1Mby1M Deal Radar 2010: Empathica, Georgia, Ontario

Over the next few weeks Deal Radar will feature companies that have been successful in creating and using Facebook applications as part of of their business model. Empathica is a company that has used Facebook in its efforts to automate the measurement and management of customer loyalty and thereby prevent customer defection. The company’s mission is to help businesses build an intimate relationship with their most important stakeholder – the customer.

Founded in 2001, the company now has offices in Georgia, Ontario, and Birmingham in the United Kingdom. The current CEO is Mike Amos, who has over 15 years of experience in retail. Empathica’s expertise focuses around three primary divisions in a company: marketing, operations and human resources, and the company offers three SaaS products corresponding to these departments – “driveMessage,” “driveExperience,” and “driveEngagement” – to help improve a brand’s identity and overall customer experience management (CEM) program.

One of Empathica’s most recent successful products is a Facebook application called GoRecommend. Multi-unit retailers are increasingly focused on the ‘intent to recommend’ metric but are often at a loss as to how to translate these customer intentions into actual brand recommendations. Even through social networking applications can help advocates (customers) to communicate a positive brand experience to millions of prospects, many are not doing so because they lack an easy and convenient way to do it. Empathica developed GoRecommend as a tool to make it easy for brands to share their recommendations online. The use of GoRecommend doesn’t require an existing social media strategy or even a company Facebook account, and it is a way to introduce retailers to the power of using social media in conjunction with their CEM strategy.

After a customer completes an Empathica retail experience survey, the GoRecommend engine prompts those who indicated a high intent to recommend their experience to share their recommendation with friends on Facebook. The location-specific recommendation can be posted on the recommender’s Facebook profile page, which exposes the personalized recommendation to all of the user’s friends via the Facebook newsfeed. The recommendation can also be posted to the brand’s Facebook fan page.

According to Gartner, the enterprise feedback management (EFM) market is currently worth $330 million a year with a CAGR of more than 20% through 2011. Empathica also sees potential to access the social media marketing market with its GoRecommend offering. This market is worth $700 million, according to Forrester, and is forecast to grow to $3.1 billion by 2014, representing a CAGR of 34%. Empathica anticipates being able to access approximately 25% of this market through direct and agency channels.

The company’s focus is on multi-unit retailers and it serves the food services (primarily quick service restaurants and casual dining chains), grocery, general retail, petro convenience, and financial services segments. Empathica works with more than 200 brands, including the number 1 foodservice company globally; the no. 1 casual dining chain in North America; the largest petro convenience company globally; the largest financial services company globally; the leading drug store chain in Canada; the largest drug chain in Europe; and largest department store in North America. The burger chain Red Robin, the fried chicken chain Popeyes, and zpizza are some of the companies currently using GoRecommend.

GoRecommend has generated some 50,000 recommendations from customers that have been shared with over 7.7 million friends on Facebook. As a recent example, in just 60 days more than 15,000 customers recommended one large restaurant chain to their friends using GoRecommend. The program, which is still in a growth stage, further generated over 10,000 e-mail club opt-ins and more than 1,000 Facebook fans for the brand.

The company was bootstrapped until 2006, when it raised a $7 million Series A from JMI Equity in April of that year, followed by a debt facility through Orix in 2008. At present, Empahtica is relatively self-sufficient and is being funded through cash flow from operations. It continues to look at additional growth opportunities, through both organic growth and potential M&, and says that depending on the opportunity, there could be significant potential for future investment. Annual revenues are in the $15 to $25 million range.

We saw in the recent Deal Radar profile of Medallia that CEM, its cousin customer feedback management (CFM), and the more comprehensive customer relationship management (CRM), is a crowded and evolving field. Other companies focusing on CEM products with social media aspects are ResponseTek, Medallia, RightNow, Satmetrix, Cicero, and Astute Solutions. Empathica believes that what sets it apart from its competition is its prescriptive reporting model approach that integrates the “experience” data into a CEM reporting suite with actionable insights. The company’s emphasis on key vertical markets – including the restaurant, retail, and financial services industries – allows Empathica to grow geographically and offer focused consulting services.

Empathica believes that its customers are clearly responding to software-based solutions, and this is going to attract larger software companies and existing research companies to the space, with entry most likely through a strategic acquisition or consolidation of existing players. Empathica’s mandate is to become the clear leader in the space and says that existing shareholders definitely expect that they will be able to capitalize on their initial investment, most likely through a strategic exit at some point. The company suspects that the next two to four years will bring about several opportunities for exit, likely in the form of a strategic acquisition.

Recommended Readings
Clara Shih On The Facebook Era (Part 1)
CRM And RNOW Hook Onto Social Networking
Deal Radar 2010: Demandbase

This segment is a part in the series : 1Mby1M Deal Radar 2010