Marketing analysts who consider mobile access the future of loyalty programs for retailers and restaurants are watching closely to see how consumers respond to new mobile apps linking card purchases to rewards credits.
Though not all observers are convinced that such technologies will take hold, Boston-based LevelUp is garnering attention as a loyalty-based mobile app that links to a debit or credit card and rewards consumers with store credit for repeat purchases at participating retailers.
After a successful test, LevelUp has expanded its program to San Francisco, Philadelphia, New York City and Boston, the company said says.
LevelUp is backed by Google Ventures, among other investment partners, and was founded by SCVNGR Inc., makers of the mobile-based scavenger hunt social media application.
The concept encourages consumers to move “up a level” in the loyalty program, earning further discounts or rewards by making repeat trips to participating stores or restaurants.
LevelUp currently has 500 mostly smaller merchants on board with the program, Seth Preibatsch, chief “ninja” at LevelUp and SCVNGR, tells PaymentsSource.
Customers may use the app to create an account linked to a debit or credit card. The app generates a QR, or quick-response bar code, representing the card, which participating merchants scan from the consumer’s mobile phone screen to initiate the payment and track loyalty.
For each purchase scanned with the bar code, the app shows a credit that the shopper may apply immediately toward that purchase or use toward a future purchase. Examples of credits include a first-time $2 credit at San Francisco-based Mission Minis cupcake stores. The next time customers spend $30 at the store they receive a $3 credit, according to a LevelUp spokesperson. Customers receive an email receipt of all transactions.
Chicago-based Braintree Inc. is LevelUp’s transaction processor for its payment application, says Preibatsch.
Despite LevelUp’s innovations, some mobile payments experts contend that bar code systems may not work as well as other mobile options like Near Field Communications technology.
“Mobile phones are an incredible utility to allow merchants to get more wanted access to consumers,” Todd Ablowitz, president of Double Diamond Group, tells ISO&Agent Weekly. “But barcodes have fundamental problems.”
The analyst’s personal experience with bar code systems at gyms and retailers has been problematic, Ablowitz says. He notes that the common practice of dimming iPhones to preserve battery life affects how well bar-code scans work. But he says companies like LevelUp are “making a lot of good progress with apps like these.”
Though it is not involved in the company’s newest initiative, American Express Co. worked with LevelUp in May for its test at Levi Strauss & Co. Levi’s stores in three major U.S. cities. Cardholders received Amex statement credits by using a smartphone application that supported discounts for shopping at the clothing retailer.
One of the things LevelUp changed between its first test and the October launch is that everything for the loyalty program is performed automatically on the back end for consumers, says Preibatsch. Previously, consumers had to sign up for the deals before they could access the credit.
The company is doing mostly digital marketing for the program, including a promotion for users to bring in friends by giving away money towards lunch if they sign up.
During a test in Boston and Philadelphia, LevelUp says its data show that 45% of all customers returned to participating merchants within 30 days and the average LevelUp customer increased their spend by 38% on repeat purchases.
Some 85% of consumers who made participated during the pilot said they heard about the LevelUp program directly from the participating merchants, says Preibatsch.
IPhone and Android users may download the free app.