Targeted Shopping Solutions (TSS) has developed the first combination sales promotion and loyalty card for small businesses processed by MasterCard®. The TSS ShopMyNeighborhood® Rewards Card is a front-runner in the emerging loyalty and transaction marketing space identified by BIA/Kelsey, our marketing advisor.

We market SMN as a white label platform to organizations already helping small businesses grow and prosper, such as community banks and Chambers of Commerce. SMN becomes the centerpiece of a Buy Local campaign that for the first time actually rewards neighbors for buying from local businesses.

For independent local retailers and service providers, this is the first do-it-yourself targeted marketing platform to create and measure sales promotions to acquire new customers and reward loyal customers as part of a local coalition of merchants in a Buy Local campaign.

For consumers, it's the first multi-merchant rewards card they can use to try out and support local businesses and be rewarded for buying local. Using the card also gives back to the community. One percent of each purchase is donated to a participating local cause chosen by the consumer.

While the SMN Rewards Card is the core of the program, we’ve developed a rewards and account management mobile app. The app also acts as a key small business marketing platform through a geolocation directory and geofencing notifications, and can also transact mobile payments with no changes to merchant point of sale terminal.

MasterCard is supporting our offering with a five-year agreement, full card BIN, and significant phased marketing funds over the term of the agreement. Over $7.5 million has already been invested in proprietary technology and pilot programs. TSS is seeking to partially complete a Series A round with this fund raise. Once completed, we already have organizations interested in the Series B fund raise of $3 million to $5 million to expand nationally in 2015.

Since 2008, online deals offered by Groupon and Living Social have provided a new way for businesses to attract first-time customers. But the high cost of acquisition and lack of repeat business makes it unworkable for small businesses.

Digital loyalty solutions sprung up at about the same time. Dozens of offerings from companies like Perka, Belly, FiveStars, LocalBonus, etc., provide smart phone apps that act like digital coupons and loyalty punch cards.

Many of these solutions depend on the penetration of smart phones into the marketplace, as well as savvy users for app awareness and program adoption. Others depend on additional expensive POS technology upgrades or new POS software for implementation. Almost all of these solutions were designed for national companies trying to gain local business.

While there may be no shortage of solutions to get customers in the door and reward them for repeat business, local businesses have a need for something that’s simpler, more effective, and less expensive than what’s currently available.

Local business owners are looking for a solution that’s easy to implement for ALL their customers, uses their existing POS technology, only costs them when they make a sale, they can manage themselves, and automatically measures results to evaluate ROI.

The TSS ShopMyNeighborhood® (SMN) program is a low-budget high-impact targeted marketing solution for any small business that accepts MasterCard. At the core of the program is the innovative ShopMyNeighborhood Rewards Card. It’s the first and only multi-merchant stored-value/debit card administered by MasterCard that operates on the Card Association Network independent of the form of payment. It’s just like the big buying club cards—swipe your card first, then pay.

The SMN program recognizes the shopper with the swipe of the card at any credit card terminal that accepts MasterCard, then awards and disburses rewards in the form of Neighborhood Cash™, the SMN equivalent of stored dollars. The Neighborhood Cash rewards collected on the card are earned and applied to purchases through daily settlement on the Card Association Network as if this were a MasterCard prepaid card. Here’s an illustration of how it works:

In addition to our SMN Rewards Card, shoppers with our mobile app can earn and redeem rewards on their smartphones, even pay with it using our innovative technology. The app also promotes SMN Merchants to shoppers using a merchant geolocation directory, and geofencing push notifications of promotion offers.

With our mobile payment option, shoppers can complete their purchases using their smartphones with QRC or NFC location technology. Payment is tied into their community bank checking account. The SMN mobile payment option allows local merchants to compete with large retailers to accept mobile payments without requiring new hardware or software.

Importantly, the program records SMN purchase transaction data for later analysis. That means SMN merchants can develop their own sales promotion program to attract new customers and reward loyal customers based on their own transaction data combined with independent “big data” we can provide. They choose when a promotion starts and ends, what rewards they offer, to whom, and for what. Then they monitor the results of the program in their SMN account online.

Key merchant benefits of the program include:

• No upfront costs. Merchants only pay a small fee when a qualified SMN purchase is made.
• Merchants market directly to their neighborhood, not the whole metro area or even a Zip code. No wasted money advertising to people who will never be their customers.
• TSS offers email campaigns for merchants to target local shoppers by demographics; location; and purchase type, recency, and frequency.
• The program doesn’t require new hardware, software, or changes in normal procedures (no training).
• Merchants can track results in near real time to measure program effectiveness and ROI.

Adding to the power of this program is that it’s a rewards and loyalty program for ALL the merchants in the neighborhood. So merchants can share in the loyalty programs—and shoppers—of fellow merchants, while neighbors are rewarded for buying locally at Main Street businesses. SMN helps small businesses effectively compete in marketing against huge retail chain marketing campaigns, thus improving their chances at growth.

For shoppers, it’s easy to join and fun to participate. SMN Shoppers don’t have to clip or print coupons, or load store-specific offers onto a card-linked credit card. They only need to carry one loyalty card — the SMN Rewards Card (or optional SMN mobile app)— to earn and redeem rewards at all the participating merchants in their community.

SMN shoppers can decide when and where to redeem their rewards using their account on the SMN shoppers website or mobile app. For example, rewards can be applied with every SMN-qualified purchase, or stored up for use all at one time.

The general marketplace for SMN looks like this: There are approximately six million small businesses with employees. Half of small businesses accept credit cards and 98% of those accept MasterCard. Half of all retail sales are made by independent small businesses. Finally, American shoppers want to support local merchants. According to a Public Affairs Pulse Survey, 88% of adults have a favorable view of small businesses. Fifty-three percent have a very favorable view of small businesses.

TSS acquires these small businesses into the SMN program through strategic local channel partners that are already helping small businesses grow and prosper, such as community banks.

TSS offers community banks a turnkey ShopMyNeighborhood Program to help local businesses grow by initiating or supporting a community Buy Local campaign. SMN includes all the back office infrastructure, websites, and marketing materials to easily start and sustain a Buy Local campaign.

TSS helps its partners market the program to acquire new shoppers through traditional mass media, targeted advertising, social media, community groups, channel partners, and SMN merchant POS sales materials. They sign up for free on the SMN shopper website.

For existing SMN shoppers, TSS promotes local merchant rewards programs through its SMN shopper website, an opt-in email program, mobile app geolocation directory, and geofencing opt-in push notifications of nearby offers. Overall program awareness and image promotion is handled by TSS on behalf of participating merchants at no charge, other than the SMN transaction fee.

The ShopMyNeighborhood program is a real opportunity for community banks to provide a tangible value-added service that helps their small business customers compete more effectively with national stores. Research from an Institute for Local Self-Reliance 2012 study shows that 79% of participating merchants in a Local First initiative say they benefited, and 68% said they gained new customers. Average revenue increase was 8.6% for participating businesses compared to 3.4% among other businesses.

In addition to pay for performance and no changes to POS, another key differentiator of ShopMyNeighborhood’s program is the ability to capture sales promotion and loyalty program transaction data at POS through our strategic relationship with MasterCard. This allows merchants to build targeted marketing campaigns that they can manage and monitor themselves. For example, they can target specific SMN system shoppers with opt-in email campaigns based on demographics, geography, types of purchases, and recency/frequency of purchases.

Another key differentiator is the built-in charitable giving. Merchants donate 1% of purchases to local community groups and charities that the shopper chooses from a list of participating organizations. By bringing local shoppers to local merchants, the program also supports local causes.

TSS does not charge upfront fees, monthly subscriptions, or require costly POS hardware or software for the SMN program. This is a strictly pay for performance revenue model. Merchants are charged a 3% to 5% transaction fee per purchase captured by MasterCard at the POS. Importantly, each SMN transaction earns the sponsoring bank a percentage of the purchase amount transaction fee for revenue diversity and additional income.

For the SMN transaction fee, merchants receive a complete targeted marketing and loyalty program that they manage themselves through a powerful SaaS back office. They also get promotion of their deals and loyalty program rewards to the community and targeted shoppers at no extra charge.

Targeted Shopping Solutions, Inc. is a Denver-based private company formed in January 2008 to develop, test, pilot, and launch a national loyalty and transaction marketing solution for the small-to-mid-size business retail market.

TSS acquired the assets and intellectual property of its predecessor development company and completed major market pilots from 2008 to 2010. During the last quarter of 2011 and first half of 2012, TSS certified major enhancements to its platform in Jacksonville, Florida, including the ability to process on the Card Association Network via MasterCard®.  In late 2013 a test rollout began in the south suburbs of Denver. Based on the results of this test rollout, expansion nationally will begin in early 2015.

The investment we seek will continue our go-to-market strategy for Buy Local campaigns through community banks and Chambers of Commerce, as well help us complete the full functionality of our mobile app. An attractive growth and ROI will result from this additional investment in market growth.

Over the past eight years TSS and its predecessor R&D company have invested $7.5 million in its proprietary, patented technology and business model development. MasterCard is supporting our offering with a five-year agreement, full card BIN, and significant phased marketing funds over the term of the agreement. TSS is seeking to complete a Series A round with this fund raise. Once completed, we already have organizations interested in the Series B fund raise of $3 million to $5 million to expand nationally in 2015. A Term Sheet is available upon request.