After bootstrapping for the past year and a half, PointTunes founder and president Bill Cunningham is gearing up to launch a digital goods distribution platform positioned towards loyalty reward program administrators.
In essence, loyalty reward programs are a marketing tactic designed to identify and cultivate loyal consumer behavior; the most common example generally include some form of ‘membership’ which incentives ongoing purchases by subsidizing or giving away products and services. And more often than not, these rewards offered are tangible big ticket items.
According to a 2011 COLLOQUY report, there are more than 2 billion memberships across all loyalty reward programs, or an average of 18 per household in the US alone. This translates to $48 billion in value of goods and services delivered each year through these programs.
The primary problem with many of the loyalty rewards programs today can be found in the fulfillment cost associated with the traditional products offered. Take for example, a simple reward item nominally valued between $5 – $10. This product has a shipping cost to the warehouse, a storage cost at the warehouse and another shipping cost to ultimately deliver it to the customer. Now multiply this by millions upon millions of ‘hard’ products typically offered through loyalty rewards programs.
Due in part to the high costs associated with the fulfillment process, and additional attrition, it’s estimated $16 billion of value annually will go unredeemed, according to COLLOQUY data.
PointTunes value proposition is to offer program administrators an alternative distribution model for those increasingly popular digital consumables — such as music, videos, e books and software.
“The biggest opportunity for marketers to is to re-engage with the bottom 80% of the customers enrolled in their systems,” says Cunningham, “That’s where PointTunes will help them collect money they’re leaving on the table.”
The model operates through a bill-on-redemption system, so the rewards program administrator only pays PointTunes a percentage when someone actually redeems his or her reward points. To accomplish this, PointTunes has an API-based patent pending transaction process that converts the dollar value of digital content to reward points native to the specific loyalty rewards program.
Right now, PointTunes is set up to deliver a library of 14 million MP3s and 250,000 to 300,000 e books. While Cunningham wasn’t able to discuss who he’s currently talking with, a deal to deliver movies and TV content is in the works.
“Our goal is to target the low hanging fruit, roughly 100 million (out of the 2.1 billion) active loyalty accounts with with the launch,” he noted.
PointTunes is also high tech division semi-finalist in this years Minnesota Cup business plan competition, which is already connecting the startup to key business people while simultaneously providing exposure and credibility.
“Being selected a semifinalist for the Minnesota Cup this year has been exciting,” says Cunningham, adding that “It’s helping our cause in many facets and it has already expedited our business development as we ramp up for Novembers launch.”