Next Gen Customer Loyalty Programs: #SFSW12

Moderator: Anthony Ha of TechCrunch
Angus Davis: CEO of Swipely
Derek Webster: CEO of LocalBonus
John Valentine: VP Local of LevelUp

Webster: There are 50 start-ups trying to make loyalty punchcards obsolete.

Valentine: Typical LevelUp merchant does about $1MM in sales, mostly restaurant customers. 60-70% of business comes from repeat customers. Difference between daily deals and loyalty is loyalty builds a lasting marriage with a customer vs. a one-night stand.

Davis: We are no longer selling loyalty as a stand-alone item. We are helping them improve the value of their credit card programs with analytics, loyalty, etc.

Webster: Our main value prop is you can use your existing credit card.

Davis: Acquiring merchants and consumers is difficult. The key we’ve found is to provide value to merchants before they get a consumer into their loyalty program by providing “Google Analytics for credit cards”. Paying via smartphone has to be better than paying with your credit card. It’s not better yet. Square seems to be in the right direction. You can’t justify the cost of a local salesforce unless you can provide enough value to the merchant out of the gate. By replacing the traditional credit card system out of the gate that 70% of customers use, we can provide enough value up front to justify the cost of a local salesforce.

Valentine: We use a mobile strategy/QR Codes. 2,000 merchant customers.  LevelUp users spend 7% more when they use our service.

Davis: We are limited by the capabilities of the credit card network so we have to wait until the credit card co runs a batch process before we can get the data – no real-time…yet.

Valentine: When tech companies get involved with payment platforms it’s going to squeeze margins of incumbents.

Webster/Valentine: This stuff is the death of incomplete punchcards.

Davis:  The merchant needs Google Analytics for Main Street with loyalty built on top.

Valentine: If you can tell a merchant the demo & behavior of their customers, it’s very exciting for the brick and mortar merchant to help them understand their customers more than ever before.

Davis: Swipely using feet on the street, telesales and 3rd party sales channels.  Gross margin from customers should pay back your sales cost in one year or less.

Valentine: Merchant & their employee participation is key.   They do referral promotions.  LevelUp willing to pay $5-$8 per new user in promtions.

My takeaway – once the merchant signs up they are locked in #prettygenius