Our start-up of the week is Loyalzoo, a digital loyalty card service for small businesses.
“In other words, we empower independent retailers and restaurants to run an in-store loyalty programme that’s smart, uncomplicated and delivers results,” explained Massimo Sirolla, CEO and founder of Loyalzoo.
“Most large retailers and brands have switched their traditional loyalty cards to tech-based tools such as apps, web, etc.
“The SME retail sector lags behind, and this is where we come in,” Sirolla said.
Loyalzoo is currently focusing on the US (with more than 2m independent retailers) and the UK (more than 180,000).
“Within the US, small and medium-sized businesses (SMBs) tend to be very savvy when it comes to rewards programmes and most of them want to run digital loyalty schemes.
“In the UK, SME retailers are very forward in loyalty but only just recognising the benefits of going digital.
“54pc of independent retailers in the UK use stamp cards, which provides a huge market for us to target and presents a rather exciting opportunity,” Sirolla said.
Sirolla has worked for 19 years in the payments space, including at companies such as NCR and Windor Nixdorf.
“This has been mostly with large retail banks and some tier-1 retailers.
“My co-founder, Mark Ryan, was previously working as business development manager at an Opentable competitor.”
Loyalzoo is designed to fit into the working process of any small retailer, without forcing them to change the way they work, Sirolla explained.
“We hide all the complexity behind a very easy and simple user interface that runs directly on their point-of-sale terminal.
“This allows them to enrol customers into their loyalty programme in a few seconds, with customers receiving their loyalty points either by text, email or using our free mobile app. Their choice.
“To sign up to our service, merchants can visit Loyalzoo and follow the self-service process. Any retailer can create and run their own loyalty scheme in under three minutes.
“This is one of our unique selling points, and it is critical with small business owners as they have very little time to play with technology tools. In most cases, training is not necessary,” Sirolla explained.
“Our current focus is to reach 500 paying merchants by the end of 2017.
“We currently have more than 300 customers and this is growing every day. Ultimately, we want to become the leading provider of loyalty programmes for small businesses.”
Go to market strategy
Loyalzoo’s go-to-market strategy is based on partnerships with EPOS vendors, merchant acquirers and marketing agencies, as well as maintaining a strong online presence with search engines and social networks.
“As we have seen a large demand in the US, with almost 42pc of our current merchants based there, our strategy is to gain investment to employ a team in the US and further deploy our service in this market.”
The company successfully surpassed a £240,000 crowdfunding goal on Seedrs, raising £247,000 in December.
‘We want to become the leading provider of loyalty programmes for small businesses’
– MASSIMO SIROLLA
Sirolla said there have been many hurdles along the way.
“Our first challenge has been the confusion that many people have between discount programmes and loyalty programmes. Discount programmes are designed to attract a new customer through a massive discount. These programmes really do not work for SME businesses and, in fact, they are declining. Loyalty programmes are designed to increase frequency and average spend, and generate organic growth without reducing margins.
“Another common misconception is that emailing customers with offers will bring them back. This is just not true. Too much spam gets into our inboxes, and retail promotions are hardly read by anyone. A well-run loyalty programme works without bombarding customers with promotions and offers.
“From an organisational perspective, recruiting has been a major challenge. It is not easy to attract people to work for a start-up, and equity-based compensation does not work for everyone. I’m lucky to have a team that shares my vision, but finding the right candidates is a major headache.”
Sirolla said that the start-up scene in London seems sparkling, with lots of entrepreneurs full of good ideas.
“However, UK investors are not as visionary as the ones in and around San Francisco. It is very notable how start-ups in California get seed funding of millions of dollars, while similar start-ups in the UK do not have the same easy access to capital. This is a European problem that needs a solution.”
His advice to fellow founders is to keep it frugal. “Stay tight with money and, if possible, aim at being profitable quickly. This is not always possible, but if it is, it becomes a great advantage in seeking investment in Europe.
“In recruiting a team, employ people that are able to multi-task and can do many different things. This is very important in a start-up!”
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Updated, 11.16am, 30 January 2017: This article originally misstated the name of Loyalzoo co-founder Mark Ryan.