes becoming part of the trade association and acting as an advisor to the segment. This type of PR is invaluable. Write articles, speak at events and become a subject matter expert. You will be shocked at how selling becomes order taking when your company becomes a trusted advisor.
Becoming a vertical expert is not easy nor is it done overnight. It takes years to develop the brand and stay on top of a given segment, but any organization can do it. If you chose a growing profitable segment, understand the needs of the vertical and develop solutions to fit those needs, you will have a great start. The rest is marketing and building the brand while at all times continuing to tweak your business based on the changing needs of the market. Many organizations find the move to focusing on a vertical as a way to re-invent and re-energize their own businesses. The renewed focus and commitment can bring more profits and position your organization more favorably for future growth.  |
