Right now, millions of Americans are sitting on millions of dollars of unused loyalty points. Many of these loyalty points will never be used, however, companies must list these loyalty points as liabilities on their balance sheets. So, not only do customers lose out on maximizing the value of their loyalty points, companies’ balance sheets also suffer. Imagine an app that allows customers to trade away any loyalty points they do not plan to use. In this world, customers are able to save money by effectively using all of their points, and businesses gain new customers and reduce the liabilities on their balance sheets.
Initially, we are going to target retail and hospitality businesses (including restaurants, bars, boutique hotels, winemakers, and small shops) in Santa Barbara. After speaking with a number of Santa Barbara-based business owners, we identified several key problems they face:
- Small business owners in Santa Barbara do not have the marketing dollars to compete with larger businesses (especially e-commerce businesses)
- Most small business owners in Santa Barbara do not formally track customer loyalty or retention
- Businesses that do track customer loyalty and retention report that they don’t know what to do with that data
- Most small businesses in Santa Barbara do not have loyalty rewards programs
- Santa Barbara-based entrepreneurs who own multiple businesses have trouble integrating sales and customer data from multiple businesses and have no way to track customer loyalty between their businesses
After speaking with consumers about their loyalty rewards programs, we identified several key problems they face:
- Many consumers do not know about all the loyalty rewards points and programs they are a part of
- Even when consumers know about their loyalty rewards, often consumers are unsure how to use their loyalty rewards
- Loyalty point programs can be a hassle to sign up for and manage
- Sometimes consumers earn loyalty points for businesses they do not plan to return to
Pool’s MVP will solve these problems for both businesses and consumers. Pool’s MVP will have three primary features:
- Pool will centralize customers’ loyalty rewards points
- Pool will allow customers to easily trade and spend their loyalty rewards points
- Pool will help businesses create, track, manage, and analyze their own loyalty rewards systems
By centralizing customers’ loyalty rewards points and allowing customers to easily trade and spend their loyalty rewards, Pool aims to help consumers keep track of all their loyalty rewards programs and ensure that no loyalty rewards lay forgotten and unused. By helping businesses create, track, manage, and analyze their own loyalty rewards systems, Pool will enable businesses to attract new customers, retain loyal customers, and maximize the value of their loyalty rewards programs by offering personalized insights into customer loyalty trends and best practices. Additionally, by focusing on Santa Barbara, a small geographic area that is frequented by tourists, we hope to uplift local businesses and foster a sense of community. During our interviews with businesses owners, we found that many existing businesses’ loyalty programs focus on in-person community gatherings (like special dinners, speaker series, and wine tastings), and we hope that Pool can help businesses maximize the effectiveness of their in-person, community-based loyalty programs.
There are still several key assumptions that our team must validate. These assumptions include:
- Customers can conceive of equivalencies between different loyalty points and are willing to trade them
- Businesses gain value from and are willing to let customers trade points
- Customers are willing to try new places if given (point incentives)
- Customers are willing to download and open an app in order to manage and trade their rewards points
In order to test these assumptions, we will build several experience prototypes. For our first prototype, we set out to test the assumption that customers can conceive of equivalencies between different loyalty points and are willing to trade them. To do so, we set up an excel spreadsheet that allowed experiment participants to trade test points to see if participants had a desire to trade their loyalty points in the first place. During this experiment, we saw that customers are willing to trade their points and that customers desire a diverse array of points. While some customers only traded all their points for Chipotle points, other traded for Starbucks and Southwest points, showing that different customers find different kinds of points valuable, which means that it is possible to build a diverse, active loyalty point marketplace.
Most of our other key assumptions are role and UI based, such as whether users are willing to open an app to trade points. With a small budget, this could be easily concierge’d. We gather participants and have them go about their day to day, and whenever they go to a storefront or coffee shop, they text the experiment runners in a group chat. Then, the runners send the user a small amount of money via Venmo equivalent to a reasonable amount of points — say, 50 cents or a dollar. We can compare the amount of times the user requested a venmo to the user’s transaction history, or poll the user to what purchases they made at the end of the day, and see how many times the user was willing to open the app.
After speaking with business owners and customers and running several experience prototype tests, we believe that our product is viable. Business owners have clearly expressed a desire to improve the effectiveness of their loyalty rewards programs, and customers have shown that they are willing and excited to earn and trade loyalty rewards points. That being said, simplicity and ease of use will be essential to ensure our product’s viability – in interviews, customers have stated that complexity is one of the primary reasons they do not currently maximize the usage of existing loyalty rewards programs.
Our team is primarily looking for advice on the key features in our MVP and on our chosen SOM (businesses in Santa Barbara).
