Spring is a privately held advertising technology company that offers merchants a new way to implement customer loyalty and rewards programs, as well as to link digital advertising to in-store consumer spending. The company was founded in 2013 by CEO Bruce Mitchell and COO Jonathan Dyke. In the same year, the company raised $2.3 million in seed capital from Chicago Ventures, a venture capital fund that targets technology startups in the Midwest. Prior to forming Spring, Mitchell founded Apartments.com and worked in product development at Groupon.

The Spring Platform

Spring's business is founded on a software platform that enables any consumer to link a debit or credit card to any retailer enrolled as a Spring merchant. Once a consumer links her card to a particular retailer, the Spring platform automatically tracks all of her future spending at that retailer. The purchase tracking takes place in real time and is accomplished through strategic partnerships with Visa, MasterCard and American Express.

This purchase-tracking capability effectively transforms a consumer's payment card into a loyalty or rewards card, eliminating the need for separate membership cards and special rewards accounting software. Rather, a merchant can define a rewards program and allow the Spring platform to administer it automatically. For example, consider a coffee shop rewards program that provides 10% cash back after every $100 in spending. As a participating consumer makes purchases over time, they are recorded in her account and the merchant's account on the Spring platform. Once the consumer spending reaches $100 spent, the platform automatically issues a $10 credit to her payment card.

The Spring platform does much more than administer rewards programs. Merchants can use the platform to create and send carefully targeted digital advertising campaigns, including special offers, coupons or other incentives. The platform tracks the results of the campaign automatically as customers respond by redeeming offers and making other purchases, providing detailed insight into the immediate and long-term effects of a campaign. For example, a restaurant can use the platform to identify customers who haven't made purchases in 90 days and then send out digital coupons to entice them into returning. By monitoring results, the restaurant can refine its enticement to maximize returns.

Merchants who develop large Spring-affiliated customer bases can easily target all kinds of different market segments, including new and lapsed customers, customers who frequent particular retail locations, big spenders, small spenders, weekend or weekday shoppers, or other segments. Spring campaigns can be initiated through virtually any digital platform, including Facebook and Google, as long as the recipients are, or are willing to become, Spring members.

How Spring Makes Money

While Spring is free for consumers, merchants must pay to use the company's platform. Merchants pay a monthly fee, reported as $250 per month in 2015, plus a percentage of the retail revenue generated by special offers and digital advertising campaigns launched through the Spring platform. Spring contracts directly with businesses in its markets and does not make detailed pricing information public. As a privately held company, Spring does not release financial information.

As of February 2016, the company has 426 participating merchants in Chicago, its initial market, and 81 in Nashville, which it entered in February 2014. By the end of 2015, the company had started operations in 12 additional U.S. cities, but as of February 2016, no other city has more than four participating merchants. With success in its current expansion round, the company plans to enter every major market across the country.

Competition

The Spring business model targets digital advertising and e-commerce businesses such as Groupon, which operates a coupon marketplace, and Belly, which offers a digital customer loyalty solution for merchants.

Spring's loyalty and coupon services are essentially frictionless and invisible at the point of transaction. Consumers do not need to present paper or digital coupons as they do with Groupon, nor do they need to present paper or digital loyalty cards as they do with Belly.

Spring collects real-time spending information to track the actual performance of a loyalty program, a coupon offer or a digital advertising campaign on a customer-by-customer basis. Since customers are linked to the system by their payment cards, purchase tracking is handled in the background, automatically and invisibly. If Spring can gain a critical mass of participating merchants across the cities it serves, it has the potential to upend this sector of the market and become a serious threat to Groupon and Belly.

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.