If you are in ecommerce marketing you need to understand merchant processing

If you are in ecommerce marketing you need to understand merchant processing

One of the first questions I ask during my initial consulting interview is how their merchant processing account works? I usually get a blank stare from the marketing team and they respond, “That’s accounting job.”

This if farther from the truth than one can imagine. Marketing and Sales need to understand the nuances and structure of how merchant processing works and how money moves around the web community. Case in point; awhile back I posted a job description for an ecommerce manager. The description dealt with only the capturing of new business and did not touch on the affects of how the new business would affect the company.

This may seem out of the normal scope of understand and responsibility for marketing but in actuality understanding how money moves and the new technologies of money gathering and payment portals operate is very important. My background is one of operations management, sales, and marketing. And I have learned over the years that when people understand how money is collect and moves they have a much better understanding of the Big Picture.

I come from an entrepreneurial background and an ongoing discussion in my family is do you hire a specialist or generalist? The answer to this is you hire both. When an organization is small to medium in size the generalist will have a better understanding of cross department interaction and the cause and effect issues. But when you need to get something done that is very precise and has a fixed amount of time you need a specialist.

It is without fail that when you bring in a specialist their learning curve for understanding the new business is much longer. They may produce more useable work for the assigned project but they are at more of a loss when it comes to the entire company interaction.

The reason I mention this is that even if you consider yourself to be a specialist in Ecommerce Marketing, your understanding of merchant processing is an important part of the job.

For example, when you are working with sales to package and advertise a new product line an important observation needs to be made. How will the new product deviate from the standard expected order size price?

The reason this matters is illustrated in these two examples:

Fixed charge of $.35 per transaction swipe rate and 2.5% of fixed rate:

2.75% swipe rate $.20 fixed rate:

At first observation it seems that all is well but when we look at the total cost for $1000 in products and how the number of transactions affects the total merchant processing charges it demonstrates the need to understand the swipe rate verses the fixed rate.

A higher swipe rate with a lower fixed rate works better for smaller order sizes while a higher fixed rate and lower swipe rate is better for higher order sizes and over the course of a year the difference really ads up.

What this leads to is if you end up changing your expected order size in a major way, effort needs to be made to understand how this will affect your loss of sale due to merchant processing charges.

As we move more and more to mobile charge transactions from our smart phones the issues become more and more heightened. If your merchant processor charges a different rate for smart phone charges and you are about to launch a new smart phone advertising program, you may be setting the company up for a higher loss on merchant fees than is expected.