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5 Direct Marketing Practices That Could Cost You Your Merchant Account

One of the foremost challenges of any business is creating a steady flow of new customers. To achieve this end, most businesses engage in some form of direct marketing, which is characterized by messages addressed directly at potential customers that give a clear call to action, such as “buy now” or “request your free trial.”

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This form of marketing can be highly effective in that it allows businesses to circumvent the middle man in getting goods and services to the customer and provides clear response metrics. But certain marketing techniques that have evolved over time can also be be misleading to the customer and hazardous to the business owner’s merchant account. For both the sake of the customer and the continued existence of your merchant services, here are some practices you may want to avoid.
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  1. Negative options plans without clear billing disclosure

Negative option plans, also called prenotification negative option plans, are plans in which the customer signs up to have products or services sent on a periodic basis and agrees to be automatically billed unless he cancels in advance of the next shipment or billing cycle. While this is an acceptable business practice in and of itself, it has come under increased scrutiny because of the prevalence of certain misleading practices.

When offering such a plan, make certain you clearly disclose the fact that the customer is signing up for recurring billing and must cancel before the next product or service is rendered to avoid another charge. Consumers must confirm that they understand the offer and its terms at least twice before completing their purchase. Avoid pre-checked boxes, automatically selected up-sells or cross-sells, fine print that is too small (less than 12 points) or in a hard-to-read font, and allowing the customer to move forward in the checkout process without acknowledging that they understand the terms.

  1. “Free” trials with hidden costs

Free trials must truly be free, with no strings attached. If your “free” trial automatically signs the customer up for recurring billing, makes up for all or part of the cost of the product with increased shipping or handling fees, lasts for less than 10 days, or begins before the product ships, you could lose your merchant account on grounds of false advertising and/or unfair business practices.
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  1. False sense of urgency

While calls-to-action such as “call now!” and “respond today!” have been used fairly and frequently for decades, some marketers take it a step further, by falsely claiming that the offer expires at a very near date. Whether you state this explicitly through your advertising copy or implicitly through clocks, timers, or other devices, claiming a fictitious, unnecessary, or improbable expiration date is considered false advertising.

  1. Unreasonable claims

Grandiose or blanket statements about the effects of a product are generally considered unreasonable claims. For example, stating that a weight loss product will “give you the body you’ve always wanted” or “dissolve fat in days” are too broad to be substantiated by scientific research and set up unrealistic expectations that cannot be met in all circumstances or without additional lifestyle modifications, such as good diet and regular exercise.

  1. Forced up-sells or cross-sells

Offering customers another product, whether of equal or lesser value (cross-sells) or higher value (up-sells) is acceptable only if it is not required to obtain the initially-requested product or obtained through automatically-checked boxes during the checkout period. Forcing or sneaking in an upgrade is strictly prohibited by the Federal Trade Commission and may result in your merchant account being terminated.

By avoiding these practices, not only will you protect your customer’s best interests and the integrity of your business, but you will also take great strides toward ensuring your merchant account stays active.

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For more information merchant services or to set up credit card processing for your e-business, give us a call at 1-800-570-1347.

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