Has Your Industry Been Commoditized?

Recently I had a longtime customer call me to cancel, and of course I was a little taken back since I had built a relationship with them. When I asked why they were leaving they stated that it had nothing to do with my service, but that they had gotten a telemarketing call and someone gave them a smoking rate that was lower than mine. Obviously at that point I talked about lowering the rate and the service I provided, and how I was there for them anytime they had issues or problems with their account.

Upon hanging up, and yes losing the customer in the end, it got me thinking about how many industries have been commoditized by cut rate companies coming in with low ball rates but providing little service. Credit card processing, the insurance industry, and even the banking industry have all been commoditized. Many industries have been affected by cut rate companies promising low rates which sound unbelievably true.

So how do they do it?

Obviously I cannot speak for every industry, but I know how it works in the credit card processing arena. First of all, the low rates that are quoted are typically for check cards/debit cards. The cost from Visa and MasterCard for a check card or debit card is around 1.00% so 1.30% or 1.59% seems like a great rate. However, depending on your business model you may never even see a check or debit card. For instance if you are a vacation and travel company the odds of someone putting their vacation on a check or debit card are very slim so… guess what… you will never see that awesome rate of 1.30% or 1.59%.  So be careful and understand what types of cards you see before you sign a contract.

Another trick of the trade is this: many companies get the account signed at the low rate they promised and when Visa and or MasterCard increase their rates they will increase your percentage rate. So if Visa goes up .01% points well you get a notice that says it is going up .03%. After a couple of increases guess what, you are right back to what you were paying before you switched or even worse case is that they will raise you even higher than what you were originally paying.

So how can you avoid buying into another industry sales gimmick? Just as I always preach, build a relationship with an expert in that industry. Find someone that you know, like, and trust. Go with the person that has been in the business for a good number of years because that person has obviously made a living at what they are doing which means that other people must know, like, and trust them. It doesn’t always work, but I guarantee that the success rate is much higher with an industry veteran versus someone you have never met or has called upon you with the latest scheme or gimmick.