Top Stories
Top Stories

Square expands into small business marketing

Twitter Chairman Jack Dorsey
Getty Images

Square already has your credit card information and your e-mail saved after you type it in for a receipt. Now Jack Dorsey's payments startup is bringing data about what you buy at brick and mortar retailers, together with all its other information, to create a direct marketing service for small businesses. It's calling Square Marketing "powerful online marketing tools for the offline world."

Square already expanded from credit card payment services to financial services for small businesses, with loans through Square Capital. But this extension into the entirely new area of marketing could have a huge payoff -- even more important than revenue from e-mail marketing, by adding and retaining small business customers. Plus, it's yet another move from Dorsey to distance Square from the failure of its Wallet app.

Marketing to millennials

Square Marketing is designed to enable its small business customers to target different types of customers – loyal, lapsed and casual – with offers designed for each. For instance, a bakery could invite a lapsed customer back with a free cookie, or might give a loyal customer a discount. This puts Square into competition with MailChimp and Constant Contact, which handle e-mail creation.

But Square differentiates itself on a couple counts. For one, its small business customers don't have to compile a list of e-mails; Square populates the list of customers based on e-mails it's already gathered and categorizes them based on their frequency shopping at the retailer. Plus, Square can deliver analysis of exactly how well the marketing works on new and returning customers. Thanks to its credit card readers, Square sees exactly how much money you spend after receiving a direct marketing message

Read More4 marketing mistakes start-ups can't afford to make

In a blog post announcing the news the company said: "Traditional e-mail marketing tools show how many people opened your e-mails. But with Square, you see precisely how marketing drives in-store sales, whether customers come back, and how much they spend when they do." Square says its pilot program with 1,000 sellers found that promotions e-mailed saw open and redemption rates twice the industry average, generating nearly $1 million in incremental sales thanks to promotion redemptions.

Kevin Burke, Square's Head of Customer Acquisition, formerly Visa's CMO explained in a phone interview that the business model is either pay-as-you-go – 10 cents per e-mail – or the option to e-mail up to 500 customers as much as you want for $15. (And each additional 500 are another $15). But the value to Square is much larger than that incremental revenue. It's designed to create a virtuous cycle that benefits both sellers and Square. The more effective the marketing, the more money sellers make, and the more Square should earn in fees.

"If we grow their business, we're growing our business," says Burke. Square marketing will "bring in new customers, keeps current customers engaged and helps businesses grow. If they attract more customers, they're processing more payments, maybe they open a new location and raise money through Square Capital."

Correction: An earlier version of this story misstated Burke's title.