Posts Tagged ‘online business’

Michael Bloch: Minimising and handling chargebacks

Wednesday, January 7th, 2009

ccThe word “chargeback” strikes fear into the hearts of most merchants. But they can be avoided – and challenged.

What is a chargeback?

A chargeback occurs when a credit card transaction is refunded to a cardholder at the direction of the card issuing bank after a dispute from a customer.

Chargeback period

The customer has 6 months to dispute a transaction in many cases. If you offer subscription services, the situation is even worse as the chargeback can still be made 6 months after the end of the subscription and for the full subscription amount.

How does the chargeback process work?

1.    Customer lodges complaint with card issuing bank
2.    Bank researches the issue
3.    Bank debits merchant account and credits cardholder
4.    Merchant account provider sends you documentation
5.    You can then challenge the chargeback by providing suitable evidences as to why the transaction was valid.
6.    Further evidence may then be required, or a decision is made.
7.    In the even the chargeback challenge is successful, cardholder is debited again
8.    If the chargeback challenge ultimately fails, merchant is charged a chargeback fee along with having refunded the purchase.

Due to the to and fro with evidence requests and counter challenges, it can literally take months to resolve a chargeback one way or another.  It’s a frustrating, time-sucking and life wasting affair.

Chargeback danger levels

If your chargeback level is too high, you can lose your merchant account. Usually the danger figure is around 1% of transactions. However, this can mean  1% of transaction *value*. If you have lots of small sales and few large ones; and one of the large sales is charged back, that can threaten your merchant account!

Losing your merchant account is not only a short term problem, but it’s a bit like having a criminal record – you’ll find it harder to get another account and could possibly have to swallow higher processing fees.

The costs of chargebacks

Chargeback fees are usually around the $30 mark. That’s rather nasty, but then there’s all the time you spend in dealing with the issue too; plus also the loss of the sale itself where there may not be goods involved or the good are not returned. Even if your chargeback levels don’t quite hit the 1% level, your merchant account provider may get jittery and up your transaction fees. Every chargeback inches you closer towards such a situation.

Preventing chargebacks

While you can challenge chargebacks, prevention is better than cure, particularly when you understand that the way the chargeback system works is in favor of the customer – and is abused. Here’s a few tips to minimise the number of chargebacks you’ll see and things that will help you when you receive them.

Accurate marketing

If you’re exaggerating or simply misleading people in your marketing, expect a ton of chargebacks. Keep things above board.

Fraud

Fraud is a major reason for chargebacks – so ensure you have the proper screening processes in place. You should also ensure you use CVV2 on your order forms, also known as the Card Security Code (CSC). The CVV2 number isn’t included on the magnetic stripe of the card; so if card numbers are stolen, without the CVV2 number, there’s less of a chance they’ll be used successfully in fraud.

Refund policy

Refund policies can be quite contentious critters with some companies adding in all sorts of conditions. Wherever you can, be as flexible as possible with refunds as it’s cheaper to refund than to deal with a chargeback. A solid refund policy can also help boost your sales.

Communications

Offer multiple points of contact, clearly posted on your site. It’s unusual for a customer to engage the chargeback process without having first tried to contact the merchant and it’s something that the card issuing bank will usually advise them to do first.

A sure way to see more chargebacks is to not respond promptly to customer complaints or support requests; so ensure that it’s easy for people to contact you and that you do check and respond to your email regularly.

Always provide invoices and receipts to customers that very clearly state the business name that will also appear on the statement  – it helps the customer to recognize your company name when they see the charge on their credit card statement and lessens the chances that they will think it’s a fraudulent transaction.

It’s also crucial your contact details on file with your merchant account provider are current as chargeback notifications are usually sent via fax or snail mail unfortunately – and often they are delayed.

Clear terms of service

Be very clear in your terms about issues relating to cancellation, refunds and the way your services and/or products are provided. Any grey area that’s challenged will likely work against you.

Record keeping

You need to keep a copy of all receipts and communications with a customer as these may be valuable evidence in a chargeback challenge.

Be civil

You need to be professional in all communications with your customers. If you’re aggressive, this can work against you in a chargeback review. Even if the customer is being totally unreasonable and rude themselves; stay calm – their behavior will work against them.

Be thorough in challenges

A chargeback notice will contain specific instruction on what you need to provide in order to challenge it. Read these notices carefully as failure to supply the  information will just waste time and money as the review will be delayed. If you’re unable to provide a particular item; call the merchant account provider for advice – they may offer ideas as to what other forms of evidence would be acceptable.

For online merchants, chargebacks are a particularly threatening problem, mainly because the cardholder signature isn’t provided. In many ways, the banking and credit card system is still quite antiquated. Until such time that the card industry is dragged screaming into the 21st century on these issues, merchants just need to cover as many bases as they can.

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Michael Bloch: Survival in online business

Tuesday, July 1st, 2008

taming-the-beastYou’ve been working feverishly on your site for months; staring at a computer until your eyes bled in order to refine your online business. One morning you wake to your inbox full of orders or commission notices. Finally, success!

After a while of this success, you start to think about what you’ll do with this new found wealth and the dreaming begins.

It’s a wonderful feeling to be able to not only dream but to discover that these things are truly possible to achieve.

.. but…

The reality of online business

The web giveth and the web taketh away; especially if you’re relying on organic search (free search listings). The traffic may continue at that level for years, but it may also literally dry up over night. Small online businesses that don’t have a bricks and mortar store get on average 2/3 of their traffic from organic search listings. Could your business survive such a loss?

Survival strategies

Running a successful site or online store based on search engine traffic is a white knuckle ride. If you’ve suddenly achieved search engine success and are raking it in, I advise to save as much of that cash as you can and continue working like mad for a while.

Create a nest egg equivalent to at least 3 months of living expenses and loan repayments before you start spending too much of it on other goodies, and especially before you quit your day job – 6 months is even better.

During this saving phase, try to implement strategies to make your site more “sticky”; to encourage your visitors and customers to keep frequenting your site. Newsletter, blog, forum, competitions; these are all good options – particularly newsletters or a blog.

Keep close tabs on your industry, don’t let what the cash can buy you cloud your thoughts too much. You need to think about what you’ll do should the free traffic suddenly dry up. Approach your cash management as if tomorrow your business will disappear.

Rainy day revenue streams

If you generate revenue through affiliate programs and you’re offered a choice of large one-time commissions or residual options, if the company is solid; go for the residual commission option – this revenue may be what keeps food on the table if things go pear-shaped and buy you a little breathing space.

An accountant once told me; “you won’t get rich selling products, sell services”. This advice was imparted at a time before the Internet really took hold in Australia and before “soft goods” became commonplace. He was correct though – selling hard goods is a hard game – inventory to maintain (unless you’re drop shipping), handling costs, tight profit margins. Those sorts of conditions also require a lot of staff and huge amounts of advertising as the money is made on volume; unless of course you have a unique product or are addressing an underserviced niche market.

Software, information products and services are definitely a good way to go; so if you deal only with hard goods, consider branching into some sort of subscription services as a way of generating an ongoing flow of income.

Debt, saving and investment

While things are good, still try to keep capital investment down if possible and certainly don’t become over-committed credit-wise. That rainy day revenue saving could serve you very well, both psychologically and materially if should you suddenly hit the skids. How frustrating would it be to run yourself clean out of cash during a slow period when maybe all you needed was to be able to hang in there for one more month?

By the same token, don’t be too tight when it comes to reinvesting back into your business – growth is a good buffer against hard times. Determine a safe percentage of revenue to reinvest that still sees your bank balance grow and then stick to it.

Entrepreneurial spirit vs. safe play

I’ve been making a living online now for over 8 years and the web has been very generous to me – but I still have a “day” job – which is also online. It’s my way of creating a buffer; a safety zone. Often I wonder if I had jumped away from the job at particular points if I would have been able to pretty much retire by now. I’m not complaining about my income, I’ve been very fortunate; but there’s nothing like a family and mortgage to throw a bit of cold reasoning water on an entrepreneurial spirit that can sometimes get a little heated :) . And perhaps that’s not a bad thing.

No doubt you’ll come across rags to riches stories, and they do certainly occur – but the rags to riches to rags scenarios and the rags to even older rags occurrences are far more frequent.

Chasing your dreams is great, throwing everything on the roll of a dice can be exhilarating – but always consider what you can lose by doing so. It’s the old gamblers saying of “don’t bet what you can’t afford to lose”.

Get rich slow… and keep it :) .

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Michael Bloch: Traits of Successful Online Entrepreneurs

Sunday, June 1st, 2008

taming-the-beastOver the many years I’ve been involved in the online world, I’ve had  the privilege of communicating with many successful small online business owners. I’ve learned much from the good and bad ecommerce has to offer; especially regarding the mindset of people who climb the ladder.

You’ve probably come across many information products that claim to help you generate a six figure income by using them. In some instances, you certainly can; but what isn’t mentioned on many of these sales pages is the critical element in order to make the tool successful  – you.

No matter how much you spend on tools and the number of people you employ, if your heart isn’t in it, if you aren’t truly passionate about your chosen business, your venture will more than likely fail.

The following are some common traits I believe have been the major reasons for some site owners achieving massive success in online small business.

Determination

If you’re someone who retreats when told something can’t be done or handle disappointment poorly; then the online world is not for you.  You must have total faith in yourself and your goals and be able to take the hard knocks. If there’s something that all successful people share in common, it’s certainly determination.

The 2nd job

Just about everyone I know who made it online under their own steam worked two full time jobs initially – one being their salaried employment, the other their business; and often the latter made them no money for quite a while.

The salaried employment provides a source of funding and security, and sometimes experience, until the online business up to standing on its own legs. Even after that, given the volatility of online business, it doesn’t hurt to have a job on the side just in case – but preferably one related to your own business.

I pulled the cash together for my first business by cleaning toilets early in the morning 7 days a week for a couple of years. I’d do that for a few hours each day and then hook into my own business for the rest of the day and into the night. It was tough, but worth it. Even now I still contract out to steady work, but all purely online and in fields that I’m passionate about.

So many times I’ve come across people who dream of having an online business but just can’t make this sort of time commitment or aren’t prepared to work unglamorous jobs to get that crucial kick start.

Passion

Passion is key to making it in my opinion. It helps in creating a positive vibe with your prospective clients, but equally important is the passion to succeed, for *yourself* – not so much as a “head” thing (determination), but in your heart. It must be a burning desire.

Endurance/discipline

I’ll let you in on a little secret. Most of the people who say they earned 6k in 6 days selling X product fail to mention they spent hundreds of hours in prepping the product and promotion *before* it was released; not to mention the thousands of hours in failed attempts to market other products in the past. All that accrued experience allows for short cuts, but prep work is still a big time sucker and being your own boss means the only person who will motivate you is you.

Get into good working habits and stay in them – routine is essential, especially when your business revolves around you. It’s so easy to let things slide for a couple of days because you’re tired or you’ve been kicked around a bit – and then so hard to get back into routine again. Lighten up the pace a little if you need to, but never totally ignore your business, even for a single day, unless it’s absolutely necessary.

Focus

Beware of time burglars. These are things such as people who waste your time for nothing in return and petty issues that distract you from your business. Hobbies can also be time burglars. While a little rest and recreation is essential for maintaining sanity; every minute you spend not working on your business is a minute longer it will take you to achieve your online dreams.

Even within your business there will be some tasks  better farmed out to others – so outsource those where you can. Think about what your time is worth in relation to tasks that no-one else can do and then about tasks that others can.  A great example is bookkeeping.

Leadership

Even the successful one-man shows have solid leadership qualities. While you may have no staff to begin with, you will have service providers to deal with and yourself to lead. Listen and act on solid counsel, give clear instructions, and draw the line when someone you are dealing with oversteps their mark or fails to deliver.

Research

Many people fail in online business simply because they’ve had a really good idea, but no-one else, especially their target market, has shared their optimism. Just because you think something’s great and should sell, it doesn’t mean that will translate to sales. Successful entrepreneurs research the market thoroughly before betting the farm.

Family co-operation/planning

This is probably the toughest aspect of all and without the support of family, many of today’s success stories would have been dismal failures. If your family doesn’t believe in your dream, you’ll be expending energy pushing against their will for you to do something else.

When kicking off in your online business, be sure your family knows what lays ahead and how much attention it’s going to need. Let them know how much time you think it will take to achieve your goals so they know it won’t be forever.

Realism balance

Season your unbridled optimism with a dose of realism. Sure, you *can* make 6k in 6 days – but it can be a little like the lottery at times; so expect it to take a lot longer. By being realistic, it will also soften any of the blows along the way.

Dollars and sense

Good gamblers only spend what they are prepared to lose and successful online business owners are the same. Successful people also know the gravy train can derail at any time, so they sock some of the cash they’ve made away for a rainy day.

Action

There’s so many good ideas out there, but so few who are able to actually action them. Procrastination in the online world is very dangerous as things move so quickly and trends appear/disappear every other day. Do your research and once you are satisfied that a particular strategy or tool will work – implement it immediately; work day and night until it’s done.

Promote and network

Succesful entrepreneurs are always promoting at every opportunity, even to the grocery store checkout person they are on semi-familiar terms with. Don’t be shy – you’ll be surprised in where you can generate interest. Even if the person you are talking to you about your business isn’t really interested, they may know of someone who will be. Sow seeds wherever you can, without being overbearing of course – try to talk about other things with people too ;) .

Co-opetition

Sometimes small business owners tend to become overly concerned about what the competition is doing, but will also shun communicating with competitors. This can be quite counterproductive. There’s a whole swag of profits to be made through what I term “co-opetition”; working with competitors from time to time to achieve a common goal.

I hope these points have given you some insight into what makes some of the well known online small biz entrepreneurs so successful. Good luck to you in your in ecommerce venture!

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Michael Bloch: Email etiquette tips

Friday, February 1st, 2008

taming-the-beastIn the early days of your online venture, email is likely to be relatively light, but as traffic picks up, so will the email and it can be quite a juggling act keeping up with it all. I’ve been online now for many years and some days, my inbox just simple overflows and I do drop the balls from time to time.

Email is a vital line of communication with your visitors, clients and associates and the way you approach email communications can make or break your online business. Consider every note as an exercise in marketing.

The following tips can help you in honing your email communications skills:

  • Whatever you send can be forwarded to others, so consider your responses carefully knowing that they could be published elsewhere or used against you at a later date.
  • Email forgery is rampant, so don’t assume that any message is from who it says it is; i.e. be careful what information you provide in a response
  • Be careful with attachments as these can harbor viruses and other malware; so be sure to have a virus scanner running that’s upt to date.
  • Plagiarism applies to email communications, so cite all references and sources.
  • Don’t let others have access to your email account as you’ll be responsible for anything they transmit.
  • When forwarding a message, don’t change the wording of the person you are quoting.
  • When replying to a message, if the thread is lengthy, quote the relevant parts followed by your responses.
  • Bear in mind that email communications lack some of the advantages of face to face communications, such as body language and tone; so be careful in using humor or sarcasm that may be misconstrued.
  • Don’t answer emails with single word responses, particularly without any of the original note included; the recipient may be a busy person having multiple conversations and have no idea what you’re referring to.
  • Take care not to respond when angry; once a message is sent, it cannot be retrieved. It’s best to write out your response and then let it sit for a couple of hours before reviewing it and then sending.
  • UPPER CASE LETTERS ALONE ARE CONSIDERED “SHOUTING” and very rude. Use proper casing.
  • Use a  subject line that is relevant to the contents
  • Don’t use the “high priority” flag unless the email is actually urgent. Some people use this for every communication and in the end their notes are ignored or read later; and one of those notes may actually be important.
  • Use signature lines, but keep them short. Use at least your first name in your signature; people want to know who they are communicating with.
  • Always use an easily identifiable “From” name as generic names such as “Customer service” tend to be ignored.
  • When sending attachments, use a file version which is likely to be supported by the recipient.
  • Large attachments over a few hundred kilobytes can really cause a bottleneck for recipients; particularly if they are on dialup. Always ask the recipient before sending a large attachment, or upload it to your site and provide them with a download link.
  • When sending email to a list of people who may not know each other, use the Bcc (Blind carbon copy) field. This ensures that each person receiving the email will only see their name and not the whole list.
  • Read and respond to your e-mail regularly; aim to respond to people within 24 hours.
  • Delete unwanted messages from your inbox regularly. This helps prevent important emails from being overlooked or deleted when you decide to purge a large number.
  • Save important messages in a special folder email communications are considered to be legal documents.
  • Using fancy stationery or fonts in your email may look fine on your system, but can look terrible on someone else’s. Plain text is the safest bet.
  • If someone writing to you seems a little arrogant, don’t return the tone. It may be that the person doesn’t speak English as their first language, has literacy issues or is just having a really bad day. Give them the benefit of the doubt the first time around.

Human communications can be incredibly fragile; one misplaced word can destroy a potentially lucrative relationship – so always check over your responses before hitting that send button to try and ensure the message you’re putting across is the one you wish to.

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