PowerPass

This is our final podcast in our series on Ideation's new PowerPass loyalty card. In this podcast (download iPod compatible, 47MB), Tom Ungrodt and I begin by discussing the economics of print advertising and loyalty cards for the small gift shop operators who are Ideation's customers. Then Jay Upell and I discuss where he would like to see Ideation's PowerPass loyalty card in a year and how he views the competition.

Tom's discussion of small gift retailer economics and advertising is quite informative. Here are the highlights:

• For gift shops, there are two major holidays per year large enough to support mailing Ideation's catalog, Christmas and Mother's day.
• The minimum catalog printing is $6300 for 10,000 catalogs plus approximately another $2000 for mailing them.
• Ideation's average customer does under $1M per year in revenues, suggesting an advertising budget of $35–$50K. Two catalog mailings eat up half this budget.
• Retailers wanting to get year round impact for their advertising budget might see loyalty cards as an option that keeps customers returning.

In this 8 minute podcast (download iPod compatible, 42MB), Jay Upell of PowerPass and I discuss how retailers use PowerPass. There are two components. First, retailers can target their promotions better toward people who use the card. Blind promotions tend to get response rates on the order of one to two percent. Targeted promotions, such as the Powerpass birthday program get on the order of fifteen to twenty percent, a factor of 10 improvement.

An interesting piece of information that falls out of this interview is the primacy of regular mail over email in promotions. Powerpass's retail customers typically have ten times more mailable addresses than email addresses. A further limiting factor on email is the prevalence of SPAM.

Finally, we get to how sophisticated the retailer has to be to participate in the program. Training is required, and there are prebuilt reports for things like sales after promotions. Powerpass will also work with retailers to build custom reports.

Additional Links

• There's a fine line between legitimate email and spam such that many commercial messages are quickly caught in spam filters.

In this 6 minute podcast (download iPod compatible, 32MB), Tom Ungrodt, CEO of Ideation, Jay Upell, Sales Administrator for Powerpass, and I discuss Ideation's PowerPass product. As we mentioned in our previous discussion with Bob Holland, Powerpass is a loyalty card product for small retailers. Loyalty cards reward customers who shop frequently at a store by giving them discounts. Loyalty cards give store owners data about their customers. We cover two major topic areas:

• Tom stresses the value to the individual retailer. They probably could not mount a loyalty card program on their own. Just by participating they get invaluable data.
• Jay discusses the value of combining programs among retailers in the same locality. We also discuss a little how that might be coordinated.

In our next podcast in the PowerPass series, we learn more about the history of the product's development and how competitors are positioning themselves.

Additional Links

• This wikipedia article provides and extensive discussion of loyalty card programs with many examples and a critical review of the pros and the cons.

In this 7 minute podcast (download ipod compatible, 38MB), Bob Holland and I continue our discussion of business and technology innovation by examining a company with which he is intimately familiar, Powerpass. Powerpass is an outgrowth of Ideation, a local Ann Arbor company, that made its original business 41 years ago by providing gift catalog services to small retailers. Bob has an ownership stake in Powerpass.

Powerpass is designed to help local retailers compete with national big box retailers like Walmart. It provides local retailers with a loyalty card that can be used at the retailer as well as with other retailers in the local area. Loyalty cards allow consumers who frequent stores to receive discounts as a reward for continuing to shop at the store. Most national chains offer them. However, small retailers are not in a measure, themselves, to create the infrastructure to support these cards. A challenge in creating Powerpass is developing a value proposition that appeals to a broad enough array of small retailers.

Powerpass seems to represent a case of innovation where the true value comes from blending technology with specific business opportunities. In a forthcoming interview, we'll speak with Tom Ungrodt, CEO of Ideation, and Jay Upell, leader of the Powerpass effort. They will provide an interesting operational perspective on working with small retailers.