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500friends Inspires Customer Loyalty

In this guest post contributed by the CTO of 500friends, Bob Tekiela talks about the challenges of launching a business on a SaaS platform and how RightScale is an integral part of his company’s ongoing success.

Customer loyalty is a critical ingredient of any successful business, but today’s highly connected world makes loyalty more challenging. As access to mobile and online tools such as product price comparison has become easier, customer retention has become more of a pain point for many retailers. 500friends, where I serve as chief technology officer, developed LoyaltyPlus, an innovative loyalty platform for retail industry, with some help from RightScale to manage the infrastructure.

Building a loyalty platform in itself is not a novel idea, but LoyaltyPlus has several key differentiators:

  1. LoyaltyPlus lets businesses reward customers not only for purchases but also for brand advocacy and influential behaviors. At the core of the product is a flexible rules engine that lets merchants award points for any customer actions they deem important.
  2. The product supports not only financial but also social motivators. Programs offer financial incentives to members in the form of the ability to redeem points for rewards. The product also supports social motivators such as badges, leaderboards, and public mentions.
  3. LoyaltyPlus makes it easy and affordable to launch loyalty programs. All aspects of a program can be configured via an online portal. Integration is light and involves adding snippets of JavaScript code and pixels to an e-commerce site. A web services API is available when more complex system integration or workflow implementation is required.

LoyaltyPlus is a Software as a Service (SaaS) product that takes advantage of the cloud infrastructure to eliminate the need for a capital outlay and make it easy for businesses to scale infrastructure to match software adoption. We built the first iteration of the product with a team of three engineers in three months. We launched our alpha and beta releases on a bare-bones setup – two managed servers. Before we officially launched the product, however, we knew we needed a robust, professional infrastructure.

We considered various hosting options – colocation, managed servers, and cloud. We dismissed colocation because of capital investment requirements. We were tempted to use managed servers, as the application was already deployed on managed servers, but we ultimately chose cloud based on scalability, flexibility in matching hardware to application needs, and attractive pricing.

Our next step was to evaluate cloud providers. We settled on Amazon EC2 based on the scale of services it could provide, its cloud leadership and innovation, and competitive pricing.

We toyed with an idea of configuring our servers directly on AWS, but we wanted to launch quickly and without hiring system administrators, hence we started evaluating RightScale and a couple of its competitors. RightScale offered exactly what we were looking for – a robust set of ServerTemplates, rich configuration capabilities, built-in monitoring, and a solid reputation.

Setting up our new infrastructure proved to be relatively easy. We were able to use RightScale load balancer and database ServerTemplates pretty much out of the box. Application servers required a little more work. We are running Ruby on Rails and nginx with Passenger on Ubuntu. We found a ServerTemplate in the MultiCloud Marketplace that was a great starting point, but we had to get up to speed on RightScripts and write a number of scripts to get exactly what we needed. RightScale was with us through the process. I recall running into one esoteric issue with https traffic. RightScale experts proved their worth by solving it for us; the solution involved setting ignore_invalid_headers off in the nginx.conf file – not exactly an obvious change.

We went live with LoyaltyPlus in Q3 2011, and today our business is growing nicely. A sizeable number of retailers, such as Shoebuy.com and US Auto Parts, have launched loyalty programs using our platform, and millions of consumers participate in programs powered by LoyaltyPlus. Early last year we raised a venture round from Crosslink Capital and Intel Capital, and we were named among OnMedia 100’s top emerging companies.

Our infrastructure includes a load balancer, application, memcached and database servers running in two zones on Amazon EC2. We are proud of the features and functionality we built, and pleased with the uptime, performance, and scalability of our platform. In the past 18 months we have had just two downtime incidents, and in both cases it was because AWS, the hosting vendor, ran into issues. Both incidents battle-tested our infrastructure. We lost our database master, which is pretty much the worst-case scenario, bar losing the entire data center. With RightScale, we were able to failover to a slave server quickly and keep downtime to minutes, while some larger companies impacted by the same issues had service interruptions lasting hours. I am happy to share that RightScale support has been very responsive and helpful in these situations. In general, we are running far above our commitment of 99.9% uptime, with average server response time in 30-40ms range, and the ability to scale rapidly.

We have been working with RightScale for a year and a half. RightScale accelerated our time to market, reduced infrastructure risks, and reduced costs. While our business, traffic, and team have grown, we continue to be able to operate without a dedicated system administrator. Given that the cost of hiring a solid system administrator in the Bay Area is more than what RightScale bills for its services, the math is very compelling.

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Bob Tekiela is co-founder and CTO of 500friends, where he launched LoyaltyPlus, a white-labeled SaaS loyalty platform for retailers.  Prior to 500friends he was CTO of PopularMedia, a social media innovator backed by Sequoia, and CTO of StrongMail, an email marketing and social media technology provider. Earlier, Bob was vice president of technology at Sapient, a publicly traded professional services company, and CTO of Digitas, a marketing agency subsequently acquired by Publicis Groupe. He writes a blog called CTOInsights.

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