What we do: Privy is transforming the way brick and mortar marketers build, nurture and track customer relationships. By bridging the gap between online channels and in-store visits, we go beyond impressions and clicks to bring transparency to restaurant and retail marketing campaigns.Why it's a big deal:
We all know consumers turn to the web to do research before deciding or buying locally. Yet local businesses struggle to capture this interest and convert it into real customers.
Privy lets local businesses distribute specials across the web where high intent, local consumers are doing their research. Local shoppers sign up for the specials with their email address and Privy automatically tracks where customers came from, when they spent money and which location they visited.
Privy is easy to implement - simple, one-time installation onto any kind of website, one-click integration with social properties and no in-store hardware necessary. Integrating with existing service providers like Mailchimp, Constant Contact, Wordpress, MICROS, and many more to inform smarter cross platform decisions.
As clients begin to rapidly acquire customers and data through the product, we make it easy to create on-the-fly segments of targeted customers for remarketing. Visually segmenting customer lists in the hundreds of thousands, or millions of customers is no easy task. We're implementing newly emerging methods like elastic search to get the job done.
WHO WE ARE
Our team has deep roots in product development and the local marketing world. Ben's parents were local business owners who lost a ton of money through yellow pages; Jake's parents founded a media buying agency that helped local businesses grow. We realized that the way consumers make decisions about where to spend their money has changed dramatically. There was no merchant-centric approach that delivered real value & were fed up with the way local businesses have been getting screwed.
WHY WE'RE DOING THIS
Our mission began in the height of the daily deal craze, which we knew couldn't last: there's a better way to deliver quality, local customers. Our first idea sucked: daily deals on your own website. It was rooted in something smart: a growing, constantly refreshed online audience that searches for local things they want to buy NOW. After speaking with tons of merchants, we saw businesses were becoming aware and are unilaterally unsuited to address this new phenomenon. So we built the solution.
What are you building?
We are building a platform that brings the tracking and conversion capabilities of ecommerce to brick and mortar retailers for the first time. These retailers have never had the ability to run promotions that give them data on who redeems, what their demographics are, and then gives them a channel to reactivate them down the road. Retailers create landing pages for their promotional campaigns, broadcast them out, and then watch as customers give their email in order to receive an offer. We then add rich demographic data about the customers, and are able to track when a specific customer redeems an offer in store. Using Privy, offline retailers can finally track the effectiveness of their offline campaigns, and build a customer database that they can activate in the future.
Brick and mortar retailers know they need to be using digital tools to connect with customers, yet it is nearly impossible for them to engage online when their entire customer experience is offline. We bridge the gap between online customer acquisition and nurturing with offline in-store visits and promotional redemption. Using Privy, it is easy for marketers to automate customer connection while tracking conversion from online to in-store. The focus isn’t impressions or clicks, but rather how many leads they’ve gotten and how many leads come in store and spend money.
Describe the current problem and how Privy is solving it?
Retailers and restaurants are stuck using an antiquated promotional model. Until now they have only been able to measure the success of a campaign by looking at gross revenue changes during the time a campaign was running without any insight into how those numbers are influenced by other variables like competitive offerings, seasonality, etc. The dynamic with our first enterprise client is a perfect example . Their advertising agency will put together a promotion which can be redeemed for a discount. The brand then measures success by looking at sales while the campaign ran this year compared to sales in the same time period the year before. If there is a lift in transactions then the campaign is deemed successful. They have no access to real time data, no insight into who is redeeming, and a limited ability know to how much of that lift is actually due to the campaign is responsible for driving that revenue.
Beyond understanding if their promotional campaigns work, companies don’t have the ability to bring promotion redeemers back over time and understand how to convert them into loyal repeat customers. Current promotions don’t collect contact information of redeemers for retargeting after the fact. This is incredibly inefficient as marketing teams have to advertise in the same expensive way to get the same customer in the door again. Privy captures customer contact information the moment a customer engages so companies can re engage them in the future and eventually hook them onto a loyalty card for even more in depth information on customer activity.
We hear about this type of marketing in SAAS, why is this important for a retail location?
If you ask any brick and mortar retailer what their largest blind spot is, one of their primary complaints is that they have very limited data on who their customers are. If a retailer is expanding into a new market, or trying to reach a new customer demographic, it's extremely difficult to determine how effectively their promotional campaigns are achieving their objective.
When a customer walks in a retailer they never hand over personal contact information. These are called “faceless transactions.” By running promotional campaigns through us, companies can capture customer information when they claim a promotion online, grab their demographic information, and then see if they redeem the promotion in store. Super loyal customers know exactly where they want to go when they’re hungry. But more and more people turn to Yelp, Google search, FourSquare, etc to make last minute purchase decisions. Using Privy, retailers can get in front of these potential customers, test different messaging, and have real data on what actually converts to an in store purchase.
Since Privy captures contact information from customers that claim our promotions, retailers can re engage them overtime. They can currently only do this with the 1-5% of their most loyal customers who have signed up for a loyalty program. Retailers have not had a channel to re engage the the other 95% of customers are aware of the brand or in discovery mode, and get them back in store. Privy nurtures the new customers and can transition them into a loyalty program over time.
How do you measure ROI without the ability to capture the full transaction size in store?
The clients that we have integrated us with their POS can easily calculate a true ROI for their campaigns. For those that haven’t, when they log in to their Privy campaign dashboard they can see the total number of promotions that have been claimed, and the number that have been redeemed in store. Most of our clients take the average transaction amount for their customers and assume that holds true for customers brought in through a campaign. For instance, if a Privy campaign brings in 1,000 customers, and the average check size is estimated to be $10, that particular campaign is assumed to have driven about $10,000 in revenue.
What is the market size?
Today we're laser focused on the restaurant vertical which has about 50,000 brands that have 5 or more locations. Seamless, OpenTable, GrubHub are all public companies built exclusively on the restaurant market which we feel is about a $5B opportunity. $5B is quantifying a revenue opportunity based on the 50,000 brands in the U.S. paying our current rate.
Who are your competitors?
Circl.com is another early stage company working in multi-channel promotion, while less focused on the online offline redemption process. There is also SignPost and LocBox which both focus on the smaller mom-and-pop end of the market.
How much do your clients spend on promotional advertising?
Within a marketing budget there will be two kinds of marketing; one is branding and the other is call-to-action. Call-to-action or promotional marketing can be up to 50% of the marketing budget depending on the brand.
How is growth looking?
We've gone from $0 in monthly contract revenue 12 months ago (June 2013) to $10,600 MRR (Monthly Reccuring Revenue) a of the end of this June. Which equates to approx. $130,000 annual revenue run rate. We also just received our first renewal after the end of their first 12 month contract for 2.5X the original contract value as our service has improved over the last year. We also just brought on a VP of Sales to hone our inside sales process, which has led to 7 new contracts in June vs. 2 in March and 3 in April.
As of March 2014 we had about $3,000 in monthly revenue, and in the last few months several factors have brought us up to $11k in monthly revenue. We're starting to see success with larger contracts in the multi-unit market. Before our average was $50-$100 per-month per-client now that number has creeped up to an average of $500 per-contract per-month. the opportunities we're opening now are almost exclusively in the mid-market, so that $500 number will continue to grow as we start closing larger businesses.
Who owns the data?
The client owns the customer relationship and the data from individual campaigns. The software is ours, so If a client wanted to export a list of customers they could do that but the attributes and offline data on customer journey would be lost. We retain the right to use aggregate date to learn what types of campaigns are effective across all of our clients, and make recommendations accordingly. Right now, no one else can provide these kind of insights.
Can you outline all the data you're able to get?
When a consumer engages with a campaign run through Privy we construct as rich a profile as possible on them. When a customer converts on a Privy landing page, they enter their name and email address. Then through a series of third party vendors we add other information to the profile like geographic information, Facebook and Twitter profiles, as well as what they like, and follow. All that information is stored on that customers profile in Privy.
As that email address shows up over several different campaigns we add offline redemption and behavioral information as well as tags associated with the campaigns to that same customer profile. The more campaigns our clients run, the more customers in their database, and the more information they have about each customer.
Can you track transactional data along with final ticket size?
When we track a customer in store, there are two kinds of redemptions that we facilitate. One where we only capture the fact that a purchase was made, and another where we can track the size of the transaction. Both are fully automated. In one scenario, a promotion is tagged in our system with an offering type. It could be for a pepperoni pizza or another item, but the retailer will know information about the customer and the specific offer that was redeemed. All that information is appended to the customers profile in Privy which the retailer can use to understand success, and plan re engagement.
With more sophisticated clients, we run our normal redemption process, but in advance of running a campaign, the client generates a bank of single use codes stored in their POS which allows them to track all items purchased in addition to the data we normally collect. In these instances, the data enables them to run a true ROI analysis on each of the different campaigns they are running. Another client recently told me that their Facebook promotion campaigns had a high ROI based on the total transaction size at redemption, while, other online channels like Google display ads performed poorly. This kind of analysis had never been possible before.
How does Privy help clients determine if offer redeemers become long term customers?
Our clients have two primary goals: to acquire new customers, and to convert those new customers into repeat visitors. We help clients run different types of campaigns that target each of those customers groups. Clients have often run regular campaigns through Privy that are restricted to customers that have not previously engaged with a campaign.
Clients can then run Limited Time Offers that target customers that have previously engaged with a campaign and left their contact information to get them back in store. These offers are much shorter in duration and more successful at driving repeat business.
Our clients tend to focus initially on on new customer acquisition, and after using us to grow their customer database 5-10x faster than ever before, they transition to engaging that database to get them back in store. After a few such redemptions they can see that a customer has developed some form of loyalty, and transition them on to a more traditional loyalty program with the added benefit of all the demographic and behavioral data that they have been able to collect through Privy. Ultimately we think there will be an opportunity to enter the loyalty space ourselves or serve as a reseller for trusted partners.
What makes you good at email acquisition?
Most of us have been to a retailer or restaurant landing page - the classic email capture form offering ambiguous future offers, news, special events in exchange for your information. We simply flip the order by offering a specific deal in exchange for signing up. By outlining exactly what the customer is getting upfront we’re able to drive the number of signups by 5-10 times.
It sounds simple. But if any large retailers want to modify their website they need to get a bunch of people involved - IT, the advertising agency, and upper management. We’re always observing a lack of agility in the same way B2B marketers used to struggle with landing pages before solutions like Hubspot. Retailers, restaurants, and other B2C marketers are well behind the curve - Privy is their solution.
How do you convince large retailers to modify their checkout process?
Most of our mid-market and enterprise clients do not sign on the dotted line and roll-out to all 150 locations. Typically we start with a paid pilot program and expand from there. We are evaluated on two primary criteria. A) whether they were able to track the instore conversions and increase acquisition, and whether the staff was comfortable with the process. By starting with a few stores over a couple of months retailers are able to hear first hand from their staff that the redemption process is not invasive. So far we have had no staff complaints
Is Privy statistically better at converting than other offerings your clients run?
Typical industry redemption rates are single digit, anywhere from 5-10% Our typical redemption rate is between 15% and 40%. There are a variety of reasons for this. Because we capture emails when our offers are claimed, we are able to send them email reminders to drive redemption. Customers are always carrying their phones, so redemption is friction-free. Instead of needing to print out and remember a paper coupon, customers just need to reach into their pocket and take out their phone. Lastly, the promotions themselves are highly targeted. This isn't a Groupon sort of thing where we market to a general list of consumers looking for offers. Consumers who come to our landing pages have actively engaged in the discovery process - e.g. by searching for “a hamburger near me”. This intent results in high redemption rates and especially short redemption times. 65% of redemptions happen the same day.
Who is your target customer?
The restaurant category is our sweet spot making up about 85% of our clientele, but we've seen a lot of interest from other retail sectors. Generally our clients have at least 3 locations with a centralized marketing team that handles promotions for all of them. This could be a team of ten with a CMO or one marketing manager for a five location pizza chain. Having someone uniquely dedicated to customer engagement, social media, and promotional marketing means we are solving the most important problem they face every day. They are more interested in hearing about solutions than single store mom-and-pop locations who have a litany of other issues to deal with. It's also important to mention the centralized marketers are higher value customers than the single location retail or restaurant outlets.
Walk us through an offer and how the redemption process works
To create a campaign you just upload a photo, create a title, choose from a number restrictions (e.g. one per customer, mobile redemptions only) we'll programmatically enforce those. Then you set the campaign schedule, and distribute it. You can toggle the frequency with which we push that message out, and create mobile optimized landing pages that convert well on mobile devices. Retailers that work with ad agencies just need to point those campaigns back to a Privy landing page, and we take it from there.
From a customer perspective, whether they land on the retailers website or click a link from an ad, they hit the Privy landing page and are prompted to put in their name and email address in order to claim an offer. Then all they need to do is open the email on their mobile device while in store, and click the “redeem” button. We then check the customer's location to ensure they're actually in the participating location. If everything matches up, we'll surface a confirmation page and the promotion will be honored. If a customer does not redeem the offer in a few days, we send them a series of email reminders about the offer which is part of why our redemption rates are so high.
Customers of our more sophisticated clients who are set up to track the checkout transactional data have the same exact process except the confirmation page that loads when we successfully register that redemption is different.
How do you make money?
We have a few different pricing options. If you look at our contracts today, they're all paying on a per-store per-month basis. This ranges from $50 to several hundred dollars per-month per-store.
In the future we may add a performance based pricing model based in redemptions. Franchises are always butting head with management over the effectiveness of the marketing fees they are charged by corporate. By adding a redemption component, franchises will know they are only paying for corporate campaigns that benefit them. With Privy, franchises can also share control over campaigns with corporate marketers, and both receive the same valuable data.
The other reason we’re pursuing a performance model is the per-store per-month model could get really pricey for large brands. Performance pricing has the potential to drop the risk upfront but also allows us to take part in the upside as we continue to grow their customer database.
In what ways is this data useful beyond the immediate use case?
As we continue to grow we will have the the best behavioral data for online promotion to offline redemption. We're starting to see it now. Our product enables us to see channel effectiveness across multiple brands and multiple industries. For instance types of campaigns that convert well in certain verticals. Similar to the way that large email clients know which subject lines convert, we're collecting analogous data around the online to offline experience.
How many emails have you collected, and how many transactions have you facilitated?
Currently we've gotten 150,000 total emails, along with 45,000 claims on our different landing pages, leading to over 10,000 in-store redemptions. It is clear how effective email marketing is at driving repeat traffic, but building these email databases is incredibly slow in this market.
How long does it take you to close one of these deals?
In this new mid-market it could be 3-6 weeks to close a deal. The larger enterprise reataurant and retail brands will be closer to a typical enterprise timeline of 4-6 months.
Why aren't big companies doing this themselves?
Customers don’t want to download 50 apps for each retailer the visit only occasionally. Many larger clients have invested millions in their own homegrown loyalty apps which result in an initial adoption spike that quickly plateaus. They are not software companies, and have a hard time getting beyond 1-2% of their customer base. These larger companies look to us to develop leads, nurture leads, and get them in store.
What percentage of the market is ready for these analytics to run on their promotions?
We're definitely at the beginning of B2C data driven marketing. The story used to be that CEOs and COOs held the keys to the kingdom. If things were going poorly they would turn to the CMO to fix things, and if things were going well they would chalk it up to a great customer experience. What we're seeing now, as we provide more data to the marketing side of the house the balance is shifting in their favor. They're now able to control their budget, spend more effectively, and command more respect inside the organization. Part of this is certainly a shift away from traditional marketing into digital data-driven - which plays into our hand perfectly - and we've seen interest from the bigger brands for this reason.
Have you had any churn?
We had one client churn. It was a small business in Texas. As we continued to move upstream and mature the product, it clearly wasn't a good fit.
What do you get that your competitors don't understand?
We understand that the role of a centralized marketer is very different than a single location mom-and-pop store owner doing this part time. For example small retailers will use something like LocBox or SignPost because it is 100% hands off. These competitors allow smaller retailers to plug into multiple channels without lifting a finger. That works for the small store owner who doesn't have time to think about customer data or optimization.
The mid-tier marketer who has a budget, revenue numbers to meet, and a boss to report to. They want more customer data, value relationships, and in many cases are measuring database size and growth. Catering to the internal marketing person is very different than a hands off service experience for an owner of a mom-and-pop. We all go after restaurants and retail but are selling to different customers within the same industry.
How will Privy attract large enterprise companies?
The real challenge is figuring out the sales process for enterprise marketing teams, which are often segmented. For instance do we fit under the email service team, the digital advertising team, or the promotional team. Eventually we'll touch a number of different categories, but we'll always need to focus on the biggest pain points and target that portion of any enterprise team. Dunkin Donuts is an excellent example - when you get into enterprise of that scale, the marketing teams grow from 1-2 people to 20 people and an agency. Navigating such an organization is a skill we are in the process of learning.
But if you look at some of the names in the pipeline we're not far away. For a while some of the interested parties wanted case studies to prove the model before such an operational expense - we've since overcome this, and are making progress as a result.
What's your biggest challenge right now?
Selling into larger organizations has been our biggest hurdle. Over the last 2-3 months we've run a series a experiments like webinars, cross-client data, cold email outreach, and case studies. Finally our experiments on pipeline generation are starting to work. A slightly larger budget coupled with additional sales resources is going to result in phenomenal growth.
What's your plan for customer acquisition?
The rule of thumb for any SAAS business is the ability to pay back your cost of acquisition within 3-4 months of the relationship. Right now while we experiment with customer acquisition, our cost of acquisition is inconsistent. With our MRR coming in around $500 we're confident we'll be paid back in 3-4 months, and as contract values continue to increase that payback time will continue to go down.
How did you get into the business in the first place?
Our original concept was to be the Anti-Groupon. We built out a platform so that any kind of merchant could create and distribute a prepaid deal on their website. Quickly we noticed that the engagement from marketing folks was blowing the mom-and-pops out of the water. Feedback suggested that marketers didn't actually care about the revenue resulting from the prepaid coupon. What they loved was the ability to control marketing campaigns while facilitating and building relationships with consumers. Using email lists that they built through us, they were able to track redemption and get the customer information they wanted.
They kept asking us if we could help them with additional distribution and engagement, so we pivoted and answered their requests by offering coupon deals that cost nothing. Conversion went through the roof and marketers were happy. We turned our attention to what was effectively a new product - lead capturing and nurturing with the offline tracking component.
How much are you raising? And what milestones do you need to hit before your series A?
Realistically we'll need to be at $20-30k MRR with ~45 contracts to hit a true Series A metric. We expect that to happen at our current trajectory no later than November/December. Right now we're looking for approximately $200k to get us from where we are through Series A. The money will almost entirely be used to bolster sales and marketing.
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