Customer loyalty program startup expanding deals throughout Ann Arbor and Midwest
Melanie Maxwell | AnnArbor.com
Adrian Fortino and David Lin think they’ve found the solution to both problems in FlockTag, their all-in-one loyalty card that is being used in 25 Ann Arbor locations mostly near downtown.
Besides Ann Arbor, FlockTag is being used in East Lansing, Bloomington, Ind., and Columbus, Ohio, with plans to expand in those cities and across the Midwest before breaking into major metropolitan areas on the East Coast. In all, 45,000 customers of 70 businesses are using the cards to communicate with sensors at the participating locations using near field communication technology. The near field communication system allows users to simply tap their wallets on a sensor to use their FlockTag, no swiping necessary.
Ben Freed | AnnArbor.com
That "deal engine" can then produce coupons, specials and offers unique to where you shop and what you buy. Fortino said the deals can be targeted to encourage customers to try items with higher profit margins at a familiar location, or could encourage you to try a new location.
“We tell businesses that there are people walking across your storefront windows every day and it’s just not occurring to them that you have stuff in there that they probably want,” Fortino said.
That was precisely the problem facing Lin, who also owns Bubble Island on South University. He knew that there were more customers out there, but he was having trouble reaching them in a cost-effective way.
He joined with Fortino, who had been a part of founding three other startups, to create a program that could fulfill this need while also offering something of value to the customers he was trying to attract.
Lin and Fortino were students together at the University of Michigan both as undergraduate mechanical engineering majors and later when they received MBAs from the Ross School of Business. As part of the testing of their product, the two came up with a business “experiment” to test the power of another coupon system.
“Dave [Lin] offered a very aggressive deal through Groupon at Bubble Island that they had wanted him to run,” Fortino said.
“He offered 2,600 Groupons and he lost money on everyone who used it, but the whole point is you do it to try to get new customers.”
In order to redeem the Groupon, Lin had customers either use their FlockTag or acquire a new one. From studying the user’s data, the they were able to determine that 80 percent of the customers using the Groupons were already coming to Bubble Island at least twice a month.
Of the 460 who were not already frequent users, only 40 returned regularly to the store after using the Groupon.
While it is difficult to judge the immediate success of a Groupon campaign, Fortino said, the FlockTag system can track purchase habits and uncover new buying patterns.
“We know that if we send out 200 deals to 200 people, we know how many redeem and we know how many of those guys come back after redemption,” he said. “We are trying to change behavior.”
Melanie Maxwell | AnnArbor.com
"We still keep some of the old paper punch cards around for people who are skeptical of the technology," she said.
Fortino and Lin think that the ease of use of their product will eventually allow skeptics to get on board.
Fortino also pointed out that the system has built in checks to prevent customers being inundated by too many “deals.”
“All the deals go through our automated system; they aren’t sent to you by the individual companies,” he said. “There is an automatic catch system to make sure you don’t get spammed."
FlockTag recently moved into a new office on Huron Street in downtown Ann Arbor. The company opened in Ann Arbor in January. It already has attracted venture capital attention, raising $650,000 to date in seed funding, and with a planned A Round in the fall which aims to raise an additional $750,000 to $2 million. Fortino said he will seek funding from both coasts as well as in the Midwest, but that FlockTag is in Ann Arbor to stay.
“For one thing, my wife loves it here,” he said.
“But we really think this a is a great place to be. We want to be a part of the explosion of startup and venture activity in Ann Arbor and Detroit, and Detroit is really really coming up right now with some of the stuff going on right now in downtown and midtown. We’re going to be tackling those areas for FlockTag merchants very soon.”
As in many cases with new technologies, FlockTag is free for consumers, making them the product. Businesses pay a monthly subscription cost for access to the FlockTag system that varies based on the number of deals distributed each month.
Fortino said it’s the ease of use and number of users per business that sets FlockTag apart from competitors such as Belly and LevelUp.
“We have about 750 users per business right now, and a lot of that has to do with the ease of the system we use. It’s just touch your card to the sensor and you’re done,” he said. “Belly has about 143 users per customer and LevelUp is at around 70.”
Ben Freed covers business for AnnArbor.com. Reach him at 734-623-2528 or email him at email@example.com. Follow him on twitter @BFreedinA2
Mon, Oct 1, 2012 : 3:15 p.m.
Flocktag just started sending me text messages from businesses I've never visited or been interested in. Their website has no opt-out method, and no reward system for frequent customers. This isn't a loyalty program, it is pure advertising.
Mon, Sep 17, 2012 : 12:33 a.m.
I see there's iPhone app... how / where do you get a card?
Mon, Sep 17, 2012 : 12:33 p.m.
Did you happen to notice the photo at the top of the page? It shows "A FlockTag user scans in at the Espresso Royale Café on North Main Street in downtown Ann Arbor" with a selection of cards next to a scanner under a sign that says "Get FlockTAG here". My guess is you could probably get "hooked up" there.
say it plain
Sun, Sep 16, 2012 : 7:57 p.m.
bleh and meh on business such as this... why we are all so happy to be commodities for businesses selling us I just don't get... but, in the parlance of the youngin's who are supposed to get excited about spam-like 'deals!', "whatever".
Sun, Sep 16, 2012 : 2:48 p.m.
"It's not just a check-in system, it's intelligent loyalty," Fortino said. "We record your purchase behavior, we record what you're buying, and that information is pushed automatically into our deal engine." As in many cases with new technologies, FlockTag is free for consumers, making them the product. well that about sums it up, mark of the beast, Revelations is true.
Sun, Sep 16, 2012 : 1:08 p.m.
@ A2comments, re: "users per customer"? The customer is the business. And the customers of that business are the users.
Sun, Sep 16, 2012 : 1:04 p.m.
It sounds like you can use NFC capable Android phones with their app instead of carrying a separate FlockTag card? Neat if it works that way. I know that the Galaxy Nexus has NFC. https://play.google.com/store/apps/details?id=com.arbormoon.nfc.flocktagmobile
Sun, Sep 16, 2012 : 11:51 a.m.
I followed this until the last sentence. What's a "users per customer"?
Mon, Sep 17, 2012 : 12:10 a.m.
users = businesses who use FlockTag customers = customers of that business who used FlockTag at that business
Sun, Sep 16, 2012 : 11:42 a.m.
I'll tell you right now Groupon wasn't designed to help small businesses...it was designed to give consumers deals and make the owners of Groupon money... They're is a reason that company has only been declaring losses since the IPO (it's currently about 1/5th of what it IPOed at). Not only does it NOT bring in anymore customers than any other promotional coupons do....it usually ends up COSTING the business for each groupon it sells instead of bringing in any additional profit. Small business aren't usually repeat customers of groupon...especially not after they see the numbers. Golden rule of small business.......NEVER EVER sell at a loss. You can't afford that in small business.....period. You will NEVER "make it back in volume sales" BECAUSE you are small business.
Thinking over here
Mon, Sep 17, 2012 : 3:18 p.m.
I keep saying Groupon is an unsustainable business model... and small business should never use it...
MD from ChiTown
Sun, Sep 16, 2012 : 4:10 p.m.
I agree. I'm a CPA who has a client with a fashion boutique in Chicago. She offered a Groupon to attract new customers while clearing out the prior season's inventory. She lost money on each item she sold. On top of that, the clientele it brought in was not the clientele she wanted. It brought in bargain shoppers as opposed to fashionistas. She also stated that the Groupon would not be good for certain designers/brands. Many of the Groupon shoppers still insisted that they use it on the designers/brands that the Groupon was not valid on. Most of the Groupon shoppers didn't return. She did try it again, this time limiting it to unpopular sizes as well as making it not valid for certain designers/brands. She is doing it to get rid of last year's styles. I'll be seeing her next week. Look forward to hear what she says this time.