nyone can sell low pricing. The question is how do you avoid getting into a price war? The answer is simple: Sell low cost instead of low price.

It's all about perspective

The problem is that selling low price is selling from the wrong perspective ... the seller's perspective. The merchant, on the other hand, desires lower costs.

You may think that low cost and low price are synonymous, and you may be right in some cases. But low cost can be achieved in many ways. By selling low cost, you can close deals and retain more profit, as opposed to continually selling low price.

Merchants are interested in lowering the total cost of accepting electronic payments. You often can help them achieve this by suggesting a change in payment mix. Merchants don't care how they receive payment; they care about 1) getting paid and 2) their cost for accepting payment. Let's examine some ways to adjust the mix and lower the cost of accepting payments without lowering rates.

Pinpoint PIN debit

Statistics show that PIN debit usage is growing faster than signature debit and that consumers actually prefer it. For merchants with average tickets greater than $50 and less than $300, adding PIN debit can lower processing costs. The break-even point versus signature debit is usually somewhere in the $40 to $50 average ticket range, depending on the PIN debit network and the rates charged for each ticket.

Because PIN debit's discount rates are lower than credit card discount rates, PIN debit is less costly to merchants, and the higher the ticket, the greater the savings. Unfortunately for merchants, when tickets are above $300, consumers prefer using credit cards over either type of debit. So the greater savings of PIN debit is not germane for very high tickets.

To accept PIN debit, a merchant must purchase a PIN pad or have a terminal with an integrated PIN pad. This represents an additional cost that must be offset by the savings before the merchant will realize a true cost reduction.

All too often, merchants wrongly think that all they have to do is buy a PIN pad, and the savings will be automatic. To realize the savings, merchants must get customers to use PIN debit rather than credit or signature debit. This requires training the cashiers to encourage debit usage, displaying the PIN pad prominently at the POS and promoting debit usage with effective signage.

Go, go gift cards

Gift cards can reduce costs for merchants in three ways: by substituting a less expensive payment for a bankcard payment, by reducing merchandise returns and by eliminating the expense of handling paper-based gift certificates. Some may use bankcards to purchase gift certificates, but many will use less expensive cash and checks.

People who receive unwanted gifts will exchange them, whereas with gift cards they buy what they want the first time. Gift certificates are manpower intensive and more prone to fraud losses, since anyone can turn a blank gift certificate into a valuable gift certificate.

Savvy second accounts

Many merchants do both MO/TO and retail business. If they have only one merchant account and the card-not-present business exceeds 10% of their bankcard business, merchants are paying a premium for downgrades.

By setting up a MO/TO account and a retail account, merchants can significantly decrease downgrades and potentially lower the overall cost of bankcard acceptance. I said potentially, because if processing volume is so low that merchants pay monthly minimums on both accounts, costs could actually increase. Be sure to run the numbers before suggesting a second merchant account.

Ditch that dial

Business phone lines generally run $75 to $100 a month. Merchants who already have a broadband connection may be able to eliminate one or more business phone lines by switching from dial to Internet protocol for their payment processing. In addition, they will have faster transaction processing as a fringe benefit.

Wise up to wireless

Merchants who accept credit cards while away from their primary business location can potentially save money by using a wireless terminal. Examples are retail businesses that deliver goods and services to the customer or do business at temporary locations such as flea markets. By swiping the cards and obtaining signatures, the merchant qualifies for the lower card-present rates.

If a merchant's average ticket is high, furniture deliveries for example, this can result in significant transaction cost savings. However, for low average tickets, such as pizza delivery, the savings are much smaller.

In addition, by doing a real-time authorization, the merchant can avoid losses for denied transactions that can occur when processing transactions after the fact. Still, the transaction savings must be sizable to offset the higher cost of a wireless mobile terminal. If not, selling merchants on wireless could increase the cost of their payment programs.

Play the purchasing-card card

Merchants doing business-to-business transactions can experience excessive downgrades if they are not set up optimally for purchasing cards. For example, if merchants don't have Level II purchasing cards enabled, they may be paying for downgrades on commercial cards.

If merchants' POS solutions only support Level II purchasing cards, but they are accepting government purchasing cards, those transactions are being downgraded. By matching POS solutions and acceptance practices, business-to-business merchants can significantly reduce the cost of accepting commercial and purchasing cards.

Be a consultant, not a salesperson

To sell low cost, you should operate as a payments consultant and not be just one of many salespeople pushing lower rate. Ask questions and analyze each merchant's payment programs.

When you find aspects of merchant programs that are not optimal, you'll create opportunities to devise payment programs that will change the mix and reduce costs without lowering rates.

A consultative sales approach will win you more business and allow you to maintain greater margins. It's also the beginning of a longer-term relationship with each merchant you serve. It's all a matter of having the right perspective ... the merchant's perspective.

Ken Boekhaus is Vice President, Marketing and Business Development for Electronic Exchange Systems (EXS), a national provider of merchant processing solutions. Founded in 1991, EXS offers ISO partner programs, innovative pricing, a complete product line, monthly phone/Web-based training, quarterly seminars and, most of all, credibility. For more information, please visit EXS' Web site at www.exsprocessing.com or e-mail Boekhaus at kenb@exsprocessing.com . EXS is a registered ISO/MSP for HSBC Bank USA, National Association.