Source: FiveStars
Is digital loyalty a bigger hurdle for smaller retailers?
Smaller retailers that have long faced pressures competing on price with larger chains must now also compete on personalization through their loyalty programs.
That’s according to Victor Ho, CEO of FiveStars, a mobile loyalty provider which last week raised $50 million in a series c funding round.
“The overarching goal is to bring the customers back in more often,” Mr. Ho told Techcrunch. “We do that by helping merchants collect data on things like what customers are ordering, and through our tools we have a CRM and marketing automation suite to reach out and engage customers.”
Charging retailers about $300 a month, FiveStars enables shoppers to sign up for a rewards program with an in-store tablet that’s integrated into the store’s POS system. Members then check in with visits or purchases via an app or phone number. Aligned to purchasing data, marketing and promotion messages are automatically sent via mobile app, text message or e-mail to members, including rewards and special offers to bring back lost customers as well as special rewards on birthdays.
FiveStars also enable store staffs to identify every customer by name as they enter the store and provide personalized service in-store. In its fifth year, FiveStars claims to have driven over 35 million visits across 10,000 small businesses in North America in 2015.
“Our vision is to make commerce as personalized offline as it is online,” said Mr. Ho in a statement.
Competitors such BellyCard and Dealyze also promise loyalty solutions for money- and time-constrained storeowners. Beyond a set fee, Dealyze charges as deals are clicked and redeemed by members, as well as for deals redeemed through referrals.
In December, Belly updated its app to enable merchants to gain insights into customer frequency and the ability to set up and send automated marketing campaigns from their smartphones. Said Logan LaHive, CEO at Belly, in a statement, “We are empowering business owners to connect with their customers, no matter where they are.”
- FiveStars Raises $50 Million in Series C Funding To Personalize Offline – FiveStars
- FiveStars raises $50 million to help small businesses build consumer loyalty – VentureBeat
- FiveStars Gets $50M To Help Small Retailers Run Loyalty Programs Like Their Bigger Rivals – TechCrunch
- Dealyze Brings A Starbucks-Like Loyalty Program To Any Business – TechCrunch
- Belly Empowers Local Businesses With Mobile CRM & Marketing Automation; Unveils iOS App For Merchants – Belly
Discussion Questions
Do larger stores have an advantage with digital loyalty programs over smaller stores? What do you think of some of the emerging third-party mobile loyalty providers?
Poll
BrainTrust
Patricia Vekich Waldron
Contributing Editor, RetailWire; Founder and CEO, Vision First
Lee Peterson
EVP Thought Leadership, Marketing, WD Partners
Most larger store loyalty programs are ignored by consumers, why should the programs from Dealyze, Belly or FiveStars be any different? Large retailers for the most part have not used their loyalty programs in ways that are meaningful for consumers. I question whether small retailers will have the staff or skills to mine the data that these services provide. Better to offer a simple concept like punch cards to encourage repeat business than invest $300 a month in a system that will send a meaningless birthday email to a consumer.
I think stores of all sizes can leverage technologies like this. There are enough tools in the marketplace today to help identify loyal shoppers and offer compelling promotions to keep them engaged. If these third-party providers can differentiate the true loyal consumer from someone whom belongs to a bunch of programs in order to get perks, there is definitely value there.
I don’t think larger stores have any advantage. I think stores selling products that people need to buy frequently (like food) have all the advantage and those retailers who by the nature of the product they sell have infrequent interaction with their clients are just not candidates for loyalty programs no matter how good the software is from a functionality or an economic standpoint.
I think smaller retailers are much more nimble, and often they have niche offerings which make them naturally oriented towards personalization. They also are driven by teams that are digital natives and have relevant relationships in their DNA.
And being smaller, newer organizations, they don’t have the legacy processes and infrastructure of mature organizations.
FiveStars is another example of technology being miles ahead of most retailers’ ability (or even desire) to redirect meaningful content to a loyalty initiative. As other panelists have written, great technology is both a blessing and a curse as retailers who expect shoppers to download and use an app or even web-based software, must then deal with the elevated expectations from their shoppers of customized content, great deals and information.
If the retailer is prepared to change the way it does business, these solutions are great. Alternatively, if the retailer is looking to just layer on a digital program to its core marketing programs thinking it will enhance loyalty without much investment, FiveStar and other technologies will likely produce disappointing results.
Data-driven marketing is the future and the infrastructure is a big investment so, yes, larger retailers have an advantage. In fact, when scale matters, bigger has an advantage. that is why ad agency families combined their media placement teams and why online research companies combine their panel operations. these multi-retailer combined database/frequent shopper programs are a response to this.
There is no doubt that bigger is better. Every retailer should read “How Brands Grow” by Byron Sharp and learn to live by the “empirical law” of Double Jeopardy.
You can argue with it all you want, but virtually all evidence points to the fact that larger stores (i.e., those with greater customer penetration) also benefit from (slightly) greater purchase frequency.
Don’t try to break this “law” — it’s really hard to do so, and deviations from it are not sustainable.
The use and proliferation of digital loyalty systems is primarily dependent on the ability for any size company to roll it out and maintain it cost effectively. The missing ingredient for the return on investments is often the inability to identify and track total sales increases and dependence on this marketing attachment.
The misuse or sales floor abandonment of the typical failing plan is largely a factor of user friendliness and training. Without accurate measurement tools in place and functioning from the program onset many disasters go undetected with disastrous results for the company and their customers. Another design issue found in many digital loyalty programs is user electability. Some customers may only wish for a pay-and-go relationship without being subjected to answer inane personal questions. This aggravation is often contagious and or infectious in the checkout line and in particular the express lines. It’s always what we don’t know or didn’t ask that allows for a large portion of the costly mistakes we make.
Retailers have long had access to an immense amount of data. The problem has always been what will they do with the data, and how will they use it. This is where most retailers get derailed. They lose focus, and don’t have a true understanding of why they collected the data in the first place, let alone what they want to do with it now.
It’s really all about wherewithal at this point. For a smaller retailer, just trying to keep up with the new digital fundamentals is a daunting task, let alone having to constantly change and flux with daily promotions.
I had a large retailer tell me that same thing at NRF this past week: “It’s so amazingly hard just to keep up with the technology, let alone the day to day stuff.” I believe it.
Hard as it may be, a “do what they don’t do” strategy is still best: private label, good one on one service and true value (value is what you get, price is what you pay) and of course, wonderful stores.
All retailing segments are not the same, all customers are not the same, all motivations for engagement are not the same. Retailing is about merchandising or it’s about competing on price and logistics — or attracting the worst kind of customers. My suggestion to “retailers” is to engage customers who are loyal without being gamed and reinforce those attributes.
Larger stores don’t really have an advantage when it comes to digital loyalty programs. While size matters, the larger the organization the less aligned they tend to be. With all of the short-term focus along with the other “normal” day-to-day challenges, there still is a majority of the industry that is not terribly customer centric. If smaller stores make customer loyalty a priority, they should be able to out-execute their larger competitors (though maybe not Amazon) and deliver a better customer experience.
Tools like FiveStars are good as long as the retailers aren’t all going to offer the same basic loyalty proposition — like their bigger competitors do. This is a fool’s errand and will be expensive and ineffective.
I’ve seen a number of smaller businesses using these digital loyalty programs and I think they’re a great idea. The price point might be a significant barrier to entry for some, but I’ve seen them work well for those that take advantage of them.
I agree with others that the data produced by these programs is valuable, but it’s a matter of making time to analyze the information they’re getting about customer behavior. When that happens, they will have much more impact than a simple punch card.