A common criticism of daily-deals providers such as Groupon and LivingSocial is that merchants using those services generally don't always receive return visits or sufficient data to use in designing long-term customer-loyalty plans.

Smaller merchants typically have few alternatives, as they often cannot afford costly sophisticated marketing initiatives. A recent alliance involving RewardsNow Inc. and Zavee may help them to overcome that obstacle.

Zavee, of Boca Raton, Fla., specializes in securing local merchant involvement. It will work with RewardsNow to help bring small merchants the sort of marketing muscle usually only national companies can flex.

"One of the complaints merchants have with daily deals is that they don't really know anything about the people coming through the door," Ron Stack, Zavee chief operating officer, said in an interview. "What we provide is a [customer relationship management] capability that lets merchants get a handle on who's shopping, what they are spending, how often and what's effective."

Dover, N.H.-based RewardsNow for the past six years has served as a reseller of merchant-funded rewards for Cartera Commerce and Affinity Solutions, both of whose customers primarily are national and online merchants. RewardsNow links their turnkey rewards initiatives to the debit and credit cards issued by some 250 community financial institutions.

Among RewardsNow's customers is Co-op Financial Services, whose ShoppingFLING program enables credit unions to offer a merchant-funded rewards program tied to their debit and credit cards, leveraging an online shopping portal to earn cash back for members. 

But working with national and online merchants' rewards programs hasn't helped community financial institutions capitalize on their close ties with local merchants, Steve VanFleet, president and CEO of RewardsNow Inc., said in an interview.

"We realized we needed a platform and partner that was more efficient in signing local merchants almost in a self-serve, menu-driven way, and to give the merchants more of an opportunity to build programs for themselves," he says.

RewardsNow will work with local issuers to solicit their recommendations to merchants they work with in the hope they will participate in its rewards program. The local-merchant initiative from RewardsNow and Zavvy is just now getting started.

Zavee is able to board merchants into the rewards initiative within 15 minutes, and it can provide more than 20 different offers or deals as options to meet their specific business needs.

RewardsNow and Zavee provide local print advertising, coupons and mailers to help merchants promote their offers. Zavee's platform includes a tool to help distribute news releases and other content via social media, and shoppers may share their reviews and recommendations through Facebook and Twitter.

The companies also can tie rewards redemptions to merchants' gift cards, thus driving more return visits, VanFleet says.

When a participating cardholder makes a purchase, merchants pay 7% of the gross transaction amount as the typical base cost. They also may incur some setup fees depending on how customized they want their program. Fees also can vary by market, Stack says.

"As marketing costs go, that's pretty reasonable for local merchants," he says. "We provide a terrific complement if not an alternative to traditional local merchant marketing media."

Because RewardsNow and Zavee, which launched in late 2009, have relationships with processors, they can provide merchants far more data than they would get from a coupon, Stack says.

Moreover, merchants can design their promotions based on different ZIP codes to see where offers might have staying power because of their effectiveness, Stack says.

The companies are designing a mobile application that should be ready in the fourth quarter. Besides all the aspects of the RewardsNow program, likely functions will include push notifications of merchant offers and the ability for consumers to post merchant recommendations from their phones, Stack says.

Madeline Aufseeser, a senior analyst with Aite Group of Boston, says the companies' strategy to link local issuers with local merchants makes sense.

"It's a much better model for merchants than a Groupon or LivingSocial model," she says. "The business model is totally different."

Merchants pay for performance, whereas with Groupon they're giving up to 75% of the sale price with no guarantee of or ability to track repeat business, Aufseeser says.

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