This post previously appeared on OPEN Forum.
Forget the paper punch cards and plastic key fobs that most people associate with small business rewards programs. In an effort to grab the attention of customers and promote true brand loyalty, today’s SMBs are looking for digital alternatives. LevelUp, the mobile-payments-meets-loyalty program, has quickly become the frontrunner in this race since its national rollout in October 2011.
How It Works: Customers who download the LevelUp mobile app are encouraged to link up a debit or credit card to begin paying for all types of goods and services through their smartphones. Registered users receive notifications about nearby businesses offering discounts to people with LevelUp — usually $5, $10, or $20 credits, which are automatically applied to customers’ purchases when they pay with the mobile app. Customers who return to the establishments they’ve visited can earn even more merchant-specific rewards, which accumulate over time. All merchants have to do to get started with LevelUp is add a button on their registers that functions similarly to a house account. Payments and reward redemptions are tracked through LevelUp’s own mobile program, which makes for quick integration for businesses with multiple point-of-sale systems.
LevelUp In Action: To encourage return visits, LevelUp merchants can create their own “loyalty constructs” that work similarly to punch cards. Each purchase made through the LevelUp application is tracked, and customers are automatically rewarded with credits each time they return to their favorite establishments. At Fajitas & ‘Ritas in Boston, for example, customers are given $3 for signing up for the program, $5 when LevelUp periodically includes Fajitas and ‘Ritas on its Featured list, and $10 once they spend $100. The credits that customers earn can be spent immediately or used at a later date.
Why It Works: One of the biggest complaints about daily deal companies is that they bring new customers through the door without offering any incentive to drive repeat business. LevelUp has solved this issue by using immediate credits to help businesses acquire new customers, and then rewarding loyalty with additional credits that accumulate over time.
The system itself is especially useful for small businesses with multiple locations. At Sebastians, a salad and sandwich shop with six locations in Boston, director of marketing Mike Conley was struggling to create a loyalty program that worked across multiple point-of-sale systems. LevelUp offered a solution by bypassing Conley’s POS systems and using its own mobile payment system to track and redeem credits instead. Staffers at all six Sebastians locations can accept payments and track rewards by scanning their customers’ mobile phones, which made it possible for Conley to implement a loyalty program without changing the POS system his company was already using.
Outcomes: Before integrating LevelUp at all six of their Boston locations, the team at Sebastians decided to start small with a trial run at the Kendall Square shop in August 2011. Unsurprisingly, Conley says the application was an instant hit. LevelUp customers spent $500 at Sebastians’ Kendall Square location during the first week of use. “That is a pretty good start, considering this is the first time anybody is paying with their phones,” said Conley. LevelUp usage at Sebastians’ six locations has grown from 500 unique users to 2,200 in the past four months. At Fajitas and ‘Ritas, owner Brad Fredericks says between 15 and 20 guests are now paying through the LevelUp app each week. Aside from the financials, LevelUp has given these merchants a way to target their marketing efforts using statistics that show the return rate, average spending, and lifetime spending of each customer who pays through the mobile app.
Maximizing the Benefits: LevelUp advises its merchants to market its services to their customers by using a combination of printed promotional materials, social media outreach, and periodic email blasts. To make that process even easier for merchants, the company offers customizable templates for email, Facebook, and Twitter marketing. Reps for LevelUp also recommend that businesses prepare their staffs ahead of time with educational training videos and power point presentations, all available on the LevelUp website. At Sebastians, Conley advertised his company’s partnership with LevelUp in the same way he would advertise any new loyalty program — by passing out sidewalk flyers, adding the LevelUp logo to his company website, including information about the program in customer newsletters, and creating menu inserts for additional education.
Stephanie Miles is an associate editor at Street Fight.