Tag Archives: Victor Ho

SFSW16: Loyalty Must Emulate ‘Cheers,’ Not ‘Minority Report’

Loyalty products ride the crest of big data. They drive engagement and upsells based on customer behavior, and provide the analytics to steer future marketing efforts. But for SMBs, they are also an extra marketing expense and their value is still being established.

After five years or more in the market, we’d conservatively estimate there are fewer than 80,000 SMBs using electronic loyalty products today. Speaking at SFSW16 in San Francisco this week, FiveStars CEO Victor Ho, Belly CEO Logan LaHive and Empyr CEO Jon Carder weighed in on the value proposition and provided a progress report.

Ho noted that loyalty is just one components of a broader customer engagement suite that is being offered (including analytics, payment processing and marketing support.) But the digital punch card remains the most valuable component of the suite.

“In the past, you’d walk into a business, and they’d know who you are,” said Ho. “Now the only thing they compete on is service and personalization.”

Technology can help, adds Ho. But hopefully, the experience will be more like the friendly “Hey Norm” experience of Cheers than the cyborg vision of Minority Report. “You want to build on the existing relationship,” said Ho. “It goes so much further than saving $2” on a coupon.

FiveStars doesn’t report on the number of SMBs it has, but its online map shows more than 1,000 SMBs in the Bay Area. Last year, the company said it was on target to sign up over 8,000 SMBs.

Coffee shops, retailers and salons are its top customers, says Ho. Marijuana shops have been among its fastest growing categories and now represent its second largest retail category.

Belly’s LaHive, meanwhile, said the company and industry have learned a lot over the past five years. At one point, there were 30 companies in the space but now there are just a few, he noted. The problem in the early days was that there was an assumption that it would be driven by new tech channels.

“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.

Yet loyalty programs remain vital for scaling store-to-consumer relationships and targeting specific communications to consumers, he says. And there is a demand for it. The success of loyalty programs such as Starbucks point the way. Chick Fil-A’s new loyalty app is the number one category app in The Apple Store this week, he noted.

LaHive reports that Belly has about 10,000 SMB accounts, and also is beginning to target Enterprise accounts that have local stores as well. Going forward, it is all about physical retailers.

Empyr’s Carder, in a separate SFSW16 session, said the key to winning over SMBs was to bridge the gap in attribution. “There is no way to tell if any of the online advertising has resulted in a an instore sale, or created burn out and attrition, he said. Moreover, the data platforms are valuable for estimating traffic, but they don’t allow you to track 100% of the data.

“They are more of an estimate. They are designed for local advertisers,” he said.

Card- linked “Pay Per Sale” platforms that can track all the data, however, are closer to the mark. Carder notes that MasterCard, Visa and Amex have revolutionized this part of the industry by making their purchase data available “in less than one minute.”

FiveStars Lands $13.9 Million; Card-Linked Loyalty Space Heats Up

The card-linked loyalty and rewards space is seen by a lot of the smart money as the next Groupon. Today, we saw new money being poured into FiveStars ($13.9 Million), LevelUp ($9 Million) and LocalBonus ($900,000). The companies have now raised $16 million, $21 Million and $1.4 Million respectively — about half the $78 Million that we estimate has been invested in the independent loyalty space.

FiveStars, a 55 person Mountain View, CA entity, won its new funding from Lightspeed Venture Partners and DCM. Other investors include YCombinator; Mayfield Fund; Hadi and Ali Partovi; and former Facebook and AOL Mobile exec Chamath Palihapitiya.

CEO Victor Ho reported to BIA/Kelsey today that the company has signed up over 400,000 users in 14 DMAs, and that more than 775 merchants are paying it monthly fees, which widely vary but are typically around $50-65 a month.

Roughly half of its merchant accounts are with larger chains, while the other half is to mom and pops. The chains include Subway, Round Table Pizza, Metro PCS, Baja Fresh and TuttiFrutti frozen yogurt.

Ho says the major differentiator for FiveStars from rivals like Belly and LevelUp is that it has been fully integrated with the vast majority of POS systems – something loosely claimed by a number of companies. The patented technology is the company’s “secret sauce,” says Ho.

The live POS integration enables offers to be spit out to consumers based on what they are currently purchasing. It also makes it easier to sign up customers on the spot and allow merchants to see information about the customer at their display. “They can see that ‘Peter is a loyal customer’” and what he purchased, Ho notes.

The POS integration also cuts down on rebate and rewards fraud and/or mistakes. This is a major issue when cash back rewards are being applied, he says.

Ho adds that FiveStars’ Live POS integration (and other features such as social media and mobile marketing) results in the company getting “3-4 times the penetration of any competitors,” and more than 500 members at the average store, compared to 100-120 for other companies in the space. Verde Tea Cafe, a Silicon Valley chain, for instance, is cited as having gained 20,500 members in one year.

BIA/Kelsey’s SMB Digital Marketing conference Sept. 17-19 in Chicago is going deep into the loyalty space with top leaders from Belly, Cartera and Edo participating. Register here.