Texas restaurant chain Mama Fu’s tries a cash-back loyalty program to increase its customer base

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Baseball, like most team sports, creates a bonding experience. Not just on the field, but in the stands as well.

On the youth baseball diamonds of Austin, Texas, Randy Murphy could often be found watching his teen son play. During games he would often chat with another dad, Ryan Wuerch. In between cheering and encouraging their kids, Murphy and Wuerch would talk about work.

Murphy, the CEO and president of Mama Fu’s Asian House, a 26-unit fast-food Asian cuisine chain, related how he was trying to get a handle on his stagnant loyalty program. The founder and CEO of Dosh, Wuerch proposed that Murphy look at his company’s app-based cash-back loyalty program.

Begun in 2016, Dosh has earned some buzz for its simple concept: Connecting retailers and consumers with sometimes generous cash-back offers and providing management with copious amounts of data to track their marketing efforts. Participating merchants include giants such as Neiman Marcus, Target and Nike, as well as smaller retailers.

“It seems the time for the traditional loyalty card has passed,” Murphy says. “Consumers want ‘simple.’ They don’t want wallet or keychain cards or a bunch of individual store apps to download. They’re annoyed by giving out their phone number at the point of sale, and they definitely don’t want rewards that are worth very small or hard to access. That’s what attracted me to Dosh — it’s cash back when you buy something, which is easy for anyone to understand.”

EXPANDING THE LOYALTY BASE

Designing the Dosh app as a seamless, simple consumer experience was the goal for the company and has driven its rapid growth. There have been more than 2 million card-linked subscribers of the app since early 2017, and Dosh paid out $33 million in rewards cash to users in the first nine months of 2018.

The process is straightforward. After a consumer downloads the app and links it to their credit or debit cards, anytime they use their cards in a participating merchant’s store they receive a percentage of the total, ranging from 1.5 to 10 percent. Dosh then adds in a percentage to cover its fee. Once a user has a total of at least $25, the money can be transferred into the consumer’s bank or PayPal account; they also can choose a charity to receive the money.

“The most exciting thing is that it rapidly expands a merchant’s loyalty base,” says Brad Brodigan, COO and president of Dosh. “In traditional loyalty programs, you generally have your most true-blue customers. But Dosh attracts even the casual consumer because of the cash-back reward. It drives those return visits.”

At Mama Fu’s, the process of on-boarding Dosh took “a week, maybe a little more,” Murphy says. “Starting in May of 2017, we provided them with our merchant IDs, which allows them to connect to Dosh users when they visit our stores, and we gave a general overview of the program to our managers. After that we’d just get reports about how much we were paying to customers and profiles of those customers.”

Because of its design, there’s little or no staff training required for merchants. The program is tied to the consumer’s credit card, so it works like a credit card cash-back program, Murphy says. “They don’t need to pull out a loyalty card or give the sales associate a phone number, which keeps the line moving.”

Since starting the Dosh program, Mama Fu’s has found Dosh users are up to 38 percent of their repeat base, which makes sense since the most loyal customers will be interested in the reward. “Also, we see that our Dosh customers spend an average of 10 to 15 percent more,” Murphy says. “So they enjoy our product enough to spend some of their rewards on it, which is encouraging.”

One aspect that Dosh works closely with retailers on is figuring out what percentages motivate customers’ behavior. From working with a variety of merchants in a number of categories, Dosh has been able to amass a large amount of data showing how consumers react to cash-back offers. As expected, when a retailer increases its cash-back percentage, it tends to increase purchases from Dosh customers. Figuring out how much of an increase, though, is a science.

“When we look at our proprietary data and combine that with third-party data, we can create some very accurate predictions of how people react to cash back,” Brodigan says. “Some retailers may find that 3 percent is a sweet spot to move their share of the wallet. But a competitor may find that 3.5 percent works best for them. Some merchants don’t see a significant number of new customers until they hit 10 percent. It all depends on their marketing goals at the time.”

REACHING NEW CUSTOMERS

While some retailers look for Dosh to increase return visits and larger sales-per-visits, Mama Fu’s interest was primarily in reaching customers that hadn’t walked through the doors before. “We knew there were plenty of people we were not reaching who could become regular customers if they had a little nudge to try us out,” Murphy says.

“We’ve toyed with how much cash back to give out. At the moment it’s 7 percent, and that’s the best figure for us, at least for now,” he says. “Larger amounts seem to affect our margin and of course the lower you go, the fewer Dosh customers are going to buy from us.”

When it did reduce the cash back slightly, the Mama Fu’s team saw an interesting anomaly: The average ticket for Dosh users went up compared with previous weeks when they were getting more rewards. “We’re not sure why, but that’s something we want to delve deeper into,” Murphy says. “Once we get more into demographics and customer motivations, we’ll be able to really strategize our marketing.”

As use of the app grows, the number of “hardcore” Dosh users who flock to merchants with larger cash-back offers would be expected to increase. “It really bakes in loyalty,” Brodigan says. “With one of our bigger retailers, we’ve seen Dosh subscribers visiting the store 29 percent more and spending 60 percent more per visit compared with non-subscribers.”

One downside for retailers looking to Dosh as a loyalty program replacement is that they share the platform with other merchants. “People see you with other brands, which means you don’t control the channel to those consumers who are most loyal to you,” Murphy says. “On the other hand, you’re participating with a large number of other popular brands, so the customer who joined because of Sam’s Club has an incentive to try your restaurant.”

As for the future, Brodigan sees Dosh’s approach as a challenge to advertising networks. “It’s a cost-effective way to acquire and keep customers, which is the goal of advertising. As our networks become more sophisticated, we can target particular hours or days with higher bonuses. It’s a better way to attract customers — who doesn’t perk up when they hear ‘cash back’?

“We see this method of driving digital spending to in-store transactions as a massive improvement to advertising,” Brodigan says. “It’s 100 percent tractable and shows exactly what a marketing campaign can do.”

John Morell is a Los Angeles-based writer who has covered retail and business topics for a number of publications around the world.

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