There is a digital gold rush in the loyalty reward space and the impact on the fashion industry (consumers, brands, retailers, and investors) has only just begun. This week, SFFT sat down with Bob Tekiela, co-founder and CTO of 500friends. 500friends is a social loyalty platform that allows retailers to leverage social behavior to create brand loyalty.  The apparel industry is in their target cross-hairs and the recent partnership between 500friends and INDi may just be the wave of the future for retailers. Brands, retailers, social media, investors and consumers should all be paying attention.

1. 500friends recently closed a Series A round for $4.5 million -congratulations – this is an achievement that many startups dream of. How did the original concept of 500friends come about and where did the name come from?

500friends was founded to help increase consumer loyalty. We knew that loyalty was a significant pain point for retailers, who often have customer who buy only once or shop without buying, and we saw that social media could transform loyalty programs. We developed LoyaltyPlus™, a white-label, next-generation loyalty platform to enable retailers to convert shoppers into loyal customers and loyal customers into brand advocates by providing a unique and engaging customer experience. The name “500friends” reflects the powerful social dimension we bring to loyalty programs. “Friends” because we’re social, and “500” because it’s a magic number in social networks.

2. Can you explain what makes 500friends different from a traditional loyalty reward program (i.e. where one dollar equals one point) for a fashion retailer, and, if so, are there any examples you can share with us?

500friends’ social loyalty platform offers three major differentiators. First, it rewards consumers not just for purchases but also for brand advocacy. Second, it incorporates monetary and social motivators. And last but not least, it makes launching loyalty programs easy and affordable.

Traditional points-for-purchase loyalty programs focus on increasing lifetime value of a customer, and there is nothing wrong with that. But we believe there is a newer, better way of thinking about the value of customers that takes into account what they spend and whether they influence others. Some customers are “spenders” while others are “talkers,” and some are good at both. We see customers that create more impact by influencing others than through their own purchases. Great social loyalty programs encourage both “spending” and “talking” to maximize the total value of customer relationships.

An example of a program in action is INDi Club, the social loyalty program launched by INDiCustom.com, an innovative retailer that enables customers to design and tailor premium jeans online for a perfect style and fit. INDiCustom designed INDi Club to reward their customers for a broad set of sharing and shopping actions.

3. Consumers that serve as influencers are particularly important to the fashion industry; can you explain how 500friends provides tools for retailers to identify and engage influencers?

Any consumer can potentially become a brand ambassador and influencer. LoyaltyPlus™ makes it natural for consumers to share a purchase or ask a product question, encourages writing reviews and answering questions, and stimulates referrals. To accomplish this, LoyaltyPlus™ employs a broad set of motivators to drive exceptional levels of customer engagement. Social motivators such as badges, leaderboards, and public mentions augment traditional rewards or financial incentives. Badges reward customers with visible recognition of accomplishing specific goals. Leaderboards highlight top influencers (based on referrals), the most helpful (based on answers), and the most engaged (based on the overall program participation). Public mentions can feature a “customer of the month” or contributions such as the best review or the most insightful feedback. Extraordinary contributions of a member can be rewarded with points.

4. 500friends allows consumers to earn points for actions, can you describe how different actions have different effects, e.g. drive new traffic or increase customer retention?

Virtually all actions increase retention, as increasing the number of customer touchpoints has a stimulating effect. These higher engagement levels translate into a tighter connection with a brand and lead directly to increased purchase frequency.

Many actions have these benefits and also drive additional traffic. Examples of traffic-drivers include tweeting about a shopping experience, sharing a purchase on Facebook, uploading a product photo on Pinterest, and sharing a deal with friends via email. Encouraging social engagement is a virtuous cycle for retailers: customer retention goes up, and so does traffic.

5. Reward programs can drive traffic or increase retention, where has 500friends seen the most success, and, what have you learned about consumer behavior?

Traditional loyalty programs have focused purely on retention. Social loyalty programs excel at increasing retention, and they add a customer acquisition component. Social chatter and the buzz it generates have an amplifying impact that drives traffic. There is also the direct impact of referrals. We have made it very easy in LoyaltyPlus™ to encourage and track customer referrals, which is a very cost effective acquisition channel.

6. 500friends allows retailers to give customers points for a variety of actions -beyond the obvious, what kind of data can retailers learn from these tools?

The LoyaltyPlus™ Dashboard emphasizes measuring the success of a program by studying enrollment and engagement rates, monetary contribution, changes in average order value and purchase frequency, buzz generation, and referral impact. These advanced analytics are crucial to maximizing program value. Additionally, examining data at an individual customer level can identify patterns such as the correlation between social engagement and purchase behavior. In turn, this knowledge will help develop new engagement strategies. Leveraging the most influential customer posts can help a marketing organization develop new messaging.

7. 500friends offers a unique reward system to segment customers, especially to identify influencers, a group particularly important to the fashion industry -can you describe how retailers can leverage the 500 Friends platform to engage influencers to grow their business?

LoyaltyPlus™ Reporting makes it very easy to identify core customer segments such as the most influential customers or top reviewers, and this data can be incorporated into re-marketing strategies. For example, these customers can receive additional rewards through the platform, or they could be given access to a VIP section of a site featuring exclusive access to highly sought-after products. Both of these examples are very targeted ways to increase the loyalty while simultaneously driving repeat purchases.

8. There has been a lot of growth in customer loyalty-reward programs, especially on mobile devices. Does 500friends have plans to go mobile, and, if so, what challenges and opportunities do you foresee?

LoyaltyPlus™ works extremely well on the web. Extending our platform to the brick-and-mortar world means two things: mobile and point-of-sale integration. The benefits of mobile are obvious – giving consumers a tool to engage at a time and place of their choosing. The combination of maturing technologies and high consumer adoption rates make mobile an easy bet to make. Point-of-sale integration is more of a challenge because of the older platforms deployed in many stores are both hard to integrate with and expensive to replace.

9. New tools and services, e.g. Amazon EC2, are allowing entrepreneurs to launch products and tools faster than ever in the fashtech space; what areas excite you and how do you think the fashion industry can leverage these new tools?

Imagination and talent are the only barriers to launching new software products nowadays. With angel funding, a team of three people built the core LoyaltyPlus™ product in three months. Only a few years ago, the same endeavor would have required a much larger team and significantly more investment. What makes this fast pace of innovation possible is highly productive development tools, cloud infrastructure, the wide variety of tools available in a Software-As-A-Service model, open source technologies, and vibrant developer communities. This tremendous ecosystem allows a startup to focus purely on adding value. 500friends will continue to rapidly innovate, guaranteed.