The rapid proliferation of buy now, pay later (BNPL) as a payment method has undoubtedly democratized access to credit and provided an appealing way to manage expenses and access various benefits.
At a time of record high inflation and continued economic uncertainties, BNPL is aiding consumers in acquiring items they’d otherwise save for — a benefit that is also upping average order values and benefiting brands.
However, easy access to BNPL has also brought a complex web of potential pitfalls to light. Easy, interest-free installments tend to make items seem more affordable to consumers, often leading to overspending and accumulation of concealed debt due to the absence of immediate interest.
That is a problem payments startup Catch is aiming to resolve by leveraging debit, low-value transactions, and loyalty to deter debt accumulation.
In an interview with Retail Bum, co-founders of Catch, Nico Perdomo and Denia Ebersole, who previously worked at Affirm and Google, delved into how their strategy is resulting in more transparency and spending empowerment.
“We see the sweet spot for us is typically probably between $50 and $250,” said Perdomo, adding that the company observes an average transaction size of approximately $100, with apparel and beauty emerging as favored categories. So far, the inherent replenishment cycle within these segments has played a pivotal role in driving the company’s achievements.
Focusing on low-value transactions that can be replenished often, particularly in categories like apparel and beauty, offers significant benefits not only for Catch but also for brands and retailers from a loyalty perspective. This strategy is rooted in the idea that consistent, frequent customer interactions can foster deeper relationships, enhance brand loyalty, and ultimately drive long-term success.
For one, repeat customers are more likely to remain engaged with the brand or retailer over time. This consistent interaction helps keep the brand top-of-mind and builds a sense of familiarity, leading to increased customer loyalty.
Moreover, with Catch, users can shop and gain cash rewards across the company’s portfolio of patterning brands, Ebersole said.
“We’ve designed the rewards to be very tangible to the consumer. At Catch, you earn dollars, not points,” she added.
Catch also gathers insights into frequent low-value transactions across a broad spectrum of brands and retailers, who can then leverage this data to understand customer preferences, shopping habits, and buying behaviors. With this information, they can create personalized experiences, targeted marketing campaigns, and product recommendations that resonate with individual customers. After all, personalization enhances the customer experience and fosters loyalty by making customers feel understood and valued.
Perdomo and Ebersole pointed out that since the company focuses on low-value transactions, they work with brands and retailers to create thoughtful and impactful campaigns to encourage customers to pay with Catch.
“We’re thinking about how do we build mini-campaigns with them to figure out how to get customers to buy that lip balm,” said Ebersole.
The loyalty disconnect
In the realm of loyalty, brands, particularly those in the apparel sector, often face a key challenge that revolves around a misbelief: customers are not effectively engaged until they have transacted with them five times.
During this crucial phase, from the initial purchase to the fifth, brands often take a haphazard approach to keeping their customers tuned. Rather than adeptly guiding customers through this journey stage, they tend to lean on widespread promotions — a tactic that often demonstrates reduced efficacy.
Instead, brands need a methodical formulation of rewards that deeply resonate with its customer demographic, notably the younger generation. That is an approach Catch’s solution hinges on, providing customers with palpable and authentically valuable incentives. And it is resonating with customers.
Farmacy Beauty, a Procter & Gamble skincare company, reportedly saw 2x the customer lifetime value (LTV), and 4x of the customers made a third purchase with Catch.
“As an early partner, Catch has been pivotal to retaining Farmacy customers and increasing long-term brand loyalty. And as an added bonus, Catch has helped us acquire new loyal customers, too,” said Tiffany Corpuz, senior director of eCommerce at Farmacy.
Additionally, clothing label PacSun reportedly saw a 92% increase in the rate of customers making return purchases, coupled with an 88% upswing in cumulative customer lifetime revenue (LTR). Furthermore, PacSun observed that 55% more of its customer base completed a second purchase.
“Catch has driven high repeat rates for PacSun and collaborated on marketing campaigns that not only fit within our existing marketing calendar but also appeal to our Gen Z and millennial user base,” said Michael Relich, co-CEO of PacSun.
How Catch makes money
To generate revenue, the company permits customers to directly initiate purchases using their bank accounts or debit cards, accruing a minimum of 5% in-store credit with each transaction.
By adopting this method, Catch’s clientele bypasses the customary credit card processing charges usually borne by retailers. These cost savings are transferred to Catch’s customers through store credit, fostering a cycle of recurring shopping.
Catch applies a nominal charge exclusively to brands when customers utilize the accumulated store credit obtained through Catch for redemption in subsequent transactions.
With Catch’s integration within the financial flow, the company gains a holistic comprehension of not just the customer’s shopping habits but also their spending levels. This strategic position empowers retailers to adeptly tailor offers, capitalizing on the exact insights drawn from the customer’s transactional past.
That said, to stimulate repeat purchases, the Catch team takes a proactive stance, actively monitoring the value of chosen items and completed transactions. They subsequently collaborate closely with their partners, ensuring the promotion of suitable products paired with precisely tailored messaging that resonates with their customer demographic.
“Since we can see how much they’re spending, we can allow the retailer to personalize the offer for a very customized experience,” said Perdomo.
