e-Cigarettes: Executive Summary

After more than 2 years of litigation US Courts have taken the stance that the FDA must classify e-cigarettes as a tobacco product, meaning that the cigarettes are “legal”.

The FDA had wanted to ban the flavored cigarettes and classify them as a drug delivery device. At least 5 states (listed below) prohibit the sale of e-cigarettes to minors in the United States.

Legislative background on e-cigarettes
On 22 September 2009, under the authorization of the Family Smoking Prevention and Tobacco Control Act, the FDA banned flavored tobacco (with the notable exception of menthol cigarettes) due to its potential appeal to children. Wagner says that the use of flavorings such as chocolate could encourage childhood use and serve as a gateway to cigarette smoking.

The Food and Drug Administration (FDA) classified electronic cigarettes as drug delivery devices and subject to regulation under the Food, Drug, and Cosmetic Act (FDCA) prior to importation to and sale in the United States. The classification was challenged in court, and overruled in January 2010 by Federal District Court Judge Richard J. Leon, citing that “the devices should be regulated as tobacco products rather than drug or medical products.”[Judge Leon ordered the FDA to stop blocking the importation of electronic cigarettes from China and indicated that the devices should be regulated as tobacco products rather than drug or medical devices.

In March 2010, a US Court of Appeal stayed the injunction pending an appeal, during which the FDA argued the right to regulate electronic cigarettes based on their previous ability to regulate nicotine replacement therapies such as nicotine gum or patches. Further, the agency argued that tobacco legislation enacted the previous year "expressly excludes from the definition of 'tobacco product' any article that is a drug, device or combination product under the FDCA, and provides that such articles shall be subject to regulation under the pre-existing FDCA provisions." On 7 December 2010, the appeals court ruled against the FDA in a 3–0 unanimous decision, ruling the FDA can only regulate electronic cigarettes as tobacco products, and thus cannot block their import. The judges ruled that such devices would only be subject to drug legislation if they are marketed for therapeutic use – E-cigarette manufacturers had successfully proven that their products were targeted at smokers and not at those seeking to quit. The District of Columbia Circuit appeals court declined to review the decision blocking the products from FDA regulation as medical devices on 24 January 2011.

Concerns about public safety have been raised. However, some former smokers say they have been helped by e-cigarettes, and scientists at the University of California, Berkeley said that e-cigarettes had great potential for reducing the morbidity and mortality related to smoking.

State Laws regarding e-Cigarettes
Individual states have differing legal treatment of electronic cigarettes.

• California Governor Arnold Schwarzenegger vetoed a bill that would ban the sale of electronic cigarettes within the state on grounds that "if adults want to purchase and consume these products with an understanding of the associated health risks, they should be able to do so."
• In 2009, New Jersey voted to treat the electronic cigarette in the same category as tobacco products by including under the New Jersey Smoke Free Air Act. Assemblywoman Connie Wagner sponsored the legislation arguing that they "looked like the real thing"; she also objected to the potential appeal of flavored electric cigarettes to children.
• The sale of electronic cigarettes to minors in New Hampshire was legal. A group of students and a group called “Breathe New Hampshire” were concerned that electronic cigarettes will serve as a gateway to smoking cigarettes through appearing to be trendy: one compared electronic cigarettes to “having a new cell phone. It’s cool. It’s electronic.” They launched petitions to the state government to ban the sale of electronic cigarettes to minors. It is now illegal to sell e-cigarettes to minors as of July 2010.
• Arizona has a planned ban of selling electronic cigarettes to minors.
• In Washington, the King County board of health has banned smoking of electronic cigarettes in public places, and prohibited sales to minors. Neighboring Pierce County also prohibits sales to minors, but allows e-cigarette use in places such as bars and workplaces.

I have included some information from the MasterCard Registration Program as it relates to e-cigarette merchants.  Here’s a quick link to the main location for their publicly published documents.  You don’t need any login credentials to access this information, is it available to anyone. http://www.mastercard.us/merchants/resources/downloads.html

9.1 MasterCard Registration Program Overview

MasterCard requires Customers to register the following Merchant types and other entities using the MasterCard Registration Program (MRP) system, available via MasterCard OnLine®:

• Telecom Merchants—MCCs 4813, 4814, 4816, and 5967 (refer to section 9.4.1 and section 9.4.2)
• Electronic commerce (e-commerce) adult content (videotext) Merchants—MCCs 5967, 7273, and 7841 (refer to section 9.4.3)
• Non–face-to-face gambling Merchants—MCCs 7995 and 9754 (refer to section 9.4.4)
• Non–face-to-face prescription drug Merchants—MCC 5122 and MCC 5912 (refer to section 9.4.5)
• Non–face-to-face tobacco product Merchants—MCC 5993 (refer to section 9.4.5)
• State lottery Merchants (U.S. region only)—MCC 9399 (refer to section 9.4.6)
• Merchants reported under the Excessive Chargeback Program (refer to section 8.3)
• Any Third Party Processor (TPP), Independent Sales Organization (ISO), Data Storage Entity (DSE), or other person that performs or proposes to perform Program Services for the Customer or in connection with the Customer’s Program. Service Providers may be registered either using the MRP system or through a Service Provider Registration Facilitator.

If a Customer acquires Transactions for any of the Merchant types listed herein without first registering the Merchant in accordance with the Standards described in this section, MasterCard may assess the Customer as set forth in section 9.2.1 of this manual. In addition, the Acquirer must ensure that the violation is corrected promptly.

9.2 General Registration Requirements

The Customer must provide all of the information requested for each Merchant, ISO, TPP, DSE, or other entity required to be registered through the MasterCard Registration Program system. For each such entity, the requested information includes:

• The name, doing business as (DBA) name, and address
• The central access phone number, customer service phone number, or e-mail address
• The name(s), address(es), and tax identification number(s) (or other relevant national identification number) of the principal owner(s)
• A detailed description of the service(s), product(s), or both that the entity will offer to Cardholders, Merchants, or Service Providers
• A description of payment processing procedures, Cardholder or Merchant disclosures, and other practices including, but not limited to:
• Data solicited from the Cardholder
• Authorization process (including floor limits)
• Customer service return policies for card transactions
• Disclosure made by the Merchant before soliciting payment information

(including currency conversion at the Point of Interaction [POI]) – Data storage and security practices

• The identity of any previous business relationship(s) involving the principal owner(s) of the entity
• A certification, by the officer of the Customer with direct responsibility to ensure compliance of the registered entity with the Standards, stating that after conducting a diligent and good faith investigation, the Customer believes that the information contained in the registration request is true and accurate

Only MasterCard can modify or delete information about a registered entity. Customers must submit any modification(s) about a registered entity in writing to MasterCard, with explanation for the request. MasterCard reserves the right to deny a modification request.

Customers should send any additional requested information and modification requests to the vice president of Merchant Fraud Control at the address provided in Appendix C.

For requirements specific to Merchants, TPPs, and DSEs that are required to implement the MasterCard SDP Program, refer to section 10.3 of this manual.

9.2.1 Merchant Registration Fees and Noncompliance Assessments

MasterCard assesses the Acquirer an annual USD 1,000 registration fee for each Merchant under the categories listed in section 9.1, except telecom Merchants and Merchants reported under the Excessive Chargeback Program. MasterCard will collect the fee from the Acquirer via the MasterCard Consolidated Billing System (MCBS). MasterCard may assess a Customer that acquires Transactions for any of these Merchant types without first registering the Merchant in accordance with the requirements of the MRP. A violation will result in an assessment of up to USD 5,000.

If, after notice by MasterCard of the Acquirer’s failure to register a Merchant, that Acquirer fails to register its Merchant within 10 days of notice, the Acquirer will be subject to additional assessments of up to USD 25,000 until the Acquirer satisfies the requirement. In addition, the Acquirer must ensure that the violation is corrected promptly.

If any such Merchant exceeds USD 25,000 in fraud in any calendar month, the
Acquirer will be subject to the assessments shown in Table 9.1.
Table 9.1–Noncompliance Assessments

Months of Noncompliance1 Assessment

1. USD 25,000
2. USD 100,000
3. USD 150,000

(1. Months may be non-consecutive.)

9.2.2 Service Provider Registration Noncompliance Assessments

MasterCard may assess a Customer that directly or indirectly receives Program Services from any person that the Customer has not registered as a Service Provider as described in MasterCard Rule 7.6.3.

9.3 General Monitoring Requirements

The monitoring requirements described in this section apply to Customers that acquire telecom Transactions, e-commerce adult content (videotext) Transactions, non–face-to-face gambling Transactions, non–face-to-face prescription drug and tobacco product Transactions, state lottery Transactions (U.S. region only), or Transactions from Merchants reported under the Excessive Chargeback Program:

• The Acquirer must ensure that each such Merchant implements real-time and batch procedures to monitor continually all of the following:
• Simultaneous multiple Transactions using the same Card account number
• Consecutive or excessive attempts using the same Card account number

When attempted fraud is evident, a Merchant should implement temporary bank identification number (BIN) blocking as a fraud deterrent.

• The Acquirer must ensure that each such Merchant complies with the fraud control Standards in Chapter 6 of this manual and maintains a total chargeback-to-interchange sales volume ratio below the Excessive Chargeback Program thresholds. For information about the Excessive Chargeback Program, refer to section 8.3 of this manual.
• On a quarterly basis, the Acquirer must submit monthly Transaction data to MasterCard (via the MRP) for the Acquirer’s registered Merchants. This data contains sales (counts and amounts), chargebacks (counts and amounts), and credits (counts and amounts) by calendar month. If preferred, the Acquirer may submit this data on a monthly basis.

9.4.5 Prescription Drug and Tobacco Merchants

A non–face-to-face prescription drug Transaction occurs in a Card-not-present environment when a consumer uses a Card account to purchase prescription medicines from a Merchant whose primary business is non–face-to-face selling of prescription drugs.

A non–face-to-face tobacco product Transaction occurs in a Card-not-present environment when a consumer uses a Card account to purchase tobacco products (including, but not limited to cigarettes, cigars, or loose tobacco) from a Merchant whose primary business is non-face-to-face selling of tobacco products.

Before acquiring any of the Transactions described below, an Acquirer first must register the Merchant with MasterCard as described in section 9.2:

• Non–face-to-face sale of prescription drugs (MCC 5122 and MCC 5912)
• Non–face-to-face sale of tobacco products (MCC 5993)

A. Companies Subject to the New Biz Op Rule

The definition of a “business opportunity” under the New Biz Op Rule involves a commercial arrangement that includes the following 3 required elements:

1. The seller must solicit a prospective purchaser to enter into a new business (one in which the prospective purchaser is not currently engaged or a new line or type of business).

2. The purchaser must make a “required payment,” that is, all consideration paid by the purchaser to the seller or an affiliate as a condition to obtaining or commencing the operation of the business opportunity. There remains the exception for payments for the purchase of a reasonable amount of inventory at bona fide wholesale prices for resale or lease.

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1 See FTC Press Release 11/22/2011; 12 C.F.R Part 437

3. The seller must represent that the seller or a designated person (such as a locator or lead generating company) will provide any of 3 types of assistance: (i) providing locations for the purchaser’s use or operation of equipment, displays, vending machines, or similar devices that the purchaser controls; (ii) providing outlets, accounts or customers to the purchaser; or (iii) buying back any of the goods or services that the purchaser makes, including providing payment for such services such as stuffing envelopes from home or jewelry assembly.

The New Biz Op Rule continues to apply to those types of business opportunities covered by the Interim Biz Op Rule including vending machines, rack displays (such as greeting cards), payphones and Internet kiosks. However, the definition of a business opportunity has been expanded to included work-at-home schemes and has eliminated the definitional element of the “payment of $500 or more on or before the first 6 months of operations” that was a required element of a “business opportunity venture” under the Interim Biz Op Rule. The New Biz Op Rule exempts franchisors covered by the FTC Franchise Rule. The New Biz Op Rule exempts multi-level marketing (“MLM”) arrangements.

B. FTC Biz Op Disclosure Document

The New Biz Op Rule requires the business opportunity seller to provide to a prospective purchaser a 1-page written disclosure document and certain attachments containing 5 items of information (the “FTC Biz Op Disclosure Document”) at least 7 calendar days (instead of the previous 10 business days) before a prospective purchaser may sign any documents or pay any money to the seller. The English version form of the FTC Biz Op Disclosure Document produced by the FTC is included at the end of this article2.

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2 Appendix A to 12 C.F.R. Part 437 (English version) and Appendix B to 12 C.F.R. Part 437 (Spanish version)

The FTC Biz Op Disclosure Document must include:

1. Information Regarding Seller. The seller’s identifying information including its name, business address, telephone number, the name of the salesperson offering the business opportunity, and the date when the FTC Biz Op Disclosure Document is furnished to the purchaser.

2. Earnings Claim. Whether the seller makes an earning claim. The seller is not obligated to make an earning claim and can check the “no” box. However, if the seller does make an earnings claim, the seller must check the “yes” box and provide the purchaser with a separate earnings claim statement titled ‘EARNINGS CLAIM STATEMENT REQUIRED BY LAW’ setting forth:

(i) the name of the person making the earnings claim;

(ii) the date of the earnings claim;

(iii) the actual earnings claim;

(iv) the beginning and ending dates during which the represented earnings were achieved;

(v) the number and percentage of purchasers who achieved the represented level of earnings;

(vi) any characteristics that distinguish purchasers who have achieved the represented level of earnings from those characteristics of the prospective purchasers; and

(vii) other substantiating information.

The seller must have a reasonable basis for the earnings claim at the time the earnings claim is made. The seller can makes an earnings claim in the general media subject to the above requirements. A seller can use industry information only if the seller is able to measure the performance of existing purchasers and documents those the existing purchasers’ typical performance equals or exceeds the average performance of other business opportunities available in the industry. The use of a chart, table or mathematical calculation that demonstrates possible results based on a combination of variables constitutes an earnings claim.

3. Legal Actions. Whether the seller, its affiliates (including a parent or subsidiary) or key personnel (including in a prior business) have been involved in any civil or criminal “legal action” against the seller or its representatives (any sales manager, or individual who occupies a position or performs a function similar to an officer, director or sales manager of the seller) within the past 10 years that “involve fraud, misrepresentation, securities law violations, or deceptive or unfair practices including violation of any FTC rule.” This includes matters in arbitration or governmental actions. If there is any such legal action, the seller must include a separate page setting forth the full caption of each action and may choose to include a brief (not to exceed 100 words) description of the action. Bankruptcy filings do not have to be disclosed.

4. Cancellations or Refunds. The seller’s cancellation or refund policies, if any. The New Biz Op Rule does not give a purchaser a post-sale right to rescind. If the seller does not have a cancellation or refund policy, it will mark the “no” box. If the seller has a cancellation or refund policy, it will mark the “yes” box and attach a separate page describing the material terms of the seller’s cancellation or refund policy. This includes the period of time the purchaser has to cancel a purchase or request a refund; the specific steps necessary to cancel a purchase or request a refund; any fees or penalties incurred for cancellation; and where unused inventory must be returned to and by what method.

5. List of Purchasers. A list of the 10 purchasers of the business opportunity closest to the prospective purchaser’s home, or in the alternative, a list of all purchasers during the last 3 years. The list must include only the prior purchasers’ name, state (not address) and telephone number.

The seller does not file the FTC Biz Op Disclosure Document with the FTC and the FTC does not approve it but the seller has the burden of proving compliance with the New Biz Op Rule. As discussed further below, the New Biz Op Rule does not preempt (eliminate) state business opportunities laws. A seller cannot include disclosures required by state law in the FTC Biz Op Disclosure Document. If a seller is subject to both the New Biz Op Rule and a state’s business opportunity law, it must prepare and provide the purchaser with both disclosure documents. The seller is required to attach a duplicate copy of the FTC Biz Op Disclosure Document and any attachments, to be signed and dated by the purchaser. The seller can send the FTC Biz Op Disclosure Document to the purchaser electronically and an electronic or digital signature of the purchaser is allowed. A new requirement provides that, if the seller conducts sales of its business opportunities in languages other than in English, the FTC Biz Op Disclosure Document must be in the same language.

C. Updating the FTC Biz Op Disclosure Document

The FTC Biz Op Disclosure Document must be updated quarterly (January 1, April 1, July 1 and October 1) except, if the seller has fewer than 10 purchasers, the seller must update the list of purchasers monthly until the seller has at least 10 purchasers. If there has been a material change in an earnings claim given to a prospective purchaser before he or she purchases the business opportunity, the seller must disclose the material change to the prospective purchaser before finalizing the purchase.

D. Prohibitions

The Seller is subject to the following prohibitions:

1. Disclaiming or requiring a prospective purchaser to waive reliance on any statement made in any document including the FTC Biz Op Disclosure Document or attachment that is required or permitted to be disclosed by the New Biz Op Rule.

2. Making any representation, whether orally, visually or in writing, that is inconsistent with or that contradicts any statement in the FTC Biz Op Disclosure Document, Earnings Claim Statement or other attachment.

3. Including any extraneous materials in the Biz Op Disclosure Document.

4. Making a false earnings claim.

5. Stating that any law or regulation prohibits the seller from making an earnings claim or disclosing the list of purchasers.

6. Failing to provide written substantiation of the earnings claim upon the purchaser’s or the FTC’s request.

7. Misrepresenting how or when commissions, bonuses, incentives, premiums or other payments from the seller to the purchaser will be calculated or distributed.

8. Misrepresenting costs, performance, efficacy or material characteristics of the business opportunity.

9. Misrepresenting the seller’s post-sale assistance to the purchaser.

10. Misrepresenting locations, outlets, accounts or customers.

11. Misrepresenting the seller’s cancellation or refund policy.

12. Failing to provide a refund or cancellation when a refund or cancellation right is given and requested by the purchaser.

13. Misrepresenting the business opportunity as an employment opportunity.

14. Misrepresenting the exclusivity of territories.

15. Assigning a purported exclusive territory to another purchaser.

16. Misrepresenting third party endorsements or other affiliation.

17. Misrepresenting references including using shills or singers.

18. Failing to disclose any consideration paid to a reference or prior purchaser or the personal relationship with a reference or a prior purchaser.

E. Record Retention

The seller and its principals must retain the following 5 types of records for at least 3 years:

1. Each materially different FTC Biz Op Disclosure Document and attachments.

2. Each purchaser’s disclosure receipt.

3. Each signed written contract with the purchaser.

4. Each oral or written cancellation or refund request received from a purchaser.

5. All substantiation upon which the seller relies from the time the earnings claim is made.

F. Penalties for Failure to Comply

A person’s failure to comply with the New Biz Op Rule will constitute a violation of Section 5 of the FTC Act, thereby entitling the FTC to bring an action. While there is no private right of action for violation of the New Biz Op Rule, a failure to comply with the New Biz Op rule may also violate a state’s unfair and deceptive practices law and give rise to a private right of action by the purchaser. This may entitle the purchaser to various remedies, which may include rescission of the transaction and a suit for damages, including court costs and attorneys’ fees.

G. State Business Opportunity Laws

The New Biz Op Rule does not preempt (replace) state business opportunity laws, except to the extent of any conflict with the New Biz Op Rule. The paper contains only a brief summary of state business opportunity laws.

Currently, 25 states regulate business opportunities or seller-assisted marketing plans (the “Biz Op States”)3. Since these state business opportunity laws afford equal or greater protection and require more extensive disclosure than required by the New Biz Op Rule, the seller must also comply with these states’ business opportunity laws. A state’s business opportunity law may apply if: (i) the seller is located in a Biz Op State; (ii) the seller advertises in, or offers a business opportunity in, a Biz Op State; (iii) the purchaser is a resident of the Biz Op State; (iv) or the purchaser intends to operate the business opportunity in a Biz Op State. Unlike the New FTC Biz Op Rule, the Biz Op States have minimum dollar investment threshold ranging $200 to $500 that may enable sellers to avoid their application if the required payment amount is below the threshold.

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3 Alaska, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Nebraska, New Hampshire, North Carolina, Ohio, Oklahoma, South Carolina, South Dakota, Texas, Utah, Virginia and Washington.

In addition, the definition of a business opportunity under state law may be more extensive than the definition of a business opportunity under the New Biz Op Rule. There are several different types of business opportunities covered by state business opportunities laws including:

1. sellers of vending machines, racks, display cases, and currency operated amusement machines that provide locations or location assistance;

2. sellers that buy back the items that the purchaser produces, grows, fabricates, or assembles;

3. sellers that guarantee in writing that the purchaser will derive income;

4. sellers that provide the purchaser with a sales or marketing program; and

5. sellers that represent to the purchaser the existence of a market for the goods or services.

These laws generally require, among other things, the preparation of a disclosure document that must be given to a prospective purchaser for presale review between 48 hours to 10 business days before the purchaser can sign any contact with the seller or give the seller any money. Most of these states also require the registration and approval of the business opportunity offering by a state regulatory body.

The Biz Op Rule does not require the seller to disclose its financial condition (or to have a minimum net worth requirement). The Biz Op States may require such disclosure. Some Biz Op States require all business opportunity sellers to post a security bond. Some Biz op States prohibit the seller from taking the entire purchase price before delivering the items to the purchaser. California, Michigan, and South Carolina require that the seller appoint a person or company located in that state, other than a governmental official, to act as a registered agent to receive service of process. Certain Biz Op States require either salespersons to register or the seller to provide a list of salespersons. A number of Biz Op States require that all advertising materials directed toward prospective purchasers, including advertisements intended to appear in publications located in that state, be filed with the state as part of the registration process. Certain Biz Op States require sellers to provide a post-sale right to cancel. Most Biz Op States require the seller’s contract to provide that the items purchased as part of the business opportunity must be delivered within a specified time (e.g., 45 days). Otherwise, the purchaser has a right to cancel the contract.

As a result, sellers of business opportunities that operate in the Biz Op States will need 2 types of disclosure statements: (1) the FTC Biz Op Disclosure Document, and (2) a state-specific disclosure document. Sellers operating in multiple states may need even more forms of state-specific disclosure documents.

H. Conclusion

On and after March 1, 2012, those companies that are currently complying with the Interim Biz Op Rule must cease using the FTC Disclosure Statement format and use the FTC Biz Op Disclosure Document and otherwise comply with the New Biz Op Rule for all sales within the United States and its Territories. Companies that market and sell products or services to persons to enable the person to start a business should consult their counsel to see if their business arrangements now meet the 3 elements of a business opportunity.

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Self-processing is time consuming and complicated as well as an accounting nightmare. Third party credit card processors will take care of all the processing of credit card payments. There is a fee of course for transactions, and this will vary quit a bit—be sure to shop around for the best rates and customer services to serve your needs.

Merchandising Your Blog

Individuals who have a blog can sell items or services on their blog; the blog is their web site it is their business. Point of sale (or POS) is the location where the transaction occurs. The web site would be the POS. Bloggers that want to sell t-shirts can do so, with a credit card merchant account.

Be prepared to provide some personal and financial data to the card merchant. Credit card merchants may want to see the page views daily. Blog content is important, and Adsense accounts are a great indication of the blog”s potential. The merchant may want to see the affiliate sales, as well. Bloggers that provide good content and just happen to sell items will do well.
Bloggers should avoid the sales pitch similar to house parties in the past. People would be invited to a great dinner only to find out that the hosts were trying to sell them something. Usually, they were plastic food containers. Provide fresh content that is useful to the reader and they will be glad to buy a tee shirt. Customers that feel they have been mislead will not purchase anything, and may convince others not too either. Get customers to the blog or web site by using good content.

Basics to Set Up

To set up a merchant account for a small business, first open up a business checking account. Some merchants will deposit funds in a personal checking account, but separating your company funds from your own is just better business all around (and in some cases it may be illegal to do otherwise).

Businesses that physically handle a customer”s credit card will need, in essence, better credit—while online merchants do not have the underwriting requirements of a brick and mortar business. Financial history can play a role, but for the most part, small business owners using E-commerce will be able to secure a merchant account. Businesses applying for a merchant account will need to prove they are who they say they are. There may be different documentation required depending on the card merchant.

Consumer Confidence

Remember appearances do count. Customers browsing the website want to be assured when they are ready to purchase online. They expect to see certain things, like “shopping carts” and “checkout now” buttons, as well as secured processing symbols. Customers want to see those familiar logos, so you want to boost the consumer”s confidence with the first few clicks inside the website.

Merchant accounts say something about the business; that it is reputable and ready to service the consumer. Online businesses or web site owners that decide they have a service or product to sell can easily set up a merchant account.

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1. Make Sure Your Customers Use Facebook

If your customers use Facebook, then it makes sense to establish a Facebook presence. Best Buy was one of the first businesses to place its products — the actual transaction is completed on BestBuy.com — on Facebook to target its younger customer base there. The Fans on its page can also ask their friends about a product, or a share a product with their friends, potentially leading to increased sales at BestBuy.com.

Best Buy’s Facebook page targets younger customers

You can do a similar thing by setting up a page for your customers, if you believe they use Facebook. Once you have the page, you can, for example, encourage your Fans to post photos and videos that show them using your products. This will further influence their friends to make a purchase on your site

2. Consider ‘Word-of-Mouth’ Marketing

If your site sells products that can benefit from word-of-mouth marketing, then Facebook is a great tool to use. You can put specials on Facebook to generate buzz. Posting pictures of your products can start conversations as your Fans start “Liking” your products.

Many retailers use this very effectively on Facebook. One Kings Lane, a provider of home decor items, is a good example. It either talks about its products or a theme — such as decorating a kitchen — to start a conversation among its Fans. This activity is posted on the Wall of their Fans and lets their friends know about One Kings Lane’s products.

The One Kings Lane’s Facebook page is aimed at starting conversations.

This additional traffic through word-of-mouth marketing will, in turn, lead to greater online sales. This also works well to promote the new products.

3. Remember Frequent Deals and Promotions

If you have frequent deals and promotions on your site, you can leverage the users on Facebook to advertise them. You can also post them on your Facebook Wall to have your Fans Like them or share them with their friends. Gap uses this strategy very effectively, as shown below

Gap uses Facebook to share promotions and drive extra traffic.

4. Post Store Events

Facebook can also be a very effective way to bring traffic to your physical store by promoting your store events. Barnes & Noble does that well, by promoting its store events on the Facebook page and driving traffic to its physical stores.

Barnes & Noble uses Facebook to promote in-store events.

As a small retailer, you can do the same for your local Fans and also encourage your Fans to share updates and pictures from the event.

5. Consider the Price Point of Your Products

If your online products are priced at thousands of dollars or more, it’s unlikely that setting up a Facebook presence will directly produce sales. However, you can create a page for providing information about your products — to interact with your Fans. Several luxury retailers use this strategy effectively, such as luxury carmakers Bentley and Maserati, and luxury watchmakers like Patek Philippe and Piaget.

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So what exactly can you expect from putting time and energy into social networking for your business? A company presence on platforms such as Facebook, Twitter and LinkedIn can:

• generate qualified leads
• allow you to listen to and interact with your community
• put a personality behind the brand
• expand relationships with other businesses and professionals
• build general awareness of your brand and product
• promote special deals to targeted groups
• enables you to keep a finger on the pulse of trends in your area of business
• keep an eye on the competition
• create a new channel for customer service
• drive traffic to your website
• help establish you and your business as thought leaders in the channel (and beyond!)

The key to success with any social media platform is not to inundate your community members with sales message after sales message. Make sure your messaging is not all about you. Post educational content, industry news and include your marketing messages in there as well. Social media management is an emerging art form, really, and timing and frequency of posting play a huge factor in how successful a small business can be online. Some of the main reasons cited for unfollowing businesses on social networks include over-communication, under-communication or lack of updating, irrelevant status updates, only talk about yourself, and do not engage in conversation with the community.

You don’t need to hire a so-called social media consultant to get you social media presence up and running. My best advice to you is to start slow, dedicate time to the craft and make every status update count. You’ll be able to grow your online community in an organic and sustainable way. To get started, sign up for the following three networks:

1) Facebook: There’s a reason more than 500 million worldwide are on Facebook. You will need a personal profile in order to set up a company page for your business. Setting up a company page for your business is easy. Here is a helpful guide with commonly asked questions about getting started.
2) Twitter: Your updates are limited to 140 characters on Twitter, so be ready to get creative. Think of Twitter as a game, and the main goal is to gain quality followers. Get inspired by reading this New York Times article, “Marketing Small Businesses With Twitter.”
3) LinkedIn: Again you’ll need a personal profile in order to set up your company page. Here’s how to get started.

Once you have the basic setup taken care of, here are some of my general tips that apply across most, if not all, platforms:

1) Listen and don’t add more noise. This goes back to my earlier point of making every status update count. Great tools for listening that I use personally include TweetDeck and Google Alerts. You can customize tools to suit your needs. For example with Google Alerts and TweetDeck, I am monitoring all mentions of Doyenz, (our company name) and Shadowcloud (our product name) in real-time from 8 am to 6 pm, Monday to Friday. These tools ensure that you are responding to negative mentions of your business and jumping in the conversation about your company that you may previously not know was happening.

2) Give credit where credit is due! If you get a link or borrow a phrase from another Twitter or Facebook user, give them a shout out! It takes little effort and will help you build a community that respects you and create positive interactions with your brand, one step at a time.

3) Think of your social media content as an editorial operation. Create a general schedule to follow (ex: we are going to send out tweets 3x a day Monday to Friday and once a day on the weekends.) You don’t have to follow the schedule religiously, but it will help to ensure you’re updating your networks within an acceptable range. Also be sure to curate the links you send out to ensure you are adding value to your community. You don’t want to be a company someone unfollows because you are flooding their news feed with irrelevant messages, or vice versa – you haven’t updated in months and your community knows it.

4) Social media platforms provide a forum for word-of-mouth recommendations in the digital age. Studies continue to show the importance of personal recommendations in influencing buying decisions. These days a large chunk of these recommendations are made on Facebook or Twitter. Keep this in mind and consider offering a special deal just to your Facebook fans.

5) Stay on top of the latest trends and news in social media with sites such as Mashable’s Social Media vertical, the HubSpot blog and the SmartBlog on Social Media.

6) Finally, and perhaps most importantly, measure your efforts and iterate based on metrics. Use Klout to get an idea of what your doing well and how to improve on Twitter, use Facebook insights (also free) to gauge how well you are interacting with your community through your Facebook company page. You can also use Google Analytics to assess how many referrals are coming to your website from each platform (See “Traffic Sources”). Looking at the past 30 days, four of our top 15 referring sources of traffic — which includes our paid campaigns with Google AdWords and ads on other websites — are social networks (Facebook, LinkedIn, Twitter and Quora).

Social media efforts cost less than traditional advertising and marketing campaigns and often produce better results and can have a greater financial return. So, what are you waiting for?

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Marketing and selling goods or services online requires several features not found in traditional retail or on typical business websites. These include a merchant account that offers Internet credit card processing ability, an online product catalog, a virtual shopping cart and a bulk email program. Once these are established, the benefits of eCommerce can start to pay off for both merchants and their customers.

For example, the upfront costs for establishing a virtual business are less than for a brick-and-mortar operation, and the process can generally be accomplished more quickly. Other benefits of eCommerce are:

• An online presence makes your business more accessible to potential customers, business associates and product manufacturers, which in turn creates new relationship opportunities.
• Customers have 24/7 buying access via the Internet, but you don’t have the associated costs of a round-the-clock operation. In a sense, eCommerce allows you to put your business on auto pilot during non-business hours and still reap the rewards.
• Promoting your brand gets easier when millions of potential customers worldwide can visit your website, peruse your inventory and make a purchase. That kind of traffic just isn’t available in a storefront operation!
• eCommerce promotes customer loyalty. Consumers like shopping when it’s easy, convenient and interactive. Being able to shop whenever they like, wherever they like and paying with a credit card ranks high with them. Remember: a satisfied customer is a repeat customer.
• An online presence gives your customers instant and direct access to product information, specials and promotions, and practically anything they need to know about your business and the services or products you offer.
• Moving a business online reduces your operating costs. There’s no physical location (and related expenses) to contend with, and fewer paid staff are required to run the operation. That’s money in your pocket that’s pure profit.
• By cutting costs and increasing your exposure to potential customers, your bottom line is likely to grow, making it possible to take your business in new directions.

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Watch your statements carefully in the beginning.

The first few months of a new merchant account are watched closely by the processing banks. Traditionally most fraud that occurs with merchant accounts, occurs in the first few months of processing. It is equally important for businesses to watch their own statements closely in the first few months of processing. The start of opening a merchant account is the best time to find errors and problems, because they can normally be corrected more easily than after the business has been processing for a long time.
What business owners should be watching for is that their business is setup with the correct merchant account type, that they aren’t downgrading excessively, and that there aren’t any major fees that they were unaware of.

Don’t exceed your processing limits early on (or without notice).

When you applied for your merchant account, there was a section on the application that asked you what your anticipated monthly volume was expected to be. This volume acts as a base line for comparing your monthly processing to. Processors use this amount to flag fraud and other risk factors. Another number that you entered was your average ticket size.
While growth to you is a great thing, quick unexpected growth is hated by most credit card processors as it opens avenues for fraud. Because of this, many businesses have been held back or even had their merchant accounts canceled due to growth.
Exceeding your monthly volume: It is my opinion that businesses should always check their merchant accounts using an online account access system, which is available with almost every merchant account. If your merchant account approaches your specified monthly volume, you should call your merchant account provider immediately. There is some leniency for the occasional high volume month, but if you consistently reach or exceeding your volume, you need to request a volume increase. If your processor cant increase it, you should start looking for a new processor. Believe me when I say that the negative reaction from some processors handling growth is far worse than shopping for another merchant account. Your current provider may also have another processing bank that will grant you a higher volume. Either way, this is something that should not be ignored.
The reason that this is also applicable to new businesses, is that they often have no idea what their volume is going to be. Hopefully if a guess was made, it was higher than needed, and if a lower guess was made, a volume increase or new merchant account should be a priority.
Exceeding your average ticket size: Almost every business has to run a few transactions over their average ticket size. After all it is an average, and not a limit. 10 – 15% is acceptable with most processors, and some like Nova often allow a 100% over transaction. But, running a $5,000 transaction when your average ticket size is set at $20 is not a good thing. The processor will force you to refund the money and collect payment with another form. They probably wont refund your processing fees as well. Now your mad at your processor, you just lost some money, your customer is inconvenienced and nobody is happy. If you expect that you are going to need to run a much larger transaction than your average ticket, call your processor. They may allow you to run a one time transaction because it just happens sometimes. If you expect that you are going to be seeing a lot of these larger transactions you either need a average ticket increase, or you need to find a processor that will let you have the high ticket size. Be prepared to prove that you do sell something costing that much (it would be hard to believe that a dollar store sold had a transaction for $5000, etc).

Check your bank account daily.

Just like anything, a merchant account sometimes has errors. At some point a human has to add your bank information to an electronic system. Although rare, this account number sometimes gets mixed up, and money goes to the wrong account. If this mix-up ever occurs, it is also soon after a merchant account is opened.
Since money is normally deposited into a business’ bank account about 48 hours after they process a transaction, there isn’t a good excuse for notifying your processor that you haven’t been receiving your money for two months. Check you bank account closely for the first few weeks and make sure that your money is going to the correct place.

Overview:

These three small tips can help prevent about 90% of all the potential problems you can possible have your merchant account. Catching them early on will help to ensure that your credit card processing is transparent, allowing you to focus on the rest of your business.

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“Consumers continue to lose more control over their personal information, and smart phones are part of this trend as they become more versatile,” Sen. Mark Pryor, D-Ariz., said during a May 19 hearing before the Senate Committee on Commerce, Science and Transportation Subcommittee on Consumer Protection, Product Safety and Insurance.

“Until there are basic parameters and best practices in place, I have a real concern this problem will only get worse.”

In addition to general consumer privacy concerns, lawmakers have said they are concerned about the use of geo-tagging, which uses Global Positioning System coordinates to pinpoint and store information about where people go with their smart phones. Recent reports suggest several of these devices can be used to collect such information without users’ knowledge or consent.

“Like many Americans, I am deeply concerned about the recent reports that the Apple iPhone, Google Android Phone and other mobile applications may be collecting, storing and tracking user location data without the user’s consent,” Sen. Patrick Leahy, D-Vt., and Chairman of the Senate Judiciary Committee, said at the start of a May 10 hearing before that panel’s Subcommittee on Privacy, Technology and the Law. “I am also concerned about reports that this sensitive location information may be maintained in an unencrypted format, making the information vulnerable to cyber thieves and other criminals.”

In early June, Leahy introduced the Personal Data Privacy and Security Act, a bill he has introduced in three previous sessions of Congress. The bill proposes strict data protection requirements on businesses that collect and store sensitive personal information about consumers, and standards for national data breach notification, among other things. Leahy said recent reports of data breaches, in both government and the private sector, “are clear evidence that developing a comprehensive national strategy to protect data privacy and security is one of the most challenging and important issues facing our country.”

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There are basically two types of merchant accounts – retail and keyed (also known as card not present, e-commerce, Internet, Mail Order / Telephone Order (MOTO)).  Retail discount rates are cheaper because the risk of a chargeback is not as high as a keyed account.

With the fee, providers might have a three-tiered pricing structure: qualified, mid-qualified, non-qualified.

Qualified Rate

This “qual” rate is the price that is usually listed on the agent’s website.  A lot of times, you won’t even see the other rates until you see the contract.  Usually, this rate is what you will be charged on most transactions.

Mid-Qualified Rate

Some providers have this “mid-qual” rate in their structure.  Sometimes, merchants won’t even know they are being charged this rate until they review their statement.

Non-Qualified Rate

These transactions are downgraded to “non-qual” for different reasons.

• Extra charges from the card associations (rewards or business cards)
• The transaction was not completed in a timely manner – usually when you do a transaction that money is guaranteed yours for a certain amount of days.  This is why most processors will automatically batch the transactions for you daily.
• If you have a retail account and you key in the transaction (the risk of a chargeback is higher)
• If you have an Internet account and you do not do Address Verification Service (AVS) (the risk of a chargeback is higher)

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