Company Name: Spendgo
2017 Projected Sales Revenue Growth Rate: 200% +
Verticals: hospitality, retail
Vendors: Apple, Epson, Google, Samsung
While many ISVs dream about inventing a new software solution or platform that’s unlike anything that’s existed previously, the probability for success is much more likely to happen by improving upon a concept that’s already available. That was exactly what Steve Jobs did at Apple: He improved upon already-available mobile and digital technologies.
Ivan Matkovic is a prime example of someone who looked at a basic and very familiar process in retail — printing receipts — and found a way to turn it into something much more valuable and lucrative. What’s more, Matkovic didn’t create his multimillion-dollar differentiator in a vacuum. He created and perfected his offering at a time when the market was exploding with similar looking solutions.
The Problem with Traditional Loyalty Programs
Ever since he graduated from college in 2008, Matkovic knew he wanted to develop a software solution for the retail vertical. Even more specifically, he wanted his software business to involve digital receipts. By 2014, Matkovic created a digital receipt solution, but he realized it wasn’t complete. “Digital receipts are nice, but most retailers aren’t willing to pay for something that’s just a ‘nice-to-have,’” he says.
The follow-up question Matkovic asked himself, which preceded his breakthrough, was, “We have this cool digital receipt technology and we have receipt data. What can we do with this to create a better customer experience?” Initially, he drew a blank when trying to figure out where he could offer value to retailers. But, after turning his attention to restaurants, the answer became clear. “Paper-based loyalty cards were still big in restaurants in 2014,” recalls Matkovic. “The programs were cumbersome to manage, and restaurants had all kinds of problems with fraud, including patrons adding hole punches to their cards to earn rewards faster.”
Matkovic wasn’t the only one who saw a big, unmet need in the hospitality market. Dozens of startups sprang up that same year, mostly offering mobile app-based loyalty programs. “The way these programs worked was that every time a customer came into the store, they would scan a bar code on their mobile app and that would confirm their return visit and earn them a point toward their next reward,” he says. “Some restaurants even took it a step further and used geofencing technology to automatically update customers’ loyalty accounts. The problem was that as the restaurants went digital, loyalty fraud grew exponentially as some customers took a picture of their bar code and scanned it at home, so they could earn rewards more frequently. Plus, these programs only captured customer visits; there was no additional data being gathered.”
To combat fraud, loyalty platform companies emerged, but that oftentimes added a cumbersome barrier between restaurants and customers, requiring restaurants to pay for access to their customers’ loyalty activities, says Matkovic, and requiring restaurant owners to manually create and monitor campaigns to realize the full value of the platform. “We started seeing lots of loyalty startups giving away their solutions in the hopes restaurants would add more advanced, paid features down the road,” he says. “But, what we found was that restaurants were running four or five different loyalty programs from four or five different vendors at the same time. Even worse was the fact that hardly any customers were actively engaged with any of them.”
Solving Restaurant’s Loyalty Challenges with Digital Receipts
Matkovic saw a way his digital receipt offering could solve the loyalty program issues restaurants were facing. “First, our solution is based on a customer’s in-store purchase, so it eliminates the fraud problem,” he says. “Plus, by capturing the transaction data digitally we can gather a lot more meaningful data points that restaurants can use to their advantage.”
He knew, however, that his idea wouldn’t work if it was just another add-on program running in conjunction with all the others. “One of our client requirements was that restaurants couldn’t have another loyalty program running at the same time. I told my team, we’ll take the hit of fewer customers initially, but it will benefit us and them in the long run.”
Toeing the line wasn’t easy at first, especially when some of Matkovic’s competitors were boasting 500+ merchants using their loyalty solutions. “I knew they were just giving away their offerings, and I was sticking to my guns that I only wanted quality merchants and brands that were going to use the solution and experience its full value,” he says.
When Your Big Idea Goes Viral, How Do You Scale?
Spendgo’s first year started out slowly, but as a few restaurants bought into the program and started seeing results, news spread and the pace of sales quickened and became overwhelming. Rather than trying to rely entirely on hiring more salespeople and support staff, Matkovic made a strategic move and reached out to several key hardware vendors and developed sales partnerships. “Working more closely with companies like Epson and Samsung opened up lots of new doors for us,” he says. “First, it eliminated the need for us to have to keep lots of hardware stock on hand. The hardware manufacturers can configure and customize the solution en masse, which simplifies and shortens our deployment times significantly and allows us to focus on software development. Plus, by partnering more closely with these companies their reseller partners become extensions of our sales team.”
Another strategic move on Spendgo’s part was making its solution POS agnostic. “We decided to treat the printer output as an API,” says Matkovic. “And since every POS can print receipts, it’s a universal and consistent integration. What’s also nice is that we capture all the important data while remaining outside of scope for PCI-DSS.”
The Big Takeaway: Make Your App Easy for Customers to Use
One other important key to Spendgo’s success is the ease of use for restaurant patrons to sign up. “At a quick serve restaurant, for instance, there’s typically a tablet facing the customer with a video highlighting great things the brand is doing and inviting the customer to become a loyalty member,” says Matkovic. “All the customer has to do is tap the screen, enter their phone number, and it automatically uses their number as their ID and links it to their purchase. There’s never a need to pull out a phone, search an email or text message; it’s all really simple.”
The metrics Spendgo has been able to capture on its solution is compelling, too. “Lots of brands are seeing fewer than 5% of their customers using their loyalty apps,” says Matkovic. “It’s hard to get customers to download it when there are so many other apps competing for attention on their smartphones. But, by focusing on in-store and signing up customers at the point of sale, we’re seeing results that are 40 times higher than our competitors. Plus, many of the other approaches require custom software development or point-of-sale upgrades costing hundreds of thousands of dollars. With Spendgo, it starts as low as $10 a month and you add whatever additional features or services you want from there. We joke with clients that they spend more on toilet paper than for our solution.”
In the next 24 months, Spendgo is integrating its loyalty offering with Google and Apple mobile wallets. “By placing NFC readers in stores, customers can simply tap their phones to earn points or redeem offers,” says Matkovic. “Brands can do push notifications right in the mobile wallets. Becoming a loyalty member will be as simple as saying, “Yes,” and your profile will automatically be completed.”