Smartphones have changed the way we shop, but the mobile deals apps on the market that helped usher in this revolution have also created noise for consumers through, as numerous reports indicate, too many irrelevant offers and offers that are too difficult to redeem.
Stephanie Taylor is a mother and former university administrator who has used her smartphone to search for fun things to do with her two children.
“I would visit websites and search coupons everywhere to try to figure out who had the best deal around me,” Taylor said. “It was always such a chore and there was always so much noise and so much going on that I really just got desensitized to all of it. So I was kind of the frustrated consumer.”
With the help of 24-year veteran Dairy Queen and Dunkin’ Donuts franchisee Gavin Hart, technologist Ryan Pfenninger (and his Exit 31 development shop), and serial entrepreneur Bill Johnson, Taylor set out to build a better mobile deals app.
They launched Shop Your Spot this July and to date they have 250 paying merchant customers and very nearly 10,000 app downloads in the Greater Indianapolis and Fort Wayne areas in Indiana. They are also reporting an offer redemption rate of close to 19 percent compared to the average coupon redemption rate of between one and five percent.
According to a U.S. Federal Reserve System report from March of this year, Forty-four percent of smartphone owners comparison shop while in retail stores, and 68 percent of those shoppers say they have changed where they made purchases because they found better deals on their phones.
Mobile couponing is one of the biggest drivers of the change in our shopping habits and Business Insider reports that the number of U.S. smartphone users redeeming mobile coupons has increased dramatically — from 7.4 million in 2010 to 29.5 million last year.
However, the largest and most recognized mobile deals apps are only focused on the largest consumer markets, which leaves two-thirds of U.S. consumers and the merchants who serve them out in the cold.
“If you go look at the Groupons, the LivingSocials, the LiveDeals, and the other people who are trying to play in the offer management space … every one of them has a business plan that says they are going after the 35 major metro areas,” said Johnson. “That means Indianapolis and nowhere else in Indiana.
“There are 6.5 million people who live in the state of Indiana and 892,000 live in the city of Indianapolis. If you’re one of the five and a half million who live somewhere else, you don’t get their deals. If you’re a merchant in Kokomo, Indiana, or Winimac, Indiana, or Wolcottville, Indiana, and you’re trying to promote something, you don’t have a lot of alternatives because Groupon is not going there and LivingSocial is not going there, and LiveDeal is not going there,” Johnson continued.
“We partnered with Marathon, the Good Oil Company folks out of Winimac, Indiana, and they wanted to have a mobile app of their own. They’ve got gas stations in Winimac and Wolcottville and a bunch of ‘villes’ that aren’t really big towns. Today, we have seven percent of the population of Wolcottville, Indiana, who have downloaded our app, and that says there is a need in small town America. There is nothing stopping us from doing larger markets — obviously we are already in Indy — but we wanted to give the small town merchants the competitive advantage they want and need.”
In addition to serving these overlooked smaller markets, Shop Your Spot addresses shortcomings in other mobile deals apps that are a major point of frustration for merchants. Here’s how Shop Your Spot outlines the market opportunity:
- Merchants (especially small/local businesses) need mobile advertising and loyalty platforms.
- National programs can be localized, but the offers can’t be changed to fit the local need.
- Loyalty apps require a complex system of check-in via a hardware dependent device (i.e. ipad) at a specific location in a store.
- Merchant target audiences no longer read newspapers, watch TV commercials or listen to broadcast radio.
- Direct mail works, but a single promotion for a small region can cost up to $30,000 and only yield a 3% redemption rate.
- Digital channels like Facebook are changing the rules so that merchants have to pay promotional fees to reach consumers with their messages.
- Mobile deals apps are only profitable in major markets, they offer no ability to communicate directly with a local audience and no strong data tracking mechanism.
“The greater message about Shop Your Spot is that we put folks in control,” Taylor said. “We put merchants in control and we put consumers in control. Within the app, merchants have the capability to immediately adjust their offers and messaging based upon the feedback they are receiving from their consumers. They can post unlimited offers in a handful of ways that can be date specific and time specific as well as in limited and specific quantities.
“If Gavin (co-founder Gavin Hart) overbuys Dilly Bars at one of his DQ stores and he wants to sell them in two hours, he can post something to the app for his local audience that will exhaust that inventory — something like buy one get one free. And we show him a dashboard so he knows immediately what’s working with immediate feedback. So if he posts something and nobody is looking at it he can take it down and do something else, and if he posts something that’s really working he knows to try that again on a different day. And it’s in real time so he sees what folks are reading and what’s sticking, he doesn’t have to wait for a report after the fact.”
Control is the key for Shop Your Spot with its consumer users as well, complete control. Consumers control who they want to hear from by ‘spotting’ or ‘unspotting’ any location at any time, and they can search for merchants by their geographical presence, by zip code, by category or by name. Most importantly, Shop Your Spot doesn’t create any noise for the consumer because they don’t receive offers that they haven’t specifically asked to receive. They will never see irrelevant deals for merchants they aren’t interested in or who are out of market, which is a perennial complaint among deals apps.
By giving merchants complete control over their own deals, Shop Your Spot has also diminished the “difficulty to redeem” issue often reported about other apps. Restaurants and hair salons are limited by both space and staffing. If a deal is extremely popular, customers are going to run into problems with getting the restaurant seating or getting the hair appointment during their desired times. With Shop Your Spot, however, merchants can watch a deal gauge in real time and end the offer before overbooking occurs or before the wait time for an appointment becomes unreasonable.
Shop Your Spot is already working with major brands in Indianapolis and Fort Wayne like Dunkin Donuts, Dairy Queen, DSW, Finishline, Ted’s Montana Grill, Marathon Oil. You can download the app and search for these and other merchants in your area at your App Store or Google Play.
The four co-founders have bootstrapped the initial $300,000 startup investment themselves to get the product to where it is today, and lead generation company LeadJen has swapped appointment setting services for equity. Shop Your Spot will be seeking a seven-figure capital raise in the first quarter of next year to fuel their internally projected 1,000 percent growth and expansion into new markets.