Case Study: Brooklyn Spa Uses Credit Card Data to Identify Consumer Trends

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At D’mai Urban Spa in New York City’s Brooklyn neighborhood, Daniella Stromberg spends roughly $45,000 a year in credit card processing fees. Frustrated by the feeling that she wasn’t getting anything for her money, Stromberg turned to Swipely for help. Using the company’s payment marketing platform, she has been able to identify patterns and gain insight into how outside factors, like weather and holidays, affect consumer behavior. Stromberg now uses quantitative data to determine when to offer discounts intended to bring in customers during off-peak times.

How do you market or advertise your spa?
Most of the marketing or advertising that we do here is with our online database. We have a 9,000-person database, and that’s our free advertising. Aside from that, everything else costs us money. Our margins are so tight, and we decided a couple years ago not to participate in any print ads or paid marketing opportunities. We just stick with our email base, which makes it a little bit harder to increase your reach.

With the email marketing you’re doing now, how do you decide which types of messages to send or when to send targeted deals?
It’s complicated because you want to strike the balance of imprinting your brand in people’s memories without bombarding them and turning them off. We tell people when we collect their emails, they will not be bombarded. We do 10 blasts a year, and we try to stick to that. We felt like just under one a month was good repetition without bombarding. The way I came up with that sweet spot was I looked at the age anecdotally of our guests. I know that because we’re a luxury business, we have a lot of guests over 40. I simply asked them, “on a scale of one to 10, how irritated are you when you get emails?” Then I did the same survey with the young men and women in their 20s. It was pretty obvious the younger clients were comfortable getting emails every day, whereas the older clients definitely felt bombarded if they got things more than once a week. I was in a bit of a dilemma because the younger market really uses the Internet to promote my business, but they’re not the ones with as much disposable income. I really wanted the repeat business of those 42- to 60-year-old women. So I tried to err on the side of what would work for them, knowing that if they unsubscribed they would forget about me.

You currently use Swipely for payment processing. Can you explain a little about what motivated you to make the switch?
I knew nothing about Swipely, and a sales representative reached out to us. [I] did some homework, and thought they may be a little different than some of the other “hounds,” as I call them. The thing that got me was that I was going to be getting something for my credit card processing fees. For me, then it was a no-brainer. I’ve been frustrated by my high processing fees since I opened. For nine-and-a-half years, it’s been a thorn in my side. We pay an exorbitant amount of fees every year, about $45,000. For a small business like mine, that’s really expensive. That fee eats into my margin considerably, and I didn’t see any workaround. I worked with three different credit card processing companies, and it didn’t get any better because there were hidden fees. I considered dropping Amex as a way of internally cutting my expenses. But again I’m a luxury business and that market sector of those women in their 50s, they like their American Express rewards points. I got a lot of pressure not to give up Amex, so I was sort of caught between a rock and a hard place.

When Dodd-Frank passed I got very excited thinking this would help me. I wasn’t quite sure how, but I thought it would. Sure enough, a hound came in shortly after and promised me a new federally regulated low rate, and with that came all the hidden fees. I didn’t notice my rates go down, in fact my rates remained constant and I was stuck with an equipment-leasing fee. Thinking of myself as reasonably savvy, I knew I couldn’t continue like this. Then [Swipely] told me I would be getting something for my fees. The fee is pretty comparable to my last credit card fees, but my experience with Swipely has been that they’re above board. They explained all the paths on my portals so I could make sense of the information they were providing. Now I feel like I’m buying something with my $45,000 a year, not that I’m burning $45,000. For me, that makes a huge difference.

Can you describe a little more about how you use the Swipely platform?
I’m just getting my loyalty program under way, so I don’t have a description of that, but we’ve been collecting data. I use my marketing report that they send me every week, and it cuts down on time. For me as a small business owner, my time is my money. I used to have to gather data from my point of sale software, and then because it didn’t integrate with my credit card terminals, I would have to spend time trying to extract information. That [information] comes to me so easily [now]. At a glance, I can see my dollar value per transaction, and if that’s gone up or down. I can take a good look at who my top spenders are without running a tedious query. The reports they send have markers on weather and major current events, so I don’t have to keep records on my own. They give that all to me, so I can notice what factors are impacting my up and down trends.

Is there anything in particular you’ve learned about your customers through these reports?
In having a business for nine-and-a-half years, I have gotten a sense anecdotally of the things I’ve experienced. What Swipely has done for me is given me analytical proof of what I thought anecdotally. So, I know that inclement weather is really good for my business, and beautiful weather is bad for my business. I’ve always had a sense of that, but it never occurred to me that it was trackable. Now I can do a five-day weather forecast, and I can increase my staff when the weather is inclement. When it’s going to be a glorious weekend, I can make other changes. Usually what I do is a promotion for that weekend. It’s last minute, but I can get the marketing together in advance because I learned from the report what I suspected but was never able to prove. I have a business partner who is less active in the day-to-day operations, but we make decisions equally. So going to him with my “feelings” about how business fluctuates is very different than being able to take that quantitative analysis [in my] weekly Swipely reports. We can make business decisions together that I think are much more strategic and beneficial.

Stephanie Miles is an associate editor at Street Fight. This interview has been edited for length and clarity.

Click here to read more Street Fight local merchant case studies.

Stephanie Miles is a journalist who covers personal finance, technology, and real estate. As Street Fight’s senior editor, she is particularly interested in how local merchants and national brands are utilizing hyperlocal technology to reach consumers. She has written for FHM, the Daily News, Working World, Gawker, Cityfile, and Recessionwire.