Belly founder Logan LaHive is stepping down, signifying a new orientation for the company that focuses less on SMBs, which are tough to scale, towards analytics for national-to- local retail (like 7-Eleven, an investor.) CFO Dan Gloede is taking over the top spot.
LaHive’s step-down tells a lot about the challenges of scaling SMB sales for premium loyalty solutions. When they came out five years ago, SMB loyalty services tied to credit cards or memberships were seen as natural successors to Groupon’s prepaid promotions, which disappointed SMBs because customers — “acquired” with heavy discounts — would often not come back. The new loyalty programs could track customers based on their shopping behavior, incent them to boost buying and come back more often, and provide crucial marketing analytics to businesses.
At the time, it seemed that key SMB segments were primed to become customers. Restaurants, salons and spas are usually top targets. Others include retailers, florists, boutiques, and health and fitness. Belly itself was developed with Groupon co-founder and lead investor Eric Lefkofsky, perhaps as kind of a hedge. Belly and Groupon are in the same Chicago building.
To be sure, loyalty still looks like a strong opportunity to investors and others. Last December, a team of VCs, led by HarbourVest Partners, plowed $50 million into Five Stars, which has now raised $105 million in total and has over 10,000 SMB customers.
But in general, loyalty services aren’t really trending – there has been a lot of friction in registering customers for a loyalty service beyond the Starbucks App. Some merchants – if they can be reached — have probably been reluctant to pay fees for full-tier programs, which can range from $35 to $300 a month.
Of the 30+ original loyalty players from 2011-2013, only a few survivors remain, including Belly, Five Stars, Empyr Networks (MOGL), Affinity Solutions, Spring and Thanx. Other companies serve the loyalty space as part of a service bundle, including Square Rewards and Perka, which is sold via First Data’s Clover POS system. Other companies, such as Groupon, have absorbed some of the functionality of the loyalty analytics programs. We conservatively estimate that there are currently fewer than 80,000 SMBs paying for electronic loyalty products.
LaHive, speaking at a Streetfight event this spring, expressed confidence in the company’s new national-to-local focus, noting that the company may have taken something of a wrong turn by focusing on tech channels to reach SMB merchants. “We put a lot into (Apple’s) Passbook,” says LaHive. But those products are really only about early adopters. Payments and Beacons are the connecting points for retail marketing in those cases. “It doesn’t go through the loyalty programs,” he said.