Subscription rate pricing structure is very familiar to me. There are several companies which use it exclusively. Merchants like the simplicity. This cost structure can be very powerful. Get my best tips in this episode on using it effectively.
If you are not familiar with these merchant services pricing structures, go to instantquotetool.com. Click on the training section. You’ll get detailed descriptions of each pricing structure there.
Most of you are familiar with interchange plus pricing. It’s interchange plus a small percentage and a transaction fee. Subscription rate pricing is basically interchange plus a small transaction fee, plus a one flat dollar amount. It’s similar to Square but without all the hidden mark-up.
The pitch for selling subscription rate is an old one. Brush up the old and take it to a whole new level. The same pitch was used to take merchants from the tier pricing to interchange. Many of you are very familiar with that pitch. I’ve done it hundreds of times myself. This is the essence of the pitch, “Oh my, I can’t believe you’re on tier pricing. You’re getting over-charged! Let’s go to interchange plus. It’s transparent, making it easy to identify your costs.”
Going from interchange plus to tier is a very different pitch. I discussed that in the episode a couple days ago.
View article: Tier Pricing and Interchange Plus Pricing
Subscription rate pricing is basically the same pitch but taken to a whole new level. This pricing structure fully separates the mark-up from the costs. Depending on the company you use, there is usually a split. They’ll charge the $99 subscription fee on the 15th, and then the statement will come with the costs on the 1st. That can be a big competitive advantage. For a competitor to make a better offer is difficult, especially if the subscription rate is on a different day than the statement.
Another big opportunity of subscription rate pricing which is not often used is very large accounts. Using this price structure can be a huge benefit when you pitch the big accounts. Big companies don’t prefer complicated payment set-ups. The complicated ones are their “lot” since they get the best deal on interchange. However, they must break down their statement to ensure they’re not being ripped off. They must determine how much of the statement is mark-up. These big companies are doing $300,000 to a million dollars per month.
Use this pitch, “Look, we do things differently for huge companies. Our first job is to manage your costs. For that we’ll look at your interchange. We’ll do a quarterly review to monitor your interchange fees, down-grades, etc. This will help you process in a more cost-efficient way. Our second job for you is to provide customer service, processing, and moving the money. For that we charge you $499 a month [or whatever amount – the subscription rate is going to be pretty high on somebody doing a million dollars a month.]” On those deals you do pass through your true costs to merchants. Interchange plus whatever your Schedule A cost is – perhaps $0.03, 1.5 basis points. Pass through your true costs plus charge the subscription fee.
This pricing structure gives the big companies peace of mind by knowing they get two different bills. Their mindset will be, “I don’t need to look at either bill too intensely. One of them is my costs, which is my costs. The other one – or even if it’s on the same statement – is always the same amount based on my volume. Separating them like that could be a huge opportunity.
Many of you have come from an industry selling software or some other service to big companies. Now you’d like to sell merchant services to some of those mega-companies. I suggest you try this approach. It should work very well for you.
These are my best tips on using subscription rate pricing effectively. Hopefully these will help you take advantage of this powerful tool in merchant services pricing.
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