Best Buy Looks to Startup edo to Combat Black Friday 'Showrooming'

Startup Links With Banks to Tie Deals to Credit Cards

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Every November, as retailers dig deep into their bags of tricks, battling each other and their online counterparts for your wallet, the demand for innovation often sparks collaborations with new startups and their novel technologies.

For Best Buy, this means partnering with Nashville-based startup, edo Interactive, which specializes in "card-linked offers." These are deals tied directly to customers' credit cards through partnerships forged with banks, such as Ally Bank and Fifth Third Bank, two of edo's current collaborators, which consumers can redeem just by swiping said credit cards.

While there are many marketing tactics, apps and startups focused on delivering deals to consumers, edo is different because it requires the bare minimum effort of the part of the consumer. Once the offer is linked to the credit card, there is no other requirement, no additional card or code or coupon. It keeps the customer's existing routine intact without adding extra steps.

Here's how it works:

The marketer can offer highly targeted deals to a specific set of consumers, based not (just) on demographics, but on purchase history -- data gleaned from those bank partners. The targeting criteria will reflect the goals of the specific retailer, be it limited to just new customers or perhaps increasing the basket size for existing patrons.

The banks are responsible for communicating the deal to the consumer through web and mobile channels. For them, this is seen as a "value add" -- a benefit exclusive to their card members and something those banks can tout as advantage over competitors.

For the consumer, the key is simplicity. Upon receiving the notification from the bank -- via email or directly in the mobile app -- all the user has to do is accept the deal. And because it's tied directly to a credit card they're already using, there are no special codes -- alphanumeric, QR, or otherwise -- no coupons to clip or loyalty cards to dig up. Just swipe your card as you normally would.

When it comes to user behavior, laziness trumps all, which is why cumbersome apps and confusing QR codes haven't caught on.

One of the retailers that has tried edo is one of the most-afflicted by "showrooming," where consumers browse the physical store only to make a purchase online.

But you never really know how consumers will react to new technologies, which is why rather than testing this on Black Friday, Best Buy ran a trial program back with edo in May, aimed at both driving new customers and lifting basket size. Of those who redeemed the deal, 80% were new customers, 25% of whom came back at least once within 90 days, without further incentive, according to edo VP-Marketing Jeff Fagel.

Best Buy didn't respond to a query and thus didn't confirm the accuracy of those numbers, but the electronics retailer is planning to launch an expanded version of the program on November 26, which says something about how the initial program performed.

Edo isn't just good for big retailers during holiday-shopping season; it also works well for smaller niche players and can be a valuable tool all year long, according to Emery Skolfield, the senior director of e-commerce for The Body Shop.

"As a smaller-sized retail brand that doesn't have tremendous awareness in U.S. market, we are always looking for opportunities to get in front of consumers in ways that are A) convenient for them and B) close to sale," he said.

Mr. Skolfield said edo's card-linked offers have proven effective for The Body Shop since implementing the card-linked offers in March, as a measurable, easy-to-implement alternative to physical displays that point people to the store." It's e-commerce, but it drives foot traffic and it's measurable -- as opposed to a sign outside the store," he said. "Being a smaller entity without major technological muscle, we look for programs like this that are simple to integrate but can make a big impact. We can't make three custom-built iPad apps, but we can look for programs like this that give an advantage."

In September 2012, edo announced $15 million in series C financing led by VantagePoint Capital Partners with participation from Baird Venture Partners, bringing the total funding to date to $54.3 million. The five-year-old company works on a pay-for-performance model and merchant partners have included Nordstrom, Target , Subway, Crate & Barrel and The Home Depot.

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