P-Cards: The End of Private Label?

P-Cards offer commercial customers the convenience of universal card acceptance, line-item purchasing details (when merchants are capable of supplying them), and rebates typically ranging from 0.5% to 1.5% of total card spend. With all these benefits, it’s no surprise that P-Card use in the U.S. has grown substantially over the past 5 years.

Does this surge in P-Card popularity signify the end for private label commercial cards? Absolutely not! Commercial Payments International published a paper in October discussing some of the reasons merchants in particular are not in love with P-Cards.

These are the top three issues I see facing P-Card adoption:

1. Risk. Yes, P-Cards offer customers the convenience of universal card acceptance, but with universal card acceptance comes an increased risk of fraud and card misuse. As evidenced by the thousands of private label commercial cardholders, many companies simply aren’t comfortable with the risks involved in issuing P-Cards to all employees.
2. Reporting. While P-Cards can offer line-item purchasing details, the line-item details collected through interchange are uniform. As a product designed for universal use and acceptance, P-Cards cannot support any deviation from this standard. And all too often, this standard falls short of the commercial customer’s needs. A private label card, however, gives a supplier the flexibility to develop its own unique standard to suite its business and its commercial customer base.
3. Cost. While P-Cards often offer cardholders attractive rebates, they offer merchants a much less attractive financial model. P-Cards are typically assessed the highest interchange rates of all card types, with some costing suppliers as much as 5.00% of the total sales amount. With price tags like this, many suppliers cannot afford to offer P-Card users their most competitive pricing, and their commercial customers are listening.

Business Concerns in 2010

The National Association of Credit Management asked credit professionals to identify their top three concerns for 2010 in a survey this October. The top three responses:

• The state and future of the economy,
• Slow pay or delinquencies,
• Larger customers increasingly dictating unfavorable terms.

I am glad I am not the only one worried about these!

Earn Your Customers: Be Useful

Rick Short recently published a blog based on an article from Marketing Profs called “Advertising is the Price You Pay for Not Being Creative.”

In today’s economy, I’d argue another spin on this title: “Advertising is the Price You Pay for Not Being Useful Enough.”

Your commercial customers are struggling with budget cuts, lack of resources, and a credit crunch. The company that is going to win their business today is the company that understands their challenges and offers business advantages beyond the features of your latest-and-greatest widget.

It’s a good thing, too, because a study done by Marketing Profs and Forrester Research showed that 40% of surveyed B2B marketers expected a budget decrease in 2009 – which means, it’s likely that you can’t afford to shout about your widget’s newest features from those standard advertising vehicles.

I’d venture to guess that even well after we recover from this downturn, the most successful B2B institutions will be the ones that earn their customers rather than pay for them.

Innovation Compensates for Fewer Resources

While on vacation last week, I received an email on my Blackberry with great news! The US GDP is improving! I mentioned it to the friends I was having dinner with and we all started wondering:

How are US companies growing after months of corporate layoffs and despite a continued credit crunch?

Well, once vacation ended, I got my answer pretty quickly. Nearly every conversation I’ve had with our clients since I’ve come back to the office is to discuss how to solve for fewer resources.

One client, for example, has a customer who is uncharacteristically default on their bills right now. Their slow payment is not due to an inability to pay, but the result of layoffs that have occurred in the customer’s accounts payable department, specifically a particular position that they do not plan to replace.

This is trend that I can easily imagine.

With fewer resources, companies need to find new ways to do more with less. By vending out additional work to other vendors reliant upon human-resources (i.e. call centers, accounting firms, collections groups, etc.), the company creates a work-overflow effect that pulls control further and further away from the source.

But by incorporating new tools into the work flow process, companies can maintain a lean cost structure while controlling business practices. That explains why technology companies like Intel, Microsoft, and Apple may be feeling an uptick in B2B sales, but also explains why I’ve had so many calls from clients this week (WSJ, CNN Money).

Our clients understand that innovation and automation are the way to streamline their business processes and maintain relationships with customers, and they look to us to develop new solutions for their payments issues and in the process, we all help to improve the GDP!

Where Good Business Begins

Criticism – even constructive criticism – is a tricky thing. It’s rare to meet an individual who can truly react to constructive criticism with grace, and even rarer to encounter an individual who proactively seeks it out in order to improve him/herself.

But just last week in Saint Louis, while attending a conference hosted by a partner in the commercial trucking industry, I met a woman with a remarkable job focused on doing just that. As “Customer Advocate,” she establishes relationships with customers in order to solicit their criticisms, and then campaigns within her organization to realize improvements that will positively impact the customers she serves.

The story of her newly-created role had my wheels turning…I started on the four-hour drive home to Kansas City, mulling over the concept of customer-centricity.

By the time I pulled into my driveway, I realized that the driving force behind every one of our client’s private label billing and payment programs is the desire to be more customer-centric. Like a Customer Advocate, these programs also yield improvements that positively impact end-users – albeit improvements related to the way in which these end-users purchase and pay for the products and services they require to do business.

For some, it’s as simple as consolidating a customer’s charges on a single billing statement in order that the customer isn’t burdened with cutting separate checks for individual purchases.

For others, the focus is providing customers with an electronic payment form they can issue to their employees--an electronic payment form that carries less risk of fraud and misuse than a general use credit card.

For others still, it’s about piping line-item purchasing data to customers in formats they can upload into their expense management systems without requiring their IT resources to manipulate it.

Some clients use us to capture customer-specific information at the point-of-purchase – information we include on billing statements such as cost centers and purchase order numbers – knowing this supplemental data makes customers’ AP processes more efficient.

The customer-centric features offered from program to program that we operate vary significantly, but they all initiated from the same place – a customer advocate (whether in title or not) listening to the customers’ needs and campaigning for a solution.