On the one hand, a lot of companies "kind of hate loyalty," according to Dan Kelly, the president and CEO of the Canadian Federation of Independent Business.
After all, large chains can afford to build their own high-tech systems – think of Shoppers Drug Mart’s Optimum points program – that are out of reach to smaller competitors.
Meanwhile, credit card companies force retailers to honour their premium rewards cards, despite the two- to three-per-cent transaction fees.
Up until now, many small businesses have had to rely on low-tech alternatives such as punch or stamp cards that get lost in wallets amongst myriad others.
But several local startups are looking to change the face of loyalty programs, placing power into the hands of small business owners by offering tech-savvy solutions – in short, bringing some love back to loyalty.
“I think there’s lots of market share to be had,” says Franco Varriano, co-founder of loyalty program provider Beaconize. “Everyone will be looking for solutions to fit their needs.”
Retaining customers is far less expensive than designing systems to attract new ones, Mr. Kelly says, and CFIB is increasingly hearing from small businesses who want to implement their own retention programs.
“There’s no question that there is a big wave coming,” he says.
Ideal candidates are businesses with regular patrons such as grocery stores, pharmacies and coffee shops. Loyalty programs can teach firms who their most regular customers are, their most popular items, the times and days that customers prefer to visit, and more.
These programs offer a different sort of value from the other popular method for attracting customers - couponing companies modelling themselves after Groupon, says Rouzbeh Zadeh, CEO of local loyalty company rHubs.
“We don’t ask (businesses) to offer deals that minimize their margins beyond the point of profitability,” he says. “We ask for small, permanent discounts.”
A loyalty model also encourages repeat customers, unlike coupons that attract a deal-finding customer base that may never provide business again.
WHAT FOILS LOYALTY?
Companies changing hands could choose not to honour promised rewards, but it doesn’t worry Max Bailey, co-founder of restaurant loyalty company Spoonity.
“They can do so, but the risk (to them) is they can upset a large customer base,” he says.
Another danger comes from programs being too complicated or too costly to implement.
There’s also the risk of consumer fatigue. After all, one’s “loyalty” can only be stretched so far.
It’s possible the multiple cards and varying rules for each contribute to the $16-billion-worth of rewards points that go unredeemed in the United States annually, according to research and marketing think-tank Colloquy.
That means there are tons of opportunities to capitalize on an underperforming market, says Beaconize’s Mr. Varriano.
“The idea is to create a digital version of the traditional rewards cards.” — Franco Varriano, co-founder.
Vendors: Letters of intent from various businesses.
An app, available through the iOS App Store, which allows users to sync up loyalty programs and accumulate points after each purchase by taking a photo of their receipt.
Customers are also able to share their location through social networks and are awarded additional points for friends who join them.
Using a software-as-a-service model, Beaconize will eventually charge vendors for its service.
The startup is in beta mode with testing in Ottawa, Toronto and Montreal. The app will be available for Android phones within a month.
“Our goal is to market Ottawa businesses, as opposed to international companies that are already online and stealing a lot of the business.”
— CEO Rouzbeh Zadeh.
rHubs is an online e-commerce market for small local businesses. Firms can offer their employees perks, or “rewards dollars,” to spend at participating vendors. Businesses can also get quotes from companies providing IT, printing or catering services.
For small companies that can’t afford classic health benefits, rHubs offers a local, online alternative.
The idea is to give small businesses, such as independent gyms or niche shops, an online presence and to promote local online purchasing.
rHubs receives approximately five per cent from each transaction.
The company plans to expand into Toronto by the end of the year, followed by Vancouver or New York.
“The value for the merchant is that they’re able to maintain a relationship with their customers after they’ve left the restaurant.” — Max Bailey, co-founder.
Employees: 10 (five in Ottawa, three in India, two in Europe)
Vendors: 15 with more in the pipeline from Halifax, Toronto and abroad
Spoonity offers a keychain tag that users can swipe at participating restaurants to “check in” and accumulate perks or credits that can be used for meals. A recently released app allows customers to use their smartphones to participate.
Spoonity provides vendors with a scanning device for a small monthly fee. Businesses choose personalized perks that can range from a free coffee to a birthday treat.
Recently, Spoonity expanded beyond restaurants and is now also working with retailers and service providers.
The swipeable tags are provided for free, which Mr. Bailey believes makes the program accessible to everyone – not just smartphone owners.