Square started as a cheap and easy way for small businesses to let customers pay with their credit cards when they visit a brick-and-mortar store. Now it wants to help those merchants lure customers into their stores in the first place.

Square has developed an email marketing tool for merchants to stay in touch with customers. Called Square Marketing, merchants will be able to email their customers with offers and other information like product announcements and track how those promotions translate into sales.

Merchants will be able to pick from a few different email templates that are designed for specific occasions like a promotion, product announcement or event invitation. Merchants will have the option to pay $0.10 per email sent through Square Marketing or $15 per month for an unlimited number of emails sent.

After the emails are sent, they will be able to see how many people actually viewed the email. They can also measure the campaign against in-store sales by cross-referencing the people who received a merchant's email with the people who bought something from the merchant.

Square is only able to do this matching for purchases made with a credit card that is swiped through a Square card reader at a merchant's store. However when that condition is met, Square is able to show the merchants the number of sales and net sales revenue directly tied to the email campaign.

In a pilot test of the email marketing tool that started last year, Square said that roughly 1,000 participating merchants combined to register nearly $1 million in sales that can be directly attributed to redemptions of emailed promotions.

"I think being able to really look at how those activities are tying directly to your sales is invaluable. That's something that's eluded a lot of businesses regardless of size," said Square's customer acquisition lead Kevin Burke, who stepped down as Visa's CMO of core products in December to join Square. Mr. Burke said that "millions of small businesses" use Square to process transactions.

While primarily a customer-acquisition tool for merchants, Square Marketing is also a customer- acquisition and -retention tool for Square. It could give added reason for cash-only small businesses to adopt Square in order to process purchases made with a credit card. And offering more than a credit-card reader could help to fend off competitors like Amazon's Local Register that also provides merchants with free devices to swipe credit cards in exchange for a percentage cut of each transaction's price.

Square seems to have found a competitive advantage in addressing what may be a setback for some merchants: An email marketing tool is only useful if a merchant has customers to email. To help with that, Square is able to pull together a list of a merchant's customers from the credit-card transactions performed at the merchant's store using Square.

Square can then categorize those customers into three groups based on their loyalty to the merchant. So the merchant could draft emails specifically for its loyal customers, with another message aimed at casual customers and yet another targeted to people who have become lapsed customers.

Square categorizes a customer as loyal if that customer has visited a merchant's store at least three times within the past six months. Customers who have visited only twice within that six-month period are considered casual customers, and lapsed customers are those who have not returned in six weeks. Merchants are not able to adjust how customers are grouped.