Mad Mex contract underpins Gruden’s strategy of increasing annuity revenues

Market leading technology agency, The Gruden Group (ASX: GGL) has signed casual dining restaurant chain, Mad Mex as a customer for its new mobileDEN “Connect” product, validating the attractiveness of the mobileDEN platform, as well as strengthening the group’s recurring revenues.

Connect is the culmination of five years of research and development undertaken by mobileDEN to identify the key drivers that help brands increase revenue through improved experiences for their most loyal customers.

It is common for 60% -70% of revenue to come from as few as 30% of customers. The mobileDEN platform and the Connect product will help Mad Mex achieve the three most sought-after goals, being increasing frequency of visits, spend per visits and return on investment from marketing initiatives.

General Manager of mobileDen, Gavin Gorazdowski, highlighted the benefits of the platform in saying, “If 70% of your revenue comes from customers who visit twice per month, and you can increase that to 3 times per month through better customer engagement, more targeted offers and a beyond-the-counter digital experience that is valued by customers, then you’ve just increased 70% of your revenue by 50%”.

Under a twelve-month rolling agreement, Mad Mex will leverage the Connect product to provide a fully digital customer loyalty program to forge stronger brand connections with its customers.

The Connect product will be rolled out to more than 50 casual dining restaurants across Australia. Connect will upgrade Mad Mex’s existing loyalty Apps, enabling a fully digital App-based program branded under the Mad Mex banner, providing rich customer insights.

The Connect platform will integrate seamlessly with Mad Mex’s internal operating systems, allowing for complete oversight across all franchises which number in excess of 50.

It should be noted here that this partnership is still in its early stages and GGL remains a speculative stocks. Investors should seek professional financial advice if considering this stock for their portfolio.

Mad Mex follows in Starbucks’ and Red Rooster’s footsteps

The vast majority of quick service restaurants have recognised the potential value of going digital with their loyalty programs, and on this note GGL’s Chief Executive Tim Parker said, “Our mobileDEN platform is already supporting the success stories of Starbucks and Red Rooster (particularly in home delivery), and our new mobileDEN Connect product has been born out of our deep understanding of what multi-location businesses want from a loyalty product”.

From GGL’s perspective, Parker highlighted the benefits of signing up long-term customers such as Mad Mex, stressing that it was a vindication of the hard work and investment the company had made in developing and delivering better ways for businesses to use digital channels.

Agreement strengthens annuity revenues and income visibility

As part of the contract, GGL will earn an upfront deployment fee, along with a per store licensing fee and payments under a service level agreement with Mad Mex.

Of significance is the fact that GGL has been able to develop Connect in such a way that it requires less need for customisation and reduces time to market from six months to 6 to 8 weeks.

Management highlighted that Connect represents a significant milestone in the commercialisation phase of mobileDen, opening up a whole new market for GGL with a full sales and marketing strategy to be launched for fiscal years 2017/2018.

This will drive the group’s corporate strategy of increasing annuity revenue to complement the service fees in other successful digital transformation business units which service the government, enterprise and performance marketing segments.

The attraction of increased recurring income could see GGL’s depressed share price rebound should it be targeted by investors looking for exposure to the high-growth digital marketing industry.