We’re seeing three models in the new loyalty and engagement space: “punch cards” where merchants reward you based on how often you come back, “Frequent flyer” or diner points that give you a leg up on airline or hotel points for shopping, and the “universal currency” model that hands out points toward programs of your choosing from a broad number of participating merchants.
The latter is being pursued by Local Bonus, a one-year-old company headed by former banking consultant Derek Webster. The eight-person company is based in New York and has raised $ 500,000 in seed funding. It has launched in New York; Sacramento, California; Portland, Oregon; Denver; and Seattle and reports 800 merchant customers at this point. Sales are a combination of in-house and partnerships with existing sales orgs.
It is not exactly virgin territory. There is currently an intense amount of activity in the loyalty space — BIA/Kelsey counts 20+ companies. Banks and credit card companies are making the biggest bets and have some advantages, including the ability to broadly track transactions. But Webster questions whether they’ll stay committed given that it represents an untraditional market for them, and their various compliance issues. “They have very little engagement with just a low, single [digit] percentage of their customers engaged in their products,” he says.
Local Bonus’ winning differentiator, meanwhile, is its universal currency model, which Webster calls a “modern version of the Green Stamps.” Without universal points, “you never get an award anywhere,” he says.
“You get one stamp here, two punches there. In the end, you might have enough points for 1/10 of a frozen yogurt.” Under Local Business’ scheme, consumers can easily add up points from many of the local merchants they go to. They can also get “wolf pack” bonuses if five or more members buy at a given location.
Webster adds that Local Bonus will be single-mindedly focused on providing a compelling value proposition to consumers and merchants alike: perpetual offers that any merchant can tap into without any opt-in required. “You just sign up once with any existing credit or debit card,” says Webster. “A lot of merchants want more help; make it fun and exciting to shop,” he adds — ideally, without having to hand out the massive discounts associated with the daily deals space.