Sramana Mitra: What is your business model in this scenario? Who pays you?
Kelly Passey: This is not a public-facing model – these merchants are getting access to a private network of consumers, Allstate Motor Club members in this example. Allstate is endorsing these merchants to their customers. That kind of value is hard for merchants to come by. They have all kinds of advertising channels, but that kind of goodwill and endorsement is valuable. Because of that and because of their not being public, these merchants give us very rich and valuable offers. Our system-wide average is about a 36% discount, and many of those offers are always 50% off on deals. I can literally use them again and again and get a two=for-one at the local pizza or hamburger shop, or dry cleaning, or whatever my needs are.
The merchant is funding the deal. Where we monetize that is we take that value to Allstate, Allstate sees value because they are signing or retaining more members and therefore they pay us. The client organization Allstate pays a licensing model back to us – it can either be a per member per month or year type of model – and we can get very flexible because we can work with the organization based on its budget and limits, expand or contract the depth or narrowness of the merchant network.
SM: Can you pick an example that is something our audience would resonate with? Our audience are largely entrepreneurs and small businesses. Is there any loyalty program you are working with that caters to this audience?
KP: Sure. I worked with a contact that used to run the Citibank’s “Thank you” Reward Program. She left there about two years ago and went to an entrepreneurial startup company called Viggle. Viggle is a direct-to-consumer startup. They launched less than a year ago. There, consumers are rewarded for engaging with their application. It is a multi-screen reward program. I can be at home watching a game and on my handset I can have my Viggle app. I can check in to the game, interact or earn extra points. In that model Viggle is monetizing it because they are getting ad revenue from advertisers and the cable network, but their customers who downloaded the app are earning points. They need a way for their customers to redeem those to get the value out of it at the back end.
What we have done with Viggle is take our offers and deals, which are up to 50% off, and using those Viggle points as an alternate currency. In the model today – for example, Groupon – where a consumer is going to pay cash for a deal, why not enable Viggle customers to redeem points for a deal? The benefit there for a consumer is that this is found money – those points are like an additional currency. The benefit for Viggle is that instead of paying $9.50 for a $10 Blockbuster gift card, we can obviously price that merchant funded deal for the same $10 off much cheaper. So it is a win for Viggle, it drives their costs down with relevant consumer value, and it gives real value to end consumers to redeem their points again.
SM: It sounds like you present an avenue for companies in the technology sector that are doing virtual currency kinds of businesses as a way to generate value against those virtual currencies.
KP: That is exactly right. We are trying to enable all kinds of reward programs like United Airlines or others, where people amassed millions and million of points for miles – which are an alternate currency – to burn that very cost effectively with high-end value. In this swift exchange model, they are trying to help bring those merchant point of sale places, where you can burn your United miles, for example. Another example: We are enabling alternate currencies to be burned for value. Those deals are funded by the merchant community.