Startups in Latin America are recovering from a steep drop-off in the availability of venture capital following record-breaking years for funding in 2021 and 2022. According to a report in The Latin Times, “total investment into South and Central American startups reached $2.9 billion in 2023, an 84% drop from its 2021 peak.”
Leal, a Bogotá, Colombia-based brand loyalty network, was one of the lucky ones. In January this year, the company announced they raised USD $5 million to expand their AI-driven customer engagements for merchants across Latin America, including in Colombia, Panama, El Salvador, Costa Rica, Honduras, Guatemala, and Nicaragua.
The company, co-founded in 2016 by Colombian CEO Camilo Martínez and Salvadoran COO Florence Frech, persevered through the pandemic and established itself regionally, attracting the attention of investment funds like Rakuten Capital (the first Latin American company to receive their investment) and LEAP Global Partners, who co-led the company’s pre-Series B round alongside Morro Ventures and Salkantay Ventures.
Among the many tools Leal provides retailers to help grow and strengthen their customer networks, the company recently introduced artificial intelligence (AI)-powered solutions to empower brands to leverage data and implement strategies to improve customer loyalty, boost sales, and effectively manage marketing for business growth.
To learn more about the company, The Bogotá Post spoke with Martinez, who shared their remarkable journey to success after reinventing themselves during the pandemic.
The Bogotá Post: Can you share the story of how Leal came to be and what inspired you to tackle the challenges of the retail industry?
Camilo Martínez: Before co-founding Leal, I worked in investment banking at Bancolombia [Colombia’s largest bank], covering the retail sector and all the mass consumption of food and beverages. What struck me was the immense amount of money spent on marketing. These companies spent between 7% and 10% of their sales on advertising and marketing.
The discussions between the finance team and the marketing team always revolved around the fact that from marketing it was not possible to predict how the advertising budget would be reflected in the sales volume. After this experience, I left finance to pursue an MBA in Chicago.
I’ve always wanted to help the retail industry by making their marketing expenses more transparent, allowing them to track the return on investment for every peso spent.
TBP: How did this desire materialize into a solution?
CM: During my MBA program, I met a Salvadoran woman who is now Leal’s co-founder. She comes from a family that has been in the business world in Central America for more than a century, so she knew very well the dynamics of the family business, of the industry. Over the two years of the MBA program, we brainstormed ways for businesses to spend their marketing budgets more efficiently. That’s how we learned in depth what the world of customer loyalty was all about.
What we found was that in the United States, about 65% of the people working in marketing always considered that the best way to grow the business was to bring in new customers. While there are no statistics to support this in Latin America, I believe nearly 100% of regional marketing leaders would share this perspective. Almost no one prioritized understanding their existing customers and encouraging them to return to the store.
So we started looking to solve this through technology with loyalty programs and initially, the company was born with ‘Puntos Leal’, a solution in which we helped each store set up a loyalty program to help them identify those customers at each purchase and reward them so that they would return to the store. However, the pandemic arrived and this forced us to reinvent ourselves.
TBP: How did your company adapt to the challenges brought forth by the pandemic?
CM: At that time we were growing up quickly. Just before the pandemic, we were reaching almost a thousand trade partner brands. At that time, most of our businesses took a huge hit. We lost about 85% of our customers and sales.
We had to rethink a lot about the technology we were offering to our allied brands, and what we were offering as a value proposition to the end consumer, and we decided to rely on the buzzword: we reinvented ourselves.
In this reinvention, we moved closer to the consumer to show ourselves more as an ally in their day-to-day life as shoppers, sending a message that it was possible to receive a reward for every purchase they made, that they could be saving money with us, and that they could make a smart purchase. On the brands’ side, we started to become their partner in terms of data, we understood the need to provide the data that retailers need to make the right decisions, completely based on data and not on intuition.
TBP: What does Leal currently offer to retailers?
CM: We have now managed to strengthen our technology platform quite a bit. We started to implement artificial intelligence tools, which provide certain “powers” that were not accessible with previous technology. Tools with which you manage to convert that data into growth in a validated way. In this new phase, we are solving four things for our partner brands.
The first is that we offer them a Customer Data Platform (CDP), a central repository of their entire customer base. We are focused on determining how we can capture the data of their consumers, by whatever source, and that we have the contactability of that customer, and that this can then become digestible in some way.
The second thing we are offering is a campaign module in which brands can communicate in a very personalized way with each of their customers. Our goal is to send the right message, the right offer, through the right channel, to the right person, at the right time; all to maximize the chances that it will convert into a purchase. We have been investing heavily in Artificial Intelligence to be able to automate many of these communications and make them hyper-personalized and hyper-targeted.
Then we have a customer experience module so we can hear the voice of the consumer, we capture the comments, and all the feedback, so we can transform this into actionable for the brand, know specifically where they need to improve and how they can communicate better with the customer to make them feel valued.
And the last thing is a benefits module in which the points part is only a sub-module. It is not our main spearhead anymore, as we are no longer Loyal points, but a more complete system for merchants. Still, if a merchant wants to offer cashback, a buyback bonus, etc., they can do so.
However, we believe that if a brand has a way to capture customer data and have traceability of their purchases, they don’t need a loyalty program. So what we did was to create these different modules of everything we offer and very focused on meeting the specific needs of each brand.
TBP: What is your vision for AI in the retail industry in general?
CM: For me, companies that do not have Artificial Intelligence in their heart, in their entire operation, are companies that are going to disappear, and not in the long term, I think in five years at the most.
This is because the efficiencies that companies acquire, the optimization, and the competitive advantages are enormous, and no matter how much human factor you may be putting in, at some point the technology ends up being much faster, much cheaper, and more efficient.
Today in the world of commerce there is already technology, artificial intelligence, which dramatically improves all operational processes, all sales processes, all marketing processes, and all accounting processes, and that makes the staff of a company focus on doing the work that is adding value and reduce the operational burden so that this operational burden is already being done by machines, which makes the customer experience much better.
TBP: What are the plans this year after your recent pre-Series B?
CM: We are working in Colombia and almost all of Central America except Belize and Mexico; in the latter, we hope to consolidate throughout this year. Also, we want to deepen our operations in the other markets we are currently in.
By the end of this year, we want to be raising a series B investment, which would be our fifth round of investment, and with this, we could be moving into the South American market.