Daily deal offerings get customers in the door, but that doesn’t always translate into repeat business, which is bad news for small businesses.
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Start up PunchTab is trying to change the daily deal mold with its Internet-based customer loyalty program.
“The big battlefield for any business is retaining customers,” said Ranjith Kumaran, founder of PunchTab.”What we’ve learned is the lifetime value of a customer.”
A recent study conducted by Rice University Associate Professor of Management Utpal Dholakia showed that close to 80% of daily deal users were new customers, but significantly fewer spent beyond the deal’s value or returned to purchase a product or service at full price. The lack of repeat business has made many small businesses shy away from the daily-deal model.
PunchTab is an online service geared toward businesses that have a strong online presence and want to reward customers for engaging with them via a social media tool. To date, the company has raised $850,000 in seed funding.
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Customers can cash in points for discounts or freebies from the company. For instance, a fitness company may give customers a free month membership or a free exercise class when they earn enough points from engaging in social media.
While companies can create loyalty programs on their own, Kumaran argues that it can be time consuming and not a main focus of many companies, especially small businesses. “You wouldn’t build your own server to host a Web site if it’s not core to your business,” said Kumaran, who also founded YouSendIt, a digital file delivery company.
In its current iteration, which was launched in early January, PunchTab is free to businesses. The company plans to launch more customization tools that will cost money.
To get started with PunchTab, business owners have to provide their e-mail address and domain name and PunchTab will embed an HTML code into the company’s Web site that will create a loyalty section to allow customers to start earning reward points immediately. If the company chooses, it can customize the catalog of rewards it wants to give away.
Customers can also sign up for a loyalty program through Facebook and Twitter, said Kumaran. Customers will only get rewarded for their first action of the day on each social Web site, preventing a customer from earning unlimited points by contributing to a Facebook conversation all day long. Customers can only earn a maximum number of rewards points a day, and a small business decides the number of reward points and the prizes associated with them.
Currently, 800 Web sites are using this service with just under three million consumers were exposed to PunchTab in June alone, said Kumaran, noting that there are 40,000 to 50,000 members since the service launched in January.
In addition to PunchTab’s loyalty program, the company offers a promotion tool that runs on top of the loyalty program and aims to build buzz and interest from new customers. The promotion tool could be set up to give members rewards if they invite friends to sign up or join a company's Facebook page.
According to Kumaran, one blog that was giving away an iPad had 20,000 entries in one weekend while an author who gave away a Kindle preloaded with all his books had 340,000 entries in one week. PunchTab is also looking at ways to bring the loyalty program offline to local businesses.
“If PunchTab brings back a paid customer for one extra month through loyalty marketing that’s a $1 million a year,” said Kumaran.