PORTLAND, Maine — A Portland tech startup has entered the online coupon space pioneered by giants such as Groupon and LivingSocial, but with a twist its founders say sets it apart.
Birthday Coups, as its name implies, focuses on birthday coupons. Chuck Drew, a 27-year-old Web developer in Portland, built the online platform as a way to allow businesses to send coupons to customers on their birthdays.
Like Groupon and LivingSocial, Birthday Coups focuses on online coupons, but that’s where the similarities end, according to Merritt Carey, Drew’s co-founder.
While using Groupon may have its benefits, many small businesses have found the experience underwhelming or even harmful, with results being a short-term rush of bargain shoppers rather than attracting customers for the long term. Birthday Coups will help foster loyal customers and drive sales 12 months a year, says Carey, who runs a marketing firm and is former head of Maine Businesses for Sustainability (she stopped leading the group in September to focus on Birthday Coups).
“Where we’re really looking to help is with current customers and making them happier, rather than getting a bunch of bargain hunters through the door who may or may not have any interest in your products,” Carey said.
The service is straightforward. Birthday Coups sets a business client up with an online dashboard where they can manage their email list and decide what type of coupon will be offered. The system automatically emails coupons to customers on the first day of their birthday month. Right now businesses need to manually track when customers redeem their coupons, but this will become automated in the future and at that point will offer valuable business data about redemption rates and what type of coupons perform best, Carey said.
Clients with fewer than 500 names on its mailing list get to use the service for free, while companies with between 501 and 2,500 customers pay $29 a month. Beyond 2,500 there’s an incremental pricing system that tops out at $129 a month. Carey says the business model calls for about 70 percent of Birthday Coups customers to use the service for free, while roughly 30 percent will pay a fee. She expects to have 50 to 70 customers by the end of the year — “though that feels like a tall order now” — and be profitable in 12 to 18 months.
Birthday Coups has been in beta mode for about the last six months, but already has signed up about a dozen clients, including Bard Coffee in Portland, Royal River Books in Yarmouth, GrandyOats in Brownfield, Mad Gabs in Westbrook, and Avena Botanicals in Rockport. So far, it has three paying customers.
Also, by virtue of its online home, the company is not restricted by geography. Without doing any marketing, Birthday Coups has signed up restaurants in Chicago, North Carolina and Texas, and a spa in South Africa, Carey said.
One of Birthday Coups’ first customers was Rosemont Market and Bakery, a neighborhood grocery with three locations in the Greater Portland area that has been using the service since the first of the year and has more than 600 people on its mailing list.
Joe Appel, Rosemont’s communications director, said Birthday Coups was immediately attractive because it focuses on building existing customer loyalty rather than attracting bargain shoppers.
“That was our reason for early on rejecting any sort of Groupon situation, because it became clear when we looked into it that most people are just coupon surfers and it’s not really about loyalty, it’s not about building a community around a business,” Appel said. “It’s just about getting a discount.”
Birthday Coups “is more about rewarding regular good customers,” he said. The coupon Rosemont customers receive in their inbox is for 20 percent off their next purchase, and Carey said the store’s redemption rate is between 45 and 50 percent.
It’s not just brick-and-mortar retail stores that are signing up. Another new client is New England Outdoor Center in Millinocket, which offers seasonal activities such as whitewater rafting and cross-country skiing, as well as lodging and a restaurant.
The center has more than 50,000 names on an existing email list, but without associated birthdays, so it will send out an email to its list asking people to sign up for Birthday Coups. Once it does it will offer discounts on rafting trips or lodging, according to Wendy Polstein, who handles marketing for the center.
Polstein says the center also uses Groupon and that the two services will complement each other.
Polstein heard about Birthday Coups when she signed up to receive birthday coupons from a few local businesses, including Royal River Books in Yarmouth.
“I thought it was a great way to thank customers and keep in touch,” said Polstein, who also handles marketing for Annie Catherine, a Portland company that specializes in stationary and cards, and another new Birthday Coups customer.
Drew, the Web developer who built Birthday Coups, has had the idea for the business since at least 2009, the year after he dropped out of the University of Maine to launch his own tech startup called Market My Menu, which received grant money from the Maine Technology Institute and Libra Future Fund. That business provided an online platform to allow restaurants to track their customer base and distribute promotional items, including birthday coupons.
While that endeavor failed, the idea for a service to help businesses send birthday coupons stuck with Drew, who is currently a full-time employee at DirectVet Marketing, an online veterinary pharmacy in Portland.
Ultimately, Drew and Carey would like to build Birthday Coups to a point where they could focus on it full time. While they’ve bootstrapped it so far, they plan to seek investment to help scale the business up.
Drew believes the growth potential is there as more businesses look for inexpensive ways to connect, and thank, customers using online tools as opposed to, for example, mailing paper postcards.
“We’re riding that cusp,” Drew said. “A whole lot of businesses are sending birthday coupons via snail mail, so when they start exploring more inexpensive options, we’ll be there to meet that demand.”
Phase two will be to enhance the online platform until it’s fully automated, so a customer could sign up for the service, design their coupons, upload their logo and start sending birthday coupons all on their own. Carey compares it to the automated services offered by Constant Contact and ExactTarget, which allow small businesses to design and send email newsletters.
Carey doesn’t think the business will be ready to start looking for investment until next year. Until then, Carey and Drew will continue to plow in the hours to improve the website and sign up customers, likely without getting paid for it. But that doesn’t faze them.
“Portland is trying to become this tech hub and this is how it’s done in Maine,” Carey said. “People bootstrap it and jump off that proverbial cliff, as they say. I’m getting my parachute out.”