Beyond Groupon: Mobile Marketing With LevelUp

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Half off dinner at an Indian restaurant! 30% off a spa package! Free large popcorn with purchase of two drinks!

The deals keep rolling in from sites like Groupon, LivingSocial, and Google Offers: locally-targeted, prepaid coupon offers delivered to your inbox each day. But for consumers and businesses alike, excitement is waning. With more consumers complaining of inbox clutter, email delivery is not as powerful as it once was. Meanwhile, businesses are finding that the e-coupons are a great way to temporarily increase traffic, but not so effective at creating repeat customers.

Enter SCVNGR’s new mobile coupon and payment service, LevelUp. Currently being piloted in 9 US cities including Atlanta, New York, and San Francisco, LevelUp builds on SCVNGR’s popular location-gaming app that rewards users for completing challenges. In this case, the user unlocks greater deals with each purchase, creating an interactive experience that builds customer loyalty. Here’s how it works:

  • Participating businesses create a series of three deals. As further incentive, SCVNGR is waiving its fee on the first deal, and takes only 25 percent on the second and third (as compared to many coupon sites which can take up to a 50 percent cut).
  • User downloads the LevelUp app, registers a credit card, and receives a personalized QR code that is used to make purchases.
  • Each day, the app features a new local business along with an offer of free credits to spend at that business (typical credits are between $1 – $5). This initial offer is good for up to 7 days, and users can choose to spend their credits all at once or save some for later.
  • The user pays with his/her mobile device and receives a receipt by email. With the second and third purchases, the user “levels up” to even better deals.

Why is the 3-tiered deal model important? SCVNGR CEO Seth Priebatsch says his company has found that it takes three visits to establish a loyal customer. Unlike Groupon, LevelUp rewards users for repeat visits while also capturing cash-register metrics that allow the business to see exactly how much profit is being generated from the promotion. Furthermore, businesses can structure their deals as stepping stones to introduce the customer to their range of offerings. For example, a spa could offer a discount on a manicure as its first deal, a facial as its second, and a massage as its third. A martial arts studio could offer a series of classes, each at a lower rate than the last, to get the customer interested in continuing.

Currently the LevelUp service is only offered in a few cities, but that will change as it grows in popularity. The first pilot cities, Boston and Philadelphia, are currently the most active, though San Francisco is gaining traction with around 160 offers available as of today. A quick scan of participating businesses shows that restaurants are by far the earliest adopters, though the app could have exciting potential for retail and other service businesses as well.

The emailed “daily deal” may be on the decline. Businesses are demanding more accountability and better results for their money, and LevelUp may be just the service to give it to them.

(By Karen Rudy)

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