As Passive Loyalty Platforms Arise, Will Merchants Miss the Check-In?

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Last Thursday, I stopped by an informal get-together in New York hosted by the founders of Mirth — a bootstrapped loyalty startup that launched at TechCrunch Disrupt last month. The party was small, with 25 to 30 friends huddled around the bar at Piazza 17, a gourmet pizza and wine bar, which is one of Mirth’s early partners.

The company’s pitch isn’t overly ambitious: users link their credit card to a Mirth account and, after visiting a merchant twice, they receive a small discount. Little is asked from the merchant (“regulars” usually get a 3% discount), and even less is asked of the consumer (redemption is fully integrated into the debt or credit transaction so no need to remember to check-in).

My issue with Mirth, and the set of companies that have emerged as the leave-no-trace response to the high-impact methods of the check-in and daily deal, is one of engagement. What effect does asking less of the consumer have on the value proposition for the merchant?

I posed the question to Mirth’s founder, Jeremy Galen and he seemed to agree, pointing out that the value is less in changing behavior (i.e. lead generation or loyalty), and more in providing awareness. Use the small discount as a vehicle to establish a low-level data sharing agreement, and then provide businesses with analytics and intelligence about their customers. (Mirth currently only provides merchants with users’ email addresses, but Galen said that the company plans to develop a data product on top of its platform for merchants.)

Mirth isn’t alone in asking far less from consumers. Foursquare’s redesign earlier this month greatly de-emphasized the company’s trademark check-in for a more passive, discovery experience built around its Explore feature. In an interview with TechCrunch TV, CEO Dennis Crowley said that while the early features remain, the new app is very much a response to users who were using the app regularly but never checking in.

So what happens when you ask less of your users? For companies like Foursquare whose product is built on user-generated data, a passive platform means less relevant and lower quality content. The check-in, for all its issues, created over two billion pieces of content in less than three years; it powers the very dataset that Foursquare is now looking to harvest.

A passive platform isn’t in itself a negative. For a company like Mirth, whose model is built around information and analytics, passivity means less friction and overall, a more seamless flow of information. But Foursquare is not in the business of selling information; it sells (or will sell) the ability to change behavior. The question for the company is whether by shifting its consumer model from content creation to content consumption, the level of engagement and value of its users, as measured by conversions on its specials platform, will decrease.

The difference to be aware of is whether a company is selling consumer engagement or consumer information. The two are related, but the former requires a far more active platform than the latter.

Steven Jacobs is deputy editor at Street Fight.


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