Frozen yogurt is not a new concept. It’s been done before and it’s been done well, so starting a new froyo chain in an already saturated market could have been a risky move. But former investment banker Daniel Kim was used to risk, and waded right in, opening his first Red Mango (www.redmangousa.com) location in 2007 at the age of 30. His youth or former occupation might have been the more notable things about that launch, but now with more than 200 locations nationwide, the meteoric rise of Red Mango to one of the major players — not just in the frozen yogurt space, but in the quick-serve space in general — is what makes his story truly impressive.
So how did a money man launch a yogurt empire? Before the first Red Mango even had a plot of land to break ground on, it had a definitive presence. This was a shrewd move on Kim’s part, who knew that in order to make the brand successful he needed to make potential customers love the product. No big deal, right? Business owners always seek customer loyalty, but the difference was Kim started that process before he really had a brand.
“This was my first restaurant venture so I really didn’t know what I was getting into in terms of building awareness,” Kim admits. “Everything we did was related to making the product. There was a lot of R&D and I had a general idea of when the store was going to open, so I knew I had to build awareness before that.”
Kim’s age and business inexperience might have seemed like a detriment, but in this case both worked in his favor. Coming of age during the social media boom, Kim was well-suited to utilize technology to make his brand a nationwide phenomenon. “I did the only thing I knew at the time, which was trying to connect with customers online,” Kim explains. “That was an environment I was very comfortable in and I had done a lot of that in the past at other companies. It wasn’t really a deliberate decision — it was the only thing I knew how to do.”
Friending in high places
In those early days of the new millennium, social networking was relatively young, but Kim saw an opportunity. He couldn’t yet drive customers into a brick and mortar store, so he drove them to Red Mango’s digital presence. “At that point we had Myspace and we invited people to check out the brand, pictures, and what customers were saying. We also connected with bloggers,” Kim recalls. “It was an interesting process that paid off.” He even went so far as to set up Red Mango frozen yogurt machines in the Google and Facebook offices, before they were the giants they are today. “I had friends who worked at Facebook, Google and Twitter. We were all kind of starting up at that time too and it was a mutual learning process,”Kim recalls.
As an official opening for Red Mango loomed, consumers and businesses began migrating to Facebook and the store’s social presence grew. Red Mango had quite a head start. It was through Facebook that Kim started talking about the opening of the store, getting people excited about potential locations, upcoming flavors, and basically creating a digital experience about frozen yogurt and smoothies that hadn’t existed.
Once Red Mango had a physical location, the next step was to convert his followers into loyal customers. “Loyalty was always something I had an interest in, not because of what it did for the retailer, but because of the technology behind it,” Kim says. “I always thought it was cool to track people’s behavior and basically give them a profile for an offline experience.”
Converting buzz into loyalty
Naturally, Kim didn’t want a traditional method for loyalty, such as the age-old punch card. Kim began to look for solution providers that were forward-thinking and really believed in technology as a way to connect with customers.
Through his research, Kim was introduced to Paytronix (www.paytronix.com). He was impressed that the company was founded by a true “technology guy,” an MIT graduate who knew databases and technology, and was deploying that into the loyalty space, as opposed to the many vendors that had loyalty experience but not enough tech experience to integrate their solution into the POS. “I knew that POS systems would be key to that because it has to be integrated with the way you do a transaction,” Kim recalls.
Currently Red Mango uses Micros (www.micros.com) for its POS and is in the process of switching to its cloud-based SIMPHONY product. “The importance of the POS in my opinion is the flexibility to allow data and information to transfer back and forth from whoever your service provider is,” Kim states. “Fortunately, Paytronix knew who the major players were and they went and built all the relevant APIs for them so all the development work was already there.”
The initial technology rollout was more advanced than the company needed in its early days. “Our loyalty program was probably much bigger than the number of customers we had,” Kim admits. “But it was one of those things that I felt was going to be important to keep in touch with customers, so we just decided to move ahead and forge a relationship with [Paytronix].
Paytronix provides each customer with a digital profile using either their e-mail or their phone number and that becomes their record in Red Mango’s customer database. This allows the company to track customers’ purchases, spending and frequency. At the same time, customers earn rewards for every purchase. Kim decided on a points-based system that rewards 10 points for every dollar. Once they earn 500 points they get a $5 reward. “Basically it’s a 10-percent-off or buy-nine-get-one-free type of deal, but I thought using points as a driver was better because the higher the transaction the more points you get,” Kim explains. “I felt like getting a point for a visit was unfair — sometimes I go in and buy less or buy more. The mission of equality in loyalty was the second reason I wanted to go to a digital system.”
Good “old-fashioned” e-mail
One area that Kim thinks will be more and more important though not necessarily the most innovative, is e-mail marketing. “We think e-mail is tremendously important, but it’s about relevancy,” he stresses. “A lot of brands will go out and just acquire emails or buy them. We don’t do that. We don’t want to play a game of statistics. We want there to be a genuine interest in the brand. I think it’s not innovation, but rather simplification — a tightening up of who joins your database and how you communicate with them that will have the most impact.”
Unlike other companies that have separate email databases from loyalty, Red Mango combines those into one singular program with 1.3 million members. “We believe in e-mail marketing because our users are very engaged,” Kim enthuses. “They are opting in and are electing to give us their purchasing behavior, engaging with us in a way that they’ve
welcomed us to.”
Paytronix does have an email marketing program, but Kim is waiting for the company to roll out a self-service system that will allow franchises and store managers to administer local campaigns on their own based on templates. In the meantime, Red Mango uses a system called Campaign Monitor (www.campaignmonitor.com), an Australian based company that Kim describes as for “techies and agencies that resell services.” The company offers a customized program with responsive design and boasts tracking features, A/B testing and only charges a penny per e-mail. “It does start to add up with that many members, but we love the flexibility,” Kim states. “We will probably move over to Paytronix for local marketing but for national campaigns, and just how sophisticated it is, we like Campaign Monitor.”
The mobile and local future
Currently Red Mango is putting a lot of resources into developing a custom app that they hope to release this summer. “We’ve kind of waited on the app to see where things are going to fall out,” Kim admits. “We’ve seen Foursquare, Twitter, Yelp…all of these loyalty aggregation apps, and there’s a lot out there in the loyalty space that gets confusing to the customer.”
The purposeful delay has enabled Red Mango to understand its customers better. “It’s going to be very simple, but have a lot of features that we know are going to be important to a frozen yogurt customer. That’s priority number one,” Kim describes.
Part of the app development process has been looking closely at location-based technology with couponing and messaging. “We are very keen on working on with technology providers that do that,” Kim enthuses. “We’ve spent a lot of time cultivating our social culture, but as far as innovation goes, I think mobile and local is where our heads are now.”
While Kim wanted to keep some of the impending app’s capabilities close to the vest, he did share his strategy for deciding what key components it should have. Kim put himself into the place of the customer and worked backwards from there, thinking of all the relevant touchpoints that a smartphone would offer. This breakdown included, but is not limited to: being able to take a picture and share it; being able to pay for the product, which would integrate with the loyalty program; being able to look at the menu; store locator; and the ability to order online. Red Mango is working with OLO Online Ordering (www.olo.com) to build the online ordering end. “It’s a very simple program that touches on all those features,” Kim shares. “We think it’s going to be something that’s pretty cool for the industry. We’re not trying to complicate processes. I hate complexity when it comes to technologies. It will be highly relevant and targeted to the customer.”
While Kim feels that location-based technologies are an important part of marketing for the future, he stresses that it should be tied to loyalty. “If someone checks in on Foursquare or Facebook, we’re in the process of tracking that and converting that to leads,” he acknowledges. “We are trying to connect that checking-in process to be a more immersive experience that you can only get with loyalty.”
The frozen yogurt franchise landscape is not only competitive, but it is a mature space as well. The Red Mango strategy from day one has been to elevate the experience beyond what people were used to.
“The importance of bringing life and personality into our brand has been a driving factor of our success,” Kim explains. “A lot of other brands didn’t have a face or voice or active digital presence because at the time the technology was not available to take advantage of it. Fortunately we started at a time that we fell into the life cycle of digitalization and aligned ourselves with that growth. It’s given us a lot more brand power than other brands that have been around a lot longer.”
As an entrepreneur Kim admits he is constantly on the lookout for ways to improve things. If he could wish for a superpower it would likely be the ability to predict what customers are going to like. Until that wish is granted he believes technology is an effective way to do that. “It’s a challenge that doesn’t grow because we get larger — it gets more important because product rollouts get more important as our system gets larger,” Kim says.
Ultimately Kim believes it’s about quality, and that must transcend both the physical and online worlds. “Once there is a disconnect between who you are online and what you get in the store, that’s when things fall apart.”