Consider Automatic Credit Card Processing With SpaBoom
October 24th, 2007 • Posted by Larry Donahue • Permalink
Did you know the money from your Instant Gift Certificate sales can go direct to your bank account — without additional cost from SpaBoom??!? This is a free service from us. (Note: If you use PayPal, there is an extra step involved before your money gets to your bank account).
If you consistently sell more than $1,000 a month in Instant Gift Certificate sales, you might want to consider integrating your SpaBoom account with an online merchant account. This is especially helpful during the holidays, when your online sales of Instant Gift Certificates goes through the roof!
There are a number of advantages to doing this, such as:
- Save time. You don't have to manually process each credit card with every sale.
- More secure. Since each credit card is immediately submitted to your merchant account upon each sale, the provisioning of an Instant Gift Certificate doesn't occur unless there is a successful credit card transaction. This means no one can print or email an Instant Gift Certificate, unless their credit card has been successfully processed. Also, the credit card companies will allow us to ask for the card code, when the credit card transaction is immediately forwarded to the merchant account. See the PCI Data Security Standard (PCI DSS) for more information.
- Save money. The rate merchant account providers often talk about - and compete with - is the "qualified rate" (learn more about rates). The problem is, most merchant account providers won't give you a qualified rate when you cannot swipe the credit card, and some will default to a non-qualified rate (the worst available). You need to check with your merchant account provider for the specific details, but some will give you mid-qualified rates for Internet-based transactions when the card code is included.
The only downside to an online merchant account, is that no one will let you use your existing retail-based merchant account. You must obtain a new merchant account that is strictly for online sales. I recommend talking to your existing merchant account provider, and checking into the costs of an online merchant account. Then, compare what you're told with the options I present further below. Before I do, consider that you need to look at several factors when considering different merchant account providers:
- Your bank and your merchant account are two separate pieces. Most banks offer merchant account services, but you're by no means restricted to doing merchant account business with your bank.
- Compare ALL THE RATES: qualified, mid-qualified and non-qualified, for each merchant account provider. Get all the costs, including monthly, misc recurring costs and other fees - you may be surprised at how all of this adds up. Check out my merchant account analysis spreadsheet, discussed below.
- Look at the determining factors that decide which rate you're charged. If you're looking for just an online merchant account, make exactly sure what rate you'll be charged (i.e. some merchant account providers automatically assume all online credit card transactions are non-qualified).
- When considering an online merchant account, know that you need a payment gateway. It's the equivalent of your terminal in your store. SpaBoom is compatible with Authorize.net, and merchant account providers usually will provide you the gateway for an additional cost. Note that you can obtain the payment gateway yourself (more on this below).
- Use this opportunity to keep your existing retail merchant account provider honest. You may not be getting as great as a deal as you think you are, because the bulk of your transactions are being treated as mid-qualified. Or, your "introductory rates" have long since expired. I have personal experience in getting a lower rate, simply by threatening to leave. Don't sign long-term commitments, and seriously train yourself to switch merchant account providers as necessary to keep your rates as low as possible. You can save yourself thousands.
- Finally, if you're serious about this, I've prepared a spreadsheet to help you with your analysis. It gives you a view of several scenarios, based on your level of transaction volume. Assuming you know that, you can see an estimated monthly costs for each merchant account provider you're considering.
Assuming you are ready to take the plunge and obtain an online merchant account to interface with SpaBoom, you have only two major steps. First, obtain an online merchant account (with or/and a payment gateway) and second, let SpaBoom know about it. There are two merchant account options with SpaBoom: Authorize.net compatible or PayPal Web Payments Pro. Both of those links take you to detailed help information, with instructions on how to sign up (if you're interested) and connect them to SpaBoom. The Authorize.net option allows you to plug SpaBoom into just about anyone.
If you are considering a merchant account provider (other than the PayPal Web Payments Pro option), please make sure they are Authorize.net compatible. Most banks and merchant account providers should be, but not all are. I've heard of one unscrupulous merchant account provider actually telling one of our customers, "Yes, we're Authorize.net compatible" just to get them to sign the contract. But, when it came down to it, the sales person meant "we're just like Authorize.net" and wouldn't actually provide an Authorize.net account. Make sure you double-check this with bargain-basement merchant account providers.
The Merchant Account Analysis Spreadsheet
If you have a bit of MS Excel skill, you might be interested in my merchant account analysis spreadsheet. Download it here. This is not supported by myself or SpaBoom, and is only meant to give you a little help in figuring out the best merchant account deal. I've done my best to remove any errors and make it simple to understand.
It requires you to do a bit of homework, then fill in the blanks regarding costs and your best guess as to the performance of your business (i.e. number of and average transaction amount each month). The cells you need to fill in are light red in color. You can create some scenarios. Then, based on those scenarios, you'll have a potential cost each month of your merchant account. The results may surprise you. Often, the lowest "advertised discount rate" is not going to be your cheapest option, depending on what percentage of your transactions actually are qualified, versus mid-qualified or non-qualified. Also, PayPal tends to provide a very competitive option, if you're processing less than $10,000 in transactions each month.
I do apologize for the complexity of the spreadsheet. It's just a model, and not meant to accurately predict your merchant account expenses each month.
I'm definitely not an expert in this area, so welcome comments and suggestions that help fellow SpaBoomers select, choose and utilize merchant accounts!
Posted in SpaBoom New Features, Spa Business Management, General • Share • Trackback
October 25th, 2007 at 3:35 pm
nice! how many companies are doing $1,000+ in gc sales each month consistently (not counting november/december)? if they are, way to go! please share tips.
October 25th, 2007 at 7:57 pm
Hi, Robert!
I don't want the divulge the specific number, but it's a good size (worth my time writing the article).
While there appears to be a number of reasons a spa will sell well (or not) over the Internet, it seems the following are consistently major factors:
I would love to hear comments from our other customers about this.
Larry.
October 25th, 2007 at 8:00 pm
There is one minor error to my first sentence: "Directly into your bank account." This doesn't quite apply to PayPal. Your money sits in PayPal until you request a funds transfer from PayPal to your bank. I've read that you can have PayPal automatically "sweep" money to your bank account for a small commission, but I haven't been able to validate or confirm this.
Larry.
October 26th, 2007 at 10:05 am
How does the transaction go through the register and assign the names and all of the other information?
October 26th, 2007 at 12:56 pm
Robert — we consistently sell over $1000 in online GCs per month, and do very well with online appointments as well. For all the reasons Larry mentioned. Optimized site and easy to use site, Google AdWords campaigns, phone message, ads, and literature that says "Get instant gift certificates online at www …" Around the holidays, you can especially target men who are looking for a nice gift, because they really like to shop online rather than at the mall. Two things we will definitely do do is a postcard and e-mail campaign to all of our client list. And I will also increase my Google AdWords, Yahoo! ads budgets starting in November. It really works!!! Our expected goal for GC sales will be in the 6 figures, of that I expect at least 40%-50% or more to come from online sales. One more thing… we also have beautiful Christmas posters in our windows that mention online GCs at our website for those poor folks that come by when we are closed, but really wanted the GC!!! Last year we made an extra $5,000 on the days we were closed from Christmas Eve to Boxing Day. I hope this helps. Go SPABOOMERS for a successful season!!!
October 26th, 2007 at 1:06 pm
Follow up to above post — here is our most recent review "This was exactly what I was hoping for when I had run out of time to send my brother a present by tomorrow. I was surprised to see that you had the email gift certificate. This was very easy to use. Your web master is great!!"
I am not sure if they mean our webmaster (which is me) or SpaBoom… but I'll share 50-50 credit!!! Just wanted to add this to give other spa owners an idea of how a simple, optimized site can be really effective.
October 26th, 2007 at 3:29 pm
Thanks for the great information, Sandra!
Lori, I'm sorry I didn't address this more specifically in my article above. Basically, there are three components to fully processing an Instant Gift Certificate. IGC Delivery, CC Processing and IGC Tracking. For "tracking," I'm referring to IGC validation, redemption and reporting.
SpaBoom is a robust IGC management tool, and you can manage your IGCs for you. If you would rather manage your IGCs offline, you have many options. Most often, spas manually enter the information into their POS. On rare occasion, I've heard of spas printing individual IGCs, and keeping them in a 3-ring binder.
If you use Harms Millennium, SpaBoom can automatically push your IGC sales information directly into Millennium. Read about it here. If you have a different POS, we cannot unfortunately do this automatically at this time. Sorry.
So, in summary, having an online merchant account just deals with the CC processing issue, not importing the IGC sales data into your POS.
If you have further questions about this, please do not hesitate to contact me directly.
October 29th, 2007 at 12:15 pm
We have been members of SpaFinder and their GC program for over a year now and elected to use their "on-line redemption" feature whereupon they automatically deposit the money in our bank account. Why not setup SpaBoom certificates the same way? You could pass along the fuss involved as well as a processing cost, we pay a fee now. Many of us already have a merchant account and wouldn't want the added expense of another account.
October 30th, 2007 at 2:56 pm
Good question, Hara.
If SpaBoom collected the money, i.e. used our merchant account to charge for the online instant gift certificate transactions on your website, it would create a number of significant legal and financial challenges.
First, SpaBoom (and not your spa) would show up on the customer's CC statement. Not only does this mean SpaBoom would carry the contingent liability burden (i.e. if a chargeback occurred, we'd be on the hook), but the chance of chargebacks would increase because customers wouldn't necessarily know who SpaBoom is when they reviewed their CC statement.
Second, and more problematic for SpaBoom, is what happens if a spa decides to stop accepting its Instant Gift Certificates (i.e. goes out of business)? If we've sent all the money, at the time of purchase, to the spa, how do we get that money back if outstanding Instant Gift Certificates need to be honored? In other words, if Spa X decided to stop honoring their Instant GC's, the holder would try to get their money back (either by chargeback or coming to SpaBoom). We'd need to give these customers their money back, or direct them to another spa. Either way, we'd need the money (already given to Spa X) to satisfy the customer.
The way to solve these two issues, would be to keep the money from sales until a GC is redeemed, as well as keep the unredeemed money to cover against future liabilities (a topic for a deeper discussion). We could do this, but we're operating under the assumption most spas wouldn't want this type of financial arrangement with SpaBoom.
What are your thoughts? Do you see another way around this, or would you be okay with SpaBoom keeping money until Instant GC's are redeemed?
November 1st, 2007 at 9:04 am
What about regular PayPal? Why are we limited to the a 'PayPal Pro' level merchant processing? I do a smaller volume of online sales, and the no monthly fee PayPal option would make more sense for my situation. I currently have a manual processor in house, and cannot justify the second merchant account at this time.
November 1st, 2007 at 10:02 pm
Thanks for your question, Heather.
Our strategy has been to offer automatic credit card processing options that didn't require sending the GC buyer to a different site to complete their purchase. The rationale being that the GC buyer is more likely to complete an order if their confidence in the buying processes is maintained and thus increase conversion.
Imagine a GC buyer who starts at site A and is sent to site B to purchase a GC and is then sent to site C to complete that purchase. It's easy to see that each time a buyer is redirected to another site with a different look-and-feel that the likelihood of losing the sale increases. For SpaBoomers that have a Dynamic Website, the look-and-feel of purchasing a GC is exactly the same as the rest of the site. For Linked-in GC pages, we make efforts to maintain the look of your site to minimize the effect of the redirect.
However, the feedback from SpaBoomers hasn't been ignored. I'm happy to tell you that we DO have in the development pipeline the addition of regular PayPal accounts (Website Payments Standard) and Google Checkout. We're also looking into the possibility of adding additional payment gateway support (for example PayPal Payflow Gateway) that would work with your existing Internet Merchant Account and would provide another option to Authorize.net.
Additionally, PayPal and Google have started adding features that allow you to have some control over what their checkout pages look like (mostly colors, logos and such). While this is not preferable to completing the purchase without redirect, it does help.
I can't tell you when these new features will be ready, but we'll certainly keep you updated. If you have any feedback or suggestions, please let us know.