A speaker at the IRTA convention suggests that it is time to stop charging fees to prospective members of your barter exchange…
ITEX, one of the largest exchanges, if not THE largest exchange in North America suggests to its brokers, for the past two years, that they should quit charging fees to join ITEX…
TradeSmartNow stops charging a sign-up fee to new barter exchange members, instead opting to charge only a transaction fee…
More and more free-to-join trade exchanges are popping up…
Why?
I think many trade exchange owners feel like they are stagnant in their growth. They open the doors, put up their barter websites, and don’t do what it takes to increase their membership continually: sell.
Maybe companies like ITEX and TradeSmartNow want to capitalize on the down economy to increase membership. It is probably harder now for a business to pay $500 or $995 to a barter exchange for a membership than it was two years ago. Maybe they see not charging a sign-up fee as a way of getting more sales over time, increasing volume with less effort.
Maybe consultants and speakers at the IRTA conference want to see the barter industry become mainstream, and they see sign-up fees as a hinderance to the public acceptance of these privately managed fiat currencies. Perhaps they want privately managed fiat currency to enjoy the same status local banks or credit unions enjoy, neither of which charge cash to open an account.
In my experience as an exchange owner, both systems of reasoning are wrong. Let me explain why.
Starting with the idea of getting more sales with less effort…
Having no sign-up fee may overcome the sign-up fee objection for a percentage of people. Your sales may increase. Your new accounts may rise. The commitment and interest of those new members, in my experience, is going to be less than those that pay a fee to join. Who cares about a bank account when its free and I don’t know how to use it? If I pay $500 for a bank account, I’m going to be very motivated to find out how it works and use it.
When I gave an account to a business owner for free, 90% of the time that business would end up doing little or no trade. Those businesses would quickly exit the exchange, never to be heard from again. Yes, they were another name on the list of people we were supposed to be able to barter with. Yes, it was good on paper and it made us feel better. The truth? Those members weren’t very good members. Little volume came from them. Very little commitment to barter came from them. We were better off not having them as members at all.
The second reason, that of having barter become more mainstream like banks and credit unions, overlooks one important point: a barter exchange is not a bank or a credit union.
When you join a bank or a credit union, you get a service of accounting and safety, and that is about it. You count on your bank to hold your money (a fiat currency) and expect to be able to use that currency with anyone you want. Other than that, the bank or credit union is only responsible for record keeping. Yes, barter exchanges do that. Any trade exchange can provide good records and hold your barter currency in safety for you. That’s not a point of dispute. I dispute that this is where the value of a good barter exchange ends. Let me paint you the picture.
- Your barter exchange is a record keeper. Yes, they keep records of transactions, and provide monthly statements, and charge you fees similar to a bank or credit union.
- Your barter exchange is a paid-on-performance marketing arm for your business. Not only do they keep records, but a good exchange will go lengths in marketing your business to all of the other participating businesses. Via email, the barter website, direct phone solicitation, and word of mouth advertising, your trade exchange is going to promote you. The bonus? You only have to pay them if the marketing works. I challenge anyone to find a bank or credit union that will do that on a commission basis.
- Your barter exchange is a paid-on-performance business consultant. If you are a member of a reputable exchange, you are going to be assigned an account representative. If that rep has been trained well, they are going to come to your place of business and make suggestions to you based on their observations. They may suggest new signage, carpet cleaning, new logo design, paint for your walls, ways to make your employees happier and more fulfilled, or that you need to take a vacation. As an outside pair of eyes, they will notice what you don’t and lead you to solutions, which, by the way, will be paid for in barter, not cash. When is the last time your banker came around and offered creative solutions to your business problems? Never.
In my opinion, exchanges that give away their memberships sell themselves short. You’re not a banker, your a combo banker/marketing expert/consultant that can save a business thousands of dollars per year, open new doors for new business, and create new realms of possibility because the constraints cash imposes are released when barter is understood correctly. Your barter exchange is a world of possibility, not a simple record keeping system with an attached website. Don’t sell yourself and your exchange short.
One more thing…
If you want to charge a fee in cash for businesses to join your barter exchange, but you are finding that people are rejecting your offer based on that sign-up fee, offer to take part or all of it in trade. That will help you close the deal without having to give it away for free. In my years as an exchange owner, our registration record was collectively half cash/half trade on the sign-up fee. We charged $500 for a business to join, and never balked at taking $500 in barter instead of cash. Taking barter dollars still gives the new member a better commitment to the exchange than a free member, and you have some barter dollars of your own you can spend without having to use a credit line.
A good barter exchange is much more than a bank or a credit union, and deserves to have its members committed and willing to find out what it takes to effectively use the system. Instead of not charging a sign-up fee, lets take some or all of it in trade. We’ll get a committed member and over the years will build a better business because of it.
