How Clutch Is Turning Loyalty Programs On Their Head

The problem with loyalty programs is that they aren’t always loyal to the right people.  The customers that spend the most money and are the most loyal to the brand aren’t always the ones that get the best discounts.  Clutch realized that this wasn’t good for business and through its own platform, gave brands the tools to target the right customers and boost their bottom line.

Clutch, which started in 2012, initially started out with the idea to simplify royalty gift cards for consumers by creating a digital wallet.  They created a consumer app that digitized all the physical cards in your wallet and married them with shopping deals, like Groupon and Living Social.  While Clutch knew that there was an opportunity for brands to combine and track all the deals across all their channels, they didn’t realize that companies didn’t have the platform to marry those systems together.

“Businesses were saying that they couldn’t accept deals in their store that are online because their POS doesn’t handle it, or they can’t award loyalty rewards online because they implement them in their POS system,”  CEO Ned Moore said.  “Quickly we realized we needed to acquire a platform.”

To solve this problem, Clutch acquired ProfitPoint, a provider of gift card and loyalty platforms for merchants, and combined it with its own platform, allowing retailers to tie together offline, online and mobile loyalty into one platform.  By offering an end to end platform that creates a consistent experience against all its channels, Clutch was able to segment individual brands’ customer base to see who were the customers that companies should really be rewarding.

One major children’s apparel store recently started working with Clutch’s platform.  After segmenting their customers, Clutch realized that once that company’s VIP customer visited the store three times, the average visit jumped to six and their ticket price increased by almost 45 percent.  As a result, Clutch could design a program to heavily market to those customers that had visited the store two times in order to get them to that key third visit.

“They weren’t even aware of this,” Moore said.  “So built a model that was more frequency based and more average ticket sized, and we had a pretty big impact on moving a bunch of people.”

Because typical loyalty programs don’t always work the way their supposed to, they aren’t necessarily good for a business’s bottom line.  That’s because most loyalty programs only cater to the deal-seekers, not to the customers that are already loyal to the brand.  As a result, companies that have a higher loyalty spend had EBITDA margins that were about 10 percent lower than companies in the same sectors that spent less on loyalty, according to a study by McKinsey & Co.   Clutch believes there is a huge opportunity for companies to refocus their efforts on the customers they already have.

“80 percent of all marketing dollars today are spent on acquisition,” Moore said.  “The two things companies have to do is they have to acquire customers and maximize the relationship with their existing customer, we focus on that second one.”

So what’s next for Clutch?  Clutch has its eyes set on leveraging mobile payments solutions to enhance its platform.

“We think that there will not be a single solution for mobile payments, there will be several and what we want to do is enable that payment as part of the customer experience,”  Moore said.

I can’t wait to see what’s next…