Lantern: How a Headphone Operator Built a Loyalty Startup

The Genesis of Lantern: From Headphone Retailer to Loyalty Startup

For almost ten years, Andrew Lissimore has managed Headphones.com, a prominent online retailer of audio equipment. While dedicated audiophiles consistently seek new products, Lissimore recognized the limitations of relying on advertising platforms like Meta and Google for customer acquisition.

He aimed to improve customer retention, focusing on nurturing existing relationships rather than constantly pursuing new buyers.

Seeking a Better Loyalty Solution

Lissimore initially explored loyalty program options within the Shopify ecosystem. However, he found most offerings centered solely on spending tiers, lacking the flexibility he desired.

This prompted him to embark on developing a custom loyalty system tailored to the specific needs of Headphones.com.

Lantern Emerges

What began as an internal project to enhance loyalty for Headphones.com has now evolved into Lantern, a startup offering its loyalty solutions to other businesses.

Early iterations involved integrating various apps to support diverse loyalty mechanisms, including stamps, points, spending-based rewards, and referral programs.

Challenges with Integration

Managing these disparate applications proved complex. Furthermore, combining different apps created inconsistencies in user experience and brand presentation.

“A natively integrated Shopify loyalty system, easily customizable, was the ideal solution,” Lissimore explained.

Collaboration with Shopify Experts

Lissimore successfully recruited Kyle Peatt and Dominic McPhee, the architects of Shopify’s Polaris design system, to collaborate on this project.

Both Peatt and McPhee subsequently joined Lantern as co-founders, with Peatt serving as chief design and product officer and McPhee as chief technology officer.

Currently, the company comprises a team of eight full-time employees.

Lantern’s Capabilities

Lantern provides comprehensive customer account management, loyalty program functionality, and referral tracking for Shopify vendors.

Businesses can incentivize both new and returning customers, awarding points for activities such as forum participation.

The company emphasizes the ease of integration, requiring no additional coding from merchants.

Leveraging Experience from Headphones.com

Lissimore asserts that operating Headphones.com provided invaluable insights into the challenges faced by online retailers and the importance of customer retention.

“Our experience with Headphones.com fueled the development of Lantern, as we were acutely aware of the need to increase repeat purchases,” he stated to TechCrunch.

Significant Results

Following the implementation of Lantern at Headphones.com, the repeat purchase rate increased from 30% to 50%.

The average time between purchases of a second pair of headphones also decreased, shortening from 198 days to 98 days.

Growing Client Base

Lantern’s client roster now includes prominent brands like Counter, a skincare company generating over $200 million in annual revenue, and Vessi, a footwear brand.

The company has also developed tools to accurately measure retention rates, demonstrating the value of its solutions to clients.

Seed Funding and Competition

To accelerate growth, Lantern secured $3.1 million in seed funding, led by Salesforce Ventures, with contributions from Sidekick Partners, Day One Ventures, and individual investors including Tony Yu of Vessi.

Lantern operates in a competitive landscape, facing competition from established startups such as LoyaltyLion and Yotpo.

Salesforce Ventures’ Perspective

Rob Keith, a partner at Salesforce Ventures, highlighted Lantern’s unique approach to retention, extending beyond traditional point-based loyalty programs.

“Lantern’s strength lies in the combined expertise of its founders – Andrew’s experience scaling Headphones.com, coupled with Kyle and Dominic’s development of the Polaris design system at Shopify,” Keith explained.

Seamless User Experience

Keith further emphasized that Lantern’s features, such as integrated wallet functionality appearing directly at checkout without disruptive pop-ups, benefit both consumers and brands.

Future Development

Looking ahead, Lantern plans to integrate artificial intelligence (AI) into its platform to provide clients with data-driven insights and personalized recommendations for improving retention strategies.