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November 11, 2013

Simsbury firm’s mobile discount technology targets small business

ConnectQuest’s app, shown above, allows small firms to offer affordable discounts.
By Matthew Broderick

As the owner of Tschudin Chocolates in Middletown, Roberto Lucheme is no stranger to the new realities of mobile-based discounting.

His business, which specializes in high-end gourmet chocolate and chocolate sculptures, has used both Living Social and Groupon to entice would-be customers into his store.

He says those efforts have produced mixed results. That's because small businesses like Lucheme's pay Groupon, for example, 50 percent of the revenues from each coupon deal — on top of the profits they're sacrificing by discounting product.

So Lucheme is testing his luck with a new strategy: geo-tracking — and he's relying on a new technology developed by Simsbury-based ConnectQuest, which offers a lower-cost service than national discount providers like Living Social or Groupon and targets discount offers only when people are within a certain distance of a business.

“With our technology, a person would receive a notification of a sale at a store or a discount at a restaurant as they are within its general vicinity,” said David Moldavsky, founder of ConnectQuest. “The deals you're offered through your smart phone are based on the businesses around you at that moment.”

The magic behind ConnectQuest's location-based tracking is its proprietary transponder technology.

“A business owner would place the transponder in the store window, which would emit a signal to any phone with our ConnectQuest app,” Moldavsky explained, noting his company, which was founded three years ago, has piloted its technology with nearly 100 Middletown businesses.

Location-based services like ConnectQuest have experienced significant growth among American consumers as mobile technology has exploded. According to a 2012 study by the Pew Research Center, more than three-quarters of smart-phone customers use their mobile devices to geo-track everything from their friends' locations to nearby restaurants.

And ConnectQuest has used that consumer tendency to help small business — what Moldavsky calls “mom and pop shops” — use mobile technology to their advantage.

“The reality is that consumers in today's economy want discounts,” said Moldavsky, “but that's not necessarily easy for a small business to offer.”

Any discount on product that a small business offers cuts into its profit margins that, Moldavsky notes, are not typically large to begin with.

“Mom and pops shops typically aren't making 40 to 50 percent profit margins,” he said. “That's why our solution is more cost effective than larger players like Groupon.”

For an average monthly fee of around $20, ConnectQuest offers businesses an opportunity to creatively control its inventory.

“If a business owner wants to move older inventory, they can use our system to discount that merchandise,” Moldavsky explained. “Or perhaps, they can use it to launch a new product.”

Mobile coupons are becoming a larger expectation among mobile users. In fact, according to a recent report from Business Insider Intelligence, mobile coupon use is expected to grow to an estimated 53.2 million consumers in 2014. And their redemption rate, the report noted, is 10 times that of printed coupons, which makes them more effective at bringing potential customers through the door.

Moldavsky sees that as a big opportunity for small businesses — and his firm, which was recently named a tech company to watch by the Connecticut Technology Council.

“There are more than 5 million small businesses in the United States,” he explained. “We'd like to capture 10 percent of that market within the next three years.”

To start, ConnectQuest plans to roll-out its technology in the Northeast region's major metropolitan cities — Boston and New York. Moldavsky thinks the flexibility ConnectQuest offers will drive its success.

“A business owner can set the parameters of his or her program through our website,” Moldavsky explained. “They can set and rotate deals as often as they choose.”

But more important to a small business than a new customer is a repeat customer, and ConnectQuest has developed a loyalty program to address that need.

“We can track the number of purchases a consumer makes at a business and offer loyalty discounts, like purchasing four meals and getting a fifth for free,” said Dean Kloter, head of sales for ConnectQuest. “But rather than having a punch card to record purchase history, our app has a virtual card.”

That sounds great to a small business owner like Lucheme, who is investing in ConnectQuest's geo-tracking app to build customer loyalty.

“We want quality, repeat customers and the ConnectQuest concept is more affordable since we do not have the cash flow to pay for advertising,” Lucheme said.

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