Asking merchants to change

When you introduce a new online payment solution to merchants, you’re asking them to change. You’re asking them to change the way they handle their payments, change the workload of their IT group (albeit temporarily), and change their customer experience. I’ve never met a merchant who really likes to do any of these things, even if in the end, there’s a good deal or some kind of benefit in it for them (which you better have if you are the one asking them to change). Maybe it’s PayPal, maybe it’s Bill Me Later, maybe it’s some cool new ACH functionality - it doesn’t matter. Implementing any of these things requires some uncomfort today, in hopes of a better, cheaper, more user-friendly payment processing tomorrow. How merchants react to your request for change depends on what stage they’re in.

I like to think of successful SMB’s as being in the growth stage. Their main concern is keeping their server up and their database from crashing, so that they continue to grow and make their customers happy, who will tell their friends about their site, which will enable them to continue to grow. That’s the growth stage.

Larger businesses, that are really too big to be considered an SMB anymore (not sure what the $$ volume is to best define this, but let’s just say at least $10 million a year in payment processing) are in what I consider the cost-cutting stage. Of course they’re still growing, love growth, and really care about it; but their business is now big enough that they can afford to “tinker” and find little ways to cut costs. Tinkering is fun and it’s a luxury. It means having the time to assign teams of people to massage the tiny details of your website’s UI, improve your splash pages using the Taguchi method, or explore payment alternatives that will reduce your processing costs by a percentage of a basis point. These are the things you get to do when you have enough cash, people and luck to be in the cost cutting phase.

So, what does all this mean? Well, I think it means that size dictates the importance that pricing has with online merchants. It’s ironic, but large merchants can afford (no pun intended) to care more about pricing.

That’s not to say that small merchants won’t adamantly tell you, during your usability sessions or focus groups, that price matters to them — because they will. But, you have to remember that they’re lying to you. They say they care, they think they care, but they really don’t. What they care about is finding a way to get their business to the growth stage. If you can sell them a payment product that costs twice as much as whay they have now, but will make their business grow like crazy — they’ll say it’s too expensive and they would never buy it. Then, they’ll leave the focus group, rush straight home to their computer and buy it.

People are liars.

Leave a Reply