Local marketing has moved beyond a sole focus on new customer acquisition to also focus on customer loyalty and engagement. Using credit card registration and point-of-sale integration techniques, leaders in the space have found new ways to engage with millions of local customers and merchants.On the final day at BIA/Kelsey‘s Leading in Local: Interactive Local Media conference, a panel of industry leaders were brought together to discuss how transaction marketing is changing the way SMBs relate to their customer base.

One major trend that was discussed heavily was point-of-sales systems. Bringing all of the “big data” that SMBs acquire and making that information manageable and useful is where the future of transaction marketing is headed. Victor Ho, CEO of FiveStars, recognized the opportunity for POS systems in the SMB market and jumped on the opportunity. “All systems are integrated on a point-of-sale. When we looked at the market we decided there was an opportunity here. We then created a platform that worked through any POS.”

FiveStars‘ quick jump into the market proved to be the right move. The company now has just under 3 million memberships.

Panelists also discussed the development of the transaction marketing space. According to Jason Dailey, Senior Director at Microsoft Bing, “mobile devices and electronic wallets are going to be one of the next biggest things.” Looking at the broader perspective, Eckart Walther, CEO of CardSpring predicts that we will be seeing “more and more online companies capture online data.The levels of interest in transaction marketing are going up exponentially.”

With all of the new interests and innovation in the transaction marketing area, Albert S. Bitton, Founder and President of Local Commerce Association of Canada warns against SMBs becoming overwhelmed with all of the different products the industry now has to offer them. “The expectation of the industry is way too high. They have a lot they need to deal with and there are too many applications that small businesses will want to manage but they can’t. This is why I am excited about companies like Groupon and FiveStars because everything is integrated”.

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Merchants sometimes like to control their own promotions to their own list of customers, rather than waiting in line for Groupon or other deals publishers to do it for them. Yelp, for instance, is one company that has had success enabling merchants to publish deals as they like. It has allowed for over 25,000 self-published deals.

Now along comes CardSpring, which ups the ante beyond simple deals to “transaction marketing” by enabling merchants to write their own promotions, distribute them over CardSpring’s new publisher network, and redeem and analyze the deal on their Point of Sales.

The service’s “near” real-time analytics can show merchants where their redeemed promotions are coming from and what they bought. It typically takes a second or two for an offer to show up after a purchase is made.

FourSquare and MOGL are among the most significant publishers providing CardSpring Connect to at least some of their merchant advertisers. Others include Thanx, Roximity Moblico, and OnStripe.

The launch of CardSpring Connect is a significant milestone for the San Francisco-based company, which has been working since 2012 with payments leader First Data to provide check-in promotions at certain venues. More recently, it has also begun integrating with VeriFone, a  POS network to enable developers to build their own card-linked services.

CEO Eckhart Walther tells us that CardSpring’s new initiative is “Google Analytics for the retail world.” It is also part of the broader trend towards performance marketing, which he says has now begun to bury brand advertising. “In the 1980s, Yahoo was all brand advertising,” he says. Now, “Yahoo online advertising is 80 percent sold on performance,” or at least, advertising that has a performance component on it.

CardSpring’s efforts here are likely to compete against a host of loyalty programs, at least for merchant mindshare. Walther, however, emphasizes that the company is not competing with other companies but seeking to become their infrastructure in return for a nominal piece of the action. CardSpring has no intentions of launching its own sales channels, he says.

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First Data’s Senior VP Dom Morea provided a set of important insights into the next generation of marketing services to small and medium businesses (SMBs) at BIA/Kelsey’s 2013 SMB Digital Marketing conference, saying these may be more about “commerce” than “advertising.” Using payments as an anchor, these “transaction marketing” services include deals, coupons, loyalty services and CRM/analytics. First Data is the giant processor of 55 percent of U.S. transactions, is aggressively pursuing this rapidly exploding space.

Morea stated that their research shows 82% of consumers want to have a seamless online/offline shopping experience. Over half (57%) start their journey to purchase either online or offline but want to finish their journey easily on the other side (i.e., starting online but ending offline for the final purchase). About four-fifths (81%) of consumers carry two or more loyalty cards and 40% want these to be personalized to them by providing tailored ads or offers.

For SMBs this creates quite a challenge. Providing simple, compelling loyalty programs that allow the consumer to seamlessly bridge their online and offline steps in their journey to purchase is not something they can do themselves. Morea provided a compelling case study of one SMB whose challenge it was to move away from costly plastic loyalty cards that had limited success in driving customer engagement to something that would work better. First Data’s solution was their Offerwise card-linked program that enables paperless redemption for offer providers, merchants, and consumers.

The result was that the SMB was able to learn more about the customer by tying in more data in an integrated view and the program drove up to 85% activation rates, much higher than the previous solution. The integrated data view allowed the SMB to leverage consumer analytics to personalize content and complete a multichannel experience.

Morea said the next frontier in transactional marketing involves rethinking mobile; leverage the cloud to integrate disparate parts of the process; and emerging privacy and security standards.

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Transaction marketing leads to a new level of revenue and engagement, according to LevelUp CEO Seth Priebatsch, who keynoted today at Leading in Local: SMB Digital Marketing

Priebatsch has based LevelUp’s success on driving more loyalty transactions, using lower Interchange fees (“Interchange Zero”) as a loss leader (or break even). It is possible to do so thanks to a new law restricting interchange fee introduced by Sen. Dick Durban. “Dick Durban is a great hero,” said Priebatsch.

LevelUp, with registered credit and debit cards to show merchants who their customers are, and made “always on” by mobile, launches promotions around a number of opportunistic situations, including first visits, loyalty, re-engagement, birthdays and rain days. The average customer uses LevelUp 4x a week, enabling the company to save even more money via interchange, akin to how iTunes bundles its sales,” says Priebatsch.

Sales can be further leveraged via game mechanics. Priebatsch notes there are three core types: sunken rewards that are passively earned by consumers; progression dynamics like punchcards, and appointment dynamics that spur people to shop or buy at ideal times.

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Groupon Rewards — “the easiest rewards program in the world” — rolled out nationally this week after tests in 36 markets that began in October. The product is Groupon’s answer to the emerging “transaction marketing” space that many believe will be the natural successor to the daily deals business. BIA/Kelsey Marketplaces has counted more than 24 vendors vying in this segment, with solutions ranging from Cartera to Swipely.

In Groupon’s model, consumers register a credit or debit card with Groupon. Every time they shop at a participating merchant, they can get points that can be applied to a Groupon at the merchant. Spending is automatically tracked, and reward vouchers are unlocked when goals are hit.

Merchants set reward terms, such as free deserts or spa treatments after a certain number of trips or dollars spent. They don’t need to participate in Groupon’s voucher business, but Groupon gets a commission based on the value of the reward when it is redeemed. As part of Rewards, merchants receive reports assessing the profitability of their Groupon campaigns.

A full report is being issued for our Marketplaces clients.

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