After exploring why ISOs and acquirers don’t get more referrals, we explore in this piece why over 99% of merchants don’t refer and what motivates merchants to refer.
The three elements that contribute to this low number of referrals from merchants are: 1) a failure to educate merchants to refer new merchants, and 2) a poor understanding and assessment of merchants’ psychology, which leads to 3) a failure to motivate merchants adequately so that their neural reward system is triggered each time they refer.
The Reasons Merchants Don’t Refer
I have always thought and I keep repeating that our industry wears payment-tinted goggles that block off from our perception every other activity happening at the merchants’ place of business and all that is happening in the merchants’ mind.
a) It is not their priority -or job- to do so (just like it is not in your top 10 priority today to refer your car mechanic). They already do their job: give you money (albeit grudgingly) for the services rendered.
b) They are not that much into you: just because they patronize you, it doesn’t mean they like your service. Many merchants keep patronizing a processor they don’t like because the perceived pain to change in higher than the aggravation they feel for the processor. So, let’s not confuse inertia with loyalty.
c) They don’t want to be responsible for somebody bad experience and are apprehensive that the referred new customer may have a bad experience.
d) Some merchants refer only by request. It never occurs to them to refer until somebody asks them specifically who they use as a processor. You probably don’t walk around referring your chiropractor. But when somebody asks, you gladly do.
e) Some merchants have no power of influence. We all know that person whose word we never put any stock into and no matter what they say, we never listen to them.
g) A lack of a system that recruits them into referrals.
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The Psychology of Rewards
It is also helpful to know the nature of rewards that trigger referral-generating behaviors versus those that don’t.
For example, non-financial rewards used intelligently are more likely to influence and induce referral-generating behaviors that than cash or statement credits.
Similarly, items unrelated to merchant processing are also much more powerful than a free terminal upgrade, or paper for the terminal.
How thrilling is it for you to receive 2 free oil changes at a car dealership after you have just agreed to spend $20,000 on a new car? The same applies and explains why your merchants don’t refer.
In the next installment, we will explore how to create a deliberate and reliable referral system that recruits your existing merchants into referring.
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