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How Many Companies Can the Local Rewards and Loyalty Space Support?

Awhile back I posted a question on Quora about the opportunity to do a roll-up or consolidation play in the mobile SMB loyalty and rewards space. I’ve seen a number of interesting companies working on this problem but none has broken out as the leader. In my neighborhood it seems like every restaurant, cafe, or small business has settled on a different loyalty and rewards system. I take the prevalence of solutions to mean that consumers and merchants find the concept interesting. But the amount of fragmentation I’ve seen doesn’t seem sustainable.

At this point, it feels to me that this is really much more of a sales and marketing challenge (merchant and consumer acquisition) as opposed to a technology challenge. Almost every system I’ve seen in the market today has the three core requirements that any good system should have:

1. Ability to order ahead (when applicable) – I have been using Tapviva and I’ve seen signs for OrderAhead as well. There is also a large number of web-based food ordering solutions as well, but most of those don’t appear to be as focused on the total loyalty solution as their mobile brethren. The ability to order ahead is a nice feature for places where you know you’re likely to have to wait in line. Some services use a separate queue for these orders and some do not – either way I think it’s valuable to consumers.

2. Ability to track loyalty / return visits – Every system I’ve seen in this space has some concept of loyalty. Some of them are designed with rewards in place while others are designed to simply track visits over time to identify top customers. This seems like a must have and I’d say that it’s well-understood by most vendors how to provide this functionality. I’ve seen tons of solutions here, including Tagtile (acquired by Facebook), BadgeIn, Belly, Stampt, Punchd (acquired by Google), Perkville and a host of others.

3. Support for popular consumer mobile devices (iPhone and Android) – Last but not least, it seems like every credible system I’ve seen in the space works on mobile phones as a native app or HTML5 app on popular platforms.

That seems like the core set of must-have features for serving the loyalty are well known and can be built. It just feels to me like there are just a ton of companies that are still at the embryonic phase and that we’re entering a phase where there’s a real opportunity for consolidation and for someone to really own this space. I’m really curious to see whether any of the startups or larger companies in the space is the one to grab the prize – it just feels like the level of fragmentation we see today is not sustainable.

As always, comments are open or you can send me feedback on Twitter @chudson.

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