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Loyalty Bay’s Loyalty Play and GE Brings Big Deals To Life

With $22B in transactions so far this month, these are anything but the “dog days” of summer. Loyalty Bay is the latest venture to try a new twist on an old payments staple – loyalty – and GE made Goldman Sachs a deal they couldn’t refuse to help stand up its lending platform. Get that and all of the investment scoop here.

If asked, most people would probably be unable to define the Pareto principle – the concept that the number of things that don’t matter far outnumber the number of things that do.

This is usually described in terms of the 80/20 rule – 80 percent of the value of something (sales, taxes, effort) generally comes from 20 percent of contributors (customers, taxpayers, workers).

That, says Loyalty Bay CEO Will Roberts, is where merchants looking at loyalty programs tend to get really hung up.

“Businesses pay a lot to drive traffic to their websites and then to get it to convert. Many stop here thinking the job is done,” he wrote on the company’s blog.

The problem is, driving business to the website is only part of the battle — and is more likely directed to the more than 80 percent of fickle customers than that 20 percent of loyalists that build a business’s bottom line.

“Retailers could be amazing at signing up paying customers, but if they all go away or never come back,  they don’t have a business, not in the long run anyway,” Roberts said.

Loyalty Bay is focused on solving the problem of how to keep customers coming back and converting through two toolsets.

First, it presents various types of rewards at its affiliated merchant’s consumers — gift cards, incentives, discounts, etc.  And then Loyalty Bay watches what consumers do, what rewards they are more likely to pick for themselves, what rewards are most tied to future conversions and what type of consumer is becoming the most frequent of flyers in a merchant’s ecosystem.

“If retailers can give something to their customer that their competitors can’t with all other things being equal, they win,” Roberts noted. “This is where the power of rewards and incentives can play an increasingly important role in their armory.”

However, he noted, that power can only be leveraged if three conditions are met. The first is that the reward has to be something the consumer actually wants. And this means having a strong understanding of who one’s customers — particularly their most loyal customers, actually are.

“This sounds obvious, but you would be amazed at how many retailers get it wrong,” he said. “Are they optimizing for new customers, LifetimeValue (LTV), existing customers, subscription revenue or one-off purchases – the list goes on. Understanding this helps them define a strategy going forward and gives them an actionable goal.”

The second involves getting customers involved in developing the reward. Loyalty Bay enables that by giving consumers a choice between four rewards for purchase.

The third and final is making sure that the reward comes quickly enough to be meaningful for the consumer.

“This is why I think so many loyalty schemes based on points do not actually work. The customer doesn’t get instant gratification, they have to accrue points that often take ages to be translated into anything meaningful unless the consumer already is an extremely frequent patron,” Roberts said.

Rewards through Loyalty Bay, on the other hand, are sent to the consumer as soon as the API in a merchant’s backend receives confirmation a purchase was made.

Loyalty Bay is relatively new to the market, but has already signed a fairly large enterprise partner in Virgin Media. The firm has also snapped up a cool million in venture funding in a round led by Talis Capital with Howzat Partners, NEON Adventures, Chris Mairs and Richard Verney participating.

Going forward, the firm looks to expand data on how consumers shop, noting that finding ways to capture a consumer’s attention in an immediate and ongoing fashion will be the future for loyalty for retailers. According to some estimates, he noted, the average consumer’s attention span is down to 8.3 seconds — and that number probably isn’t going up with all the stimulus constantly competing for consumer interest. 

“Before we get out our pitchforks, denounce Buzzfeed and storm the gates of Snapchat Castle or Tinder Towers for our diminishing brainpower, we need to think about what we can do to keep people engaged, interested and motivated enough to tell others about what we do, whether it is selling software online, marketers engaging audiences, or bloggers building up an online community,” he said.

Big Banking, again

The week that ended on Aug. 14 showed yet another surge in investment activity. And, as has been the case in the previous period, banking led the way, with a familiar, marquee name resurfacing. Yet again a major deal involving GE made headlines when Goldman Sachs said it would acquire $16 billion in customer deposits from GE Capital Bank. That deal is meant to bolster Goldman’s online lending platform with a push away from its traditional investment banking presence.

Trailing far behind that mammoth asset sale was Houlihan Lokey, with proceeds raised as part of its initial public offering, with shares going public last week. In a more “traditional” deal, this time in the software space, Blackbaud, the tech company that serves the philanthropic space, said it would buy Smart Tuition for $190 million. The latter entity specializes in billing software and other tuition management services tied to private schools. The announcement dovetails with a 2014 acquisition Blackbaud made of WhippleHill, another software firm that also has a presence in managing private school finances.

Some FinTech activity, too

With some activity in the FinTech sector Apis Partners said last week it had raised more than $150 million for its fund vehicle seeking to back companies in payments and insurance across Africa and South Asia.

Rounding out the Top 5 this past week, Payoneer, which has recently appeared in the news across the financial trade press and in commentary here at PYMNTS, raised $50 million by selling shares to existing investors. The funds will be used for expansion efforts in cross-border commerce.

Below is a recap of the most notable investments in the week, ranked by dollar amount.

And, this time around, the United States held dominance over all other geographic regions, with the bulk of that weighting, of course, coming from the aforementioned banking deal.

Even without the multibillion dollar transactions that have been the hallmark of the banking sector, enough momentum has been seen to have helped push the rolling average in the B2B sector to a significantly higher level. What looks like relatively “flat” performance through the past few weeks skews higher, nearly doubling from recent levels to just under $600 million.

And, with a bit longer-term perspective than the week, or the month, we can see that August has been the outlier month to date, with more than $22 billion in transactions through the month, which is only half over. Whoever called them “dog days” of summer was obviously not looking at all the deal-making going on.

For more Investment updates, click here.

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Latest Insights: 

The Which Apps Do They Want Study analyzes survey data collected from 1,045 American consumers to learn how they use merchant apps to enhance in-store shopping experiences, and their interest in downloading more in the future. Our research covered consumers’ usage of in-app features like loyalty and rewards offerings and in-store navigation, helping to assess how merchants can design apps to distinguish themselves from competitors.

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