Category Archives: Loyalty

Amazon & Whole foods

Amazon.com’s recent acquisition of Whole foods has set off a round of chatter about what they are really trying to accomplish with this move. Following are my thoughts:

I am really curious to see how it plays out but I would not bet against Amazon. Executives at Walmart, Kroger’s, Target etc. are right to be losing their sleep over this – they should be looking at ways to partner or invest in tech to compete with Alexa, Prime, supply chain technologies and other Amazon.com assets for engaging customers/delivering great value to customers.

Punchh story: Solving hard problems

We started Punchh in 2010. In the first few years, every week we would find another startup looking to address the challenge of local marketing for local businesses. At one point in 2010 we had over 100 other startups try to address the same problem that we were.

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By 2012, we had launched our first few pilots without a point of sale (POS) integration but while reviewing the results with one of the smarter, numbers oriented exec at one of the pilot chains, we saw that our engagement rates were not great and re-engagement rates, a key metric for loyalty apps, were downright anemic.

To investigate the issue, I decided to spend some time at the location to do some detective work. After a couple of days of painstaking and diligent observing, it became clear that our issue was lack of an integration with the POS system – typically the heart of a restaurant or retail operation. Our lack of integration was not only making it hard to engage the customers, it was also slowing down operations by introducing additional redemption processes.

When I brought this to the team there were a lot of question marks.

“We will never be able to integrate as the POS companies are based on old technology stack and hard to work with”.”We don’t have the resources”.”We don’t even know how many version are out there for each system”.”How will we ever scale this thing?”.”POS companies might view us as a threat and might not want to integrate with us”.”How do we build relationships with opaque and hard to reach POS companies?” etc.

Despite the skepticism, we persisted. I brought on a consultant who I had worked with before and who I thought would be great at handling the complexity of the problem.

To get things going, we used one of the pilot customers to pressure one of the POS companies to provide us with a system. After some more skepticism and some upfront payment we finally had a license code and a DVD (but no support) to install a system and get an integration going.

It took us 4 weeks to get a working POS system installation – a system where we could do the basics like opening a check and placing an order.

It took another 8 weeks to get the first integration code working. It took so long because we had no support – the only help we could get was from an obscure bulletin board.

And since POS integration needed a whole new backend system, another 8 weeks went to design and build the server components to handle the data coming from the POS systems.

But by the end of 5 months we had something ready to go to a customer site.

Our first customer installation took 6 customer visits – each a 100 mile round trip drive to San Francisco where the customer was – spanning over 4 weeks. During this time we were apologizing constantly to the customer for crashing their systems. The customer still persisted with us – I am very grateful – despite all the problems.

Although the first 6 months were painful, we learned a great deal during that period. We were soon onto version 2 and 3 and thinking about replicating the integration with other POS systems. When we tried the POS integration at the original pilot location, the numbers were a lot better. We were finally delivering measurable results to our customers.

Once we started getting results, we replicated the integrations to a huge number of POS integration, numerous partnerships. Each new integration brought painful business negotiations and technical challenges. There were countless delays in getting each integration rolled out. Slowly but surely we worked our way to a dominant position in the market.

While we were solving hard problem of POS integration, most of our competitors – some really well funded startups from top name VCs – were focussed on ease of selling and on scaling their solutions. They gave us the perfect opening as they were really not interested in solving the hard problem of POS integration.

The thing about solving hard problems is that, while they are painful, if you persist and solve them you might build something really valuable – a strategic advantage, product-market fit or even a hugely successful company.

Google to hand out devices to local businesses

Recently Techcrunch had a piece on Google giving away 8M devices to local businesses to facilitate checkins, reviews and more…Now to be honest, I actually had a little insider info about his coming down the Google pike. Now that I have had the time to process all the info, following are my thoughts:

1. This device could be

  • A customer-facing  tablet kind of device running android with build-in integration of Google places for reviews and checkins
  • A device to verify your location (ala ShopKick) so that users running a Google app on their phone or other devices can easily receive notifications (key), do checkins, validate coupons and write reviews. Something like this would be pretty cool but might require some standards work to get it working across different devices
  • A device that not only enables user interaction but also allows businesses to run business apps like POS apps etc. on Google infrastructure

2. At the end of the day, this move by Google is about getting more data. Google is really worried about Facebook getting all the user/local data because of FB apps and they want to distribute these devices (they will be expensive to send and maintain) to get some of this data.

3. The important point here is what is in it for local businesses? I think they will be able to see much richer data on their own customers and Google will share the data they collect with each of the merchants.

4. The Apps delivered via such a device could be really powerful as these apps will enable Google to get their hands on the all important sales/market basket data. Businesses won’t mind as the traditional business apps are old and expensive to buy and maintain. If Google can deliver these apps cheaply and easily, it would be powerful.

All in all this looks like a huge gamble on part of Google (could be over several billion dollars worth), but might be justified given the size of the market we are talking about. Still though not having a social graph will likely handicap Google in making sense of this data because  most of the local business customers are driven by word-of-mouth.