The rate increase - from one user to another

[cmusicshop]

As someone barely affected by the rate increase due to ocassionally selling higher ticket items that offset the difference I wanted to open a dialog to hear more specifics and not so much 'that's it, I am done with Square' posts.  I am a fellow user, not affiliated with Square in any way but as a user.

So, the interest rate is lower but with a new 'per transaction' fee which, if I am understanding it, is where the problem is.  Is this correct?

If so, those that are posting that the change will cost you $3K, $4K and even $10K per year is this all due to an additional 10 cents per transactions?  That's a lot of transactions!!!  Just trying to sort through it as a fellow user.

PS.  Let's keep this thread more about facts, solutions, etc. and not a "F Square, I'm leaving".  OK?

[Gart]

The point here is that any business/customer relationship is based on the customer being willing to purchase products or services from the business at an agreed upon rate.  If the rate was too high in the first place, the customer would have gone elsewhere.  A loyal customer who is paying monthly for specific services, at a consistent rate, then receives a 30+ % increase in their fees for the SAME services will be furious!  I'm not familiar with ANY business who can implement such a dramatic price increase on their customers without full expectation of a mass exodus... except those operating in a monopoly or a government.

[cmusicshop]

So...you have no suppliers that have ever raised prices because by doing business with them it is "an agreed upon rate"?  I'm just as loyal as you and effectively the rate hike is a wash to me, so what then?  Price hikes suck, and yes, I've been furious over them too.  My most recent price hike on a common seller is about 20% from a supplier.  Guess what that equals in actual dollars per unit - $25.  I have to take a $25 hit or raise my price $25 to be in the same profit margin.  $25 in ONE sale.  I have ONE sale to deal with that change.

I've said before a penny increase on a .02 item is 50%!  Sounds bad but it is a PENNY.  So, in the Square hike the absolute worst case is a dime per transaction.  Worst case.  I'd personally raise .15 and enjoy the extra profit but I can't.

So, what are you going to do?  Leave Square is an option.  Changing suppliers is ALWAYS an option and needs done periodically.  Eat the increase is an option but that sucks, right?  Or raise your price.  Several of us users have posted this and yet the answers come back "but 40%....." and "I'm leaving".  Why such a huge pushback to raising prices, seriously?  It has to happen during any business lifespan or the business dies, so why is this different (seriously, am I missing something?).

[straycatbrew]

Well, that’s it — the rates being charged to Square didn’t change. They just changed their fee structure to increase their profits. That’s why the uproar. 

their fees didn’t go up in reaction to their costs increasing — by their own claim, they were just merely undercharging, or so they claim. 

[cmusicshop]

@straycatbrew Reading your posts - they were 'undercharging'.  Did anyone complain that the rate was too good?  Of course not.  OK, you also said ' or so they claim'.  Well, easily crosschecked - look at the competition.  Any of them lower without other charges?  Any others truly flat rate for low ticket items?  Have you looked at the exchange rates set by Visa, MC, etc. to gain a better understanding (I have - they ALL have a per transaction fee of .10)?

If not, then Square was undercharging and this is offsetting that, which is fair, right?  Your previous lower rates were a plus up until now.

If so, then people should jump ship and reward the competition and send a message to Square.

There hasn't been one post providing a clear cut better deal.  I'm not trying to argue or bait anyone but 10 posts about the percentage or the disloyalty but none replying with answers to the dilema aren't making any difference.

[HeatherM]

So they discovered where they were losing money and their first reaction should have been to increase their services along with increasing the rates?

One would cancel out the other, and possibly increase losses. That doesn't make sense to me.

[cmusicshop]

@HeatherM Right!  My last post regarding the $25 hike - no increase in quality, features, etc.  Same product, just higher price.

[Gart]

I seriously doubt that your same customers are purchasing that same product from you every month.  They have an opportunity to see the pricing and make an informed decision as to whether or not they wish to purchase after your $25 increase.  I doubt your customers are a captive audience awaiting their next auto-charge for your product.  They weren't regularly consuming that same product at the same price every month and then suddenly whacked with a huge increase for the same product.  Theres a huge difference between pricing for a product meant for a one-time purchase vs. pricing for a service meant for recurring revenue.  Especially if the customer purchased your recurring services based on a simple ROI calculation involving the cost of the services and the value received from them.

Customer service matters.  Informing a customer about the price of a single product before they buy it is good business, even if it was increased the customer will still buy it if they continue to believe it is worth it and there aren't viable substitutes at cheaper rates.  Changing the existing price on an unchanged service to existing customers at an egregious rate is bad business.

[cmusicshop]

@Gart Kind of my point.  Yes, these are mostly one time purchases (re: the $25 increase product) so that means I'm in greater peril of losing the sale to an online seller as people tend to price shop more expensive things.  So, in this instance I face a greater hurdle than you do - larger ticket, more buying options, greater price sensitivity.  The one time sale could be made online just as easy.  But still, do I eat the $25 or charge more?  BTW, mine was because of tariffs, so......what do I get extra for that?

That's why I say I'd kill for your traffic - who is going to stop going to you over a .10 increase?  Even if you lose a few, the opportunity to correct the price increase is simple and small.  Is someone really going to say to you "what do I get for the extra .10?"

And yes, I do have repeat business on my smaller goods and yes, I raised my prices on a $6.50 product (already higher on the internet) to $6.95 and saw NO backlash.  And yes, I lose a .10 of that due to the price hike.  Because as you said "customer service matters" which must be a big reason for your traffic I hope.

Egregious??  Dunno.  Again, how about answering some of my questions, otherwise, you are just complaining?  Have you looked at exchange rates?  Have you found other flat rate small ticket processors?  Why is raising your price a dime such an issue that you ignore it as a solution?  Do you not have any suppliers that raise their prices?  Or, if so, do you ignore it, eat it or raise yours?  When they do, do they increase quality, quantity, etc. every time?

[Gart]

In the example I provided earlier of 40 transactions a day at 2.6% + $0.10 per transaction, it amounts to a over a 30% increase in my merchant service processing rates for my business.  My effective rate jumped from 2.75% to roughly 3.6%.  To serious business managers, 85bps is material and a big deal, especially if you don't get anything additional for it.

Your online example is moot for several reasons.  Your competitors would be hit with the same tariffs that you are.  Online sellers might be able to sell cheaper but then the customer has to pay for shipping, they don't get in-person service, they can't touch and feel the product, they don't take immidiate possession of the product, they don't build a relationship with the online seller, etc.  Additionally, nothing is stopping you from jumping into the online sales game.

I have implemented price increases, I understand how it works.  However, if I had to raise my prices every time a single vendor raised theirs, I would be doing a dozen increases per year!  I work in the food industry, we're not dealing with rockstar margins.  Our competitive price point is what helps to drive traffic.  An increase from a single vendor that amonts to almost an entire % of sales is egregious.  If you don't know what that means you should look it up.  And if you can absorb a full % increase in your costs of doing business and take it all in stride, then maybe I need to get involved in the music business!

Would you accept a 30% increase in your monthly cable or internet bill without faster speeds or more channels?  What if that 30% increase was less than 1% of your overall take-home?  I doubt it.  You agreed with the rates when you signed up and that's why you're comfortable paying for what you get.  What if the internet company really really needed to make bigger profits?  You'd be willing to just eat it?  Or would you go to your employer and ask for a raise since your costs at home went up?  Probably not that either.  My guess is that you would do what other normal people do, complain to the company and see if they care about your business enough to keep your existing rates that you agreed upon when you signed up.  Otherwise you'd probably look for competing services at a better price.  The priciple is the same.

[cmusicshop]

Here's my teardown:

Paragraph 1: Saying the same thing.  Yes, by percentage it looks terrible.  By dollar amount, not so much.  I get it now as I got it the first time.

Paragraph 2: My online example is an example of my business, which you do not know like I do not know yours but am trying to understand.  The point is prices go up, I deal with it.  Don't like it, sometimes a big deal, sometimes not but I deal.  It is because of all those things you mentioned like in person service, shipping, immediate possession, etc. that I do survive in this climate.  Been in the online thing as well.  what you aren't seeing is yes the tariffs hit us all but they have buying power I'll never have so they have lower product costs.  So, I either switched suppliers, doubled down on my own unique qualities, adjusted prices or all of the above as needed.  But this isn't about me, just trying to throw out some info.

Paragraph 3: Of course, you can't bump prices every blessed time but if you can't absorb a dime per sale, maybe go for a bigger raise so you can absorb it in the future.  I truly do sympathize, don't get me wrong.  I'm glad I don't have to deal with it.  But dealing with it isn't an option, so.....  As for 'egregious', yeah, I know what it means, just wasn't on board with the application.

Note: favorite business joke - how do you make a million in the music business?  Start with 2 million.

Paragraph 4:  Good gravy, did you really use the cable bill for an example???  Mine doubled over the course of the last couple years and no increase in service.  No competition either.  Yeah, lowered it where I could by deleting features and certainly complained!  Still too high but now 50% higher instead of 100%.  No one is saying don't be angry or don't look at Square's competition, in fact I'm encouraging it!  But unlike the cable company, you can look at competition, exchange rates, add on fees and draw a conclusion and then act on it

I appreciate the banter and maybe you and other coffee shops should band together and try to use that strength of numbers in finding a better rate.  When our industry was in the throes of the biggest upheavals timed to meet the 2008 economic crisis I and several other indie shops formed the largest independent dealer network for such purposes.  Sadly it got off track from it's original goals but lemme tell ya, it rattled some cages.