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E-COMMERCE

Determine the Fee Structure that Maximizes Your Profit Margin

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Not every product sells in the same way, and not every merchant account provider (MAP) charges you the same way. Choose a MAP that suits your business. Begin by considering the nature of the products you sell -- are they large and expensive? Perhaps then you ought to seek a MAP that offers a higher flat-rate transaction fee and minimizes the discount rate, since even a hefty $1 transaction fee will be far lower than a 2.5% deduction from the charge. On the other hand, if you rely on small, high-volume sales, even a $0.30 transaction fee can erase your profits.

Also consider cost vs. convenience issues. Many MAPs will require you to lease or buy a credit card terminal and process orders by hand (which means that customers must wait for you to process their order). Others allow for instant verification and processing via the Web, but not surprisingly, these services are often more expensive. For some products, such as memberships or access to resources stored on the Web, instant verification is especially important; a potential customer who wants to peek inside may be discouraged if he or she has to wait for manual processing.

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Last updated: Apr 1, 2000




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