Restaurants gamble on loyalty programs

Move over Groupon. Spin Streak is one of two business models launched in the area this year that represent a second generation of mobile-deal platforms designed to attract customers to revenue-hungry retailers.

Spin Streak LLC is the brainchild of Ryan Jennings and Landon McCarter, owners of Door Deals LLC, which sells and distributes door-hanging advertisements in 22 markets across the country.

To complement the print-based marketing business, Jennings and McCarter developed a digital product that didn’t mimic an email coupon program, such as Groupon or Gannett Co. Inc.’s Deal Chicken.

“There is really no point in doing an app for coupons. That’s what a lot of people have been doing,” Jennings said. “We set deals up based on probabilities.”

With Spin Streak, he said business owners set up the frequency of their offers, say one out of every five customers spin for a free cup of coffee at a coffee shop or one in 10 win a free sandwich at a restaurant.

With the product in development for roughly a year before it rolled out in May, Door Deals licensing partners became interested. Now, Spin Streak, which launched in Springfield this month, is in 24 markets across the country – from Orange County, Calif. to Portland, Maine. Locally, Jennings said 30 businesses including Little Caesars, Mr. Yen’s and Enoch’s BBQ have signed on as of Oct. 15.

The business partners say Spin Streak has generated more than $250,000 in revenue to date, and they are projecting $1 million in first-year sales. Instead of following the Groupon model of splitting revenues generated from promotions, Spin Streak charges companies – largely restaurants – a flat monthly fee of $129 to give their customers a chance to win products or offers while they’re visiting.

“We really wanted to create something that tied into loyalty and retention instead of just trying to get customers in the door. The game element was just a really nice touch,” Jennings said. “They say how much they want to give away. It’s not like a coupon that they send out in a direct mail campaign to 10,000 people where they could get 100 of them back or 1,000.”

Loyalty matters
Mindy Seymour, general manager of Pita Pit, 1318 E. Battlefield Road, in Fremont Shopping Center, said a week into the Spin Streak program she found potential to attract repeat business.

“This is kind of a fun way to get them to return,” Seymour said. “Using Spin Streak gives them a little extra incentive.”

With the free download, restaurant customers scan a QR code at the counter or table, pulling up a slot machine type lever within the app. Seymour said Pita Pit patrons can win a free cookie, drink or combo meal – or a $100 gift card at strategically greater odds. The app permits one swipe per visit, and deals are redeemable within time restrictions.

Spin Streak tracks the number of customer visits, offering the most loyal patrons additional rewards determined by participating businesses. Loyalty programs have long been used by national hotel chains and major airlines, and now small businesses are getting into the mix. In August, researcher BIA/Kelsey found 38 percent of small businesses use loyalty programs and an additional 21 percent say they plan to begin one in the next 12 months.

At KY3 Inc., New Media Development Manager Kent Oglesby said the company developed a niche marketing product it launched in January called KY3 VIP Deals that today has attracted 41,000 subscribers and features more than 200 businesses.

“People can go online to get the offers, pull up the mobile site or download the app, and then can claim or redeem offers businesses are publishing through the program,” Oglesby said.

Through VIP, subscribers can “favorite” businesses such as Andy’s Frozen Custard or Davis Cellular to receive targeted promotional offers. The platform purposely differs from KY3’s Daily Deals, which resembles the Groupon model.

“Of those 200 businesses, there might be 15 (a subscriber) really likes. They can select those businesses, and they’ll get an email or an app push to let them know there is a new offer,” Oglesby said.

Though he declined to disclose all the business costs associated with participating, he said companies pay on a sliding scale based on the number of subscribers who request their offers. He said there is no charge until a business has 200 favorites, and then they pay $50 a month or more.

Spin Streak’s McCarter said customer demographic information is a key part of the platform. Participating businesses, sometimes franchisees of large chains, have access to basic information submitted when users download the app.

McCarter said the Buffalo Wild Wings franchise group in Portland, Maine, recently analyzed data on the thousands of people who played Spin Streak during a 70-day stint.

“It was able to look at that back end on their dashboard and see that 5,500 people played and could break that out by demographics – ZIP code, age, gender, whatever – and then send push notifications to whatever demographic it would like,” McCarter said.

Staying power?
Jennings said the partners have invested more than six figures to develop Spin Streak, which employs 13. He said the company contracted with St. Louis-based Vault Event Media to develop the app, and now Vault is a 25 percent owner in the company.

At KY3, VIP Deals hedges a bet that its 3-year-old Daily Deals program would be around for the long haul. So far, Oglesby said the media company is still pleased with that product, which boasts a database of 65,000 users.

“We’ve seen other sites that have come and gone, but we believe the media with the best program will survive,” Oglesby said. “We have the promotional weight of KY3 to put behind it.”

It’s that kind of promotional weight that shuttered one local mobile-coupon effort.

ECS Prepaid LLC President Derron Winfrey in May folded his company’s mobile-app product, Bogo Fetch, citing a lack of interest from businesses. Bogo Fetch, a location-based coupon provider that would ping smartphone users when they were near a business with a special offer, had eaten up nearly $100,000 in development costs from the Springfield-based prepaid wireless company before Winfrey pulled the plug.

“Because of the constant competition with local media getting into the space, I felt there was no money to be made in it,” Winfrey said. “The people we were advertising with were also promoting their own products, so it was very counterproductive because they could promote their product for free while they were charging us thousands of dollars.”

Overall, he said the venture amounted to an expensive lesson: Stick to the core. Winfrey said what ECS has learned in developing Bogo Fetch is now being used to launch an app for its prepaid wireless customers.  

“Knowledge usually costs money,” he said. “You either go to school to find it or you lose your money learning. And sometimes both.”