Euromonitor International is pleased to present an interview with an executive of LevelUp, a Boston-based start-up that is attempting to make customer loyalty the focus in its mobile payment application. LevelUp uses a QR-code to help consumers instantly pay for their food at a restaurant while also tracking loyalty so that merchants can reward their most diligent patrons or entice less frequent consumers to return for a visit.
Euromonitor's Consumer Finance Analyst Michelle Evans had a recent conversation with Chris Mahl, LevelUp's Chief Revenue and Strategy Officer, about the company's emphasis on becoming a loyalty partner with merchants. In the second part of this interview series to publish next week, the two will discuss LevelUp's unique position in the payments space.
Euromonitor: How did LevelUp grow out of SCVNGR?
Chris Mahl: SCVNGR is the award-winning technology that allowed major marketers, football teams, retailers and movie studios to create fun for people at places that were branded on their phones. We took the experience we had from the location-based gaming business, which is what SCVNGR is about, and applied that to payments. We applied that experience to things like loyalty, progression, exclusivity and rewards structures and considered how to apply those game dynamics to the transaction. The transaction, in this case, being simply a way to pay. We are about gamification and the things that affect people in a positive way. Scavenger is the location form of that and LevelUp is the payment form.
How has LevelUp evolved since its launch as a deals platform?
We learned a lot about deals and did testing with card-base offers with American Express. We did a lot of homework and literally tried several things, which every intelligent company from a strategy perspective does. What we learned was that offering huge discounts is bad for businesses. It conditions deal-seeking consumers to come running into a place, but they don't come back and however valuable the meal was or the experience was, the consumer is conditioned to get a discount. The next time they come back, they miss the discount so there is frustration.
We studied that space, but we also evolved it significantly into what we call a shared-value model. It is something that is great for merchants and is also great for the consumer. LevelUp unifies things that compel consumers that are positive, simple and safer. For the merchant, it really is much more about loyalty and the ability to collect data. It really is a much more valuable platform for growth.
What is LevelUp's strategy for mobile payments?
We have another aspect of our payment strategy, which is to reduce the cost of moving money. That's what we do. If you look at small, medium and even significant businesses the cost to us to move money, or the interchange fee, is a flat 2% today. We have various ways that we aim to shift the focus for the merchant from the cost of moving money over to customer acquisition and loyalty marketing. We align ourselves as a payment solution. We work with the merchants on that and we are rewarded for that. We have evolved from more than just a payment solution to a partnering solution for a merchant that brings people in the door and brings people back.
What does loyalty mean to LevelUp?
Loyalty has brand interpretation, consumer interpretation and financial interpretation. The brand interpretations are that people become connected to a place of business or my brand. They come into it and they connect with it. I'm a regular purchaser of that brand. The brand wants people to be connected to it, but ultimate proof of loyalty with anyone is that people are in fact coming in more frequently and spending more money. I think we can say that anyone's measurement of loyalty in the most effective measure is that this is someone who regularly spends money on my product over time. For us, in the simplest sense that's it. People are coming to a place, coming back more often and spending more money.
The question becomes what are the things that can engender loyalty and the consumer to a particular brand. There are a lot of things along that continuum. We have several different aspects of LevelUp for a consumer that begins the experience of deep loyalty, which is about increased spending. We issue feature invitations that invite consumers to come to a merchant for the first time. The invite probably gives you $1 to $2 to try the merchant for the first time. The consumer received a credit so they tried it. Then we have the progression bar that shows up in the email receipts that catches the attention of the consumer and lets them know that they are getting close to unlocking their next reward.
Even if it's not a new merchant for a consumer, they realize that they used to spend money at these places, but now they are actually getting recognized for it and all they have to do is to pay. We have seen this progression dynamic over time. Typically it takes consumers, who have been to the merchant before, and compresses their repeat visitation by about 20%. For example, it might have taken a consumer 10 days to come back, but with this loyalty construct and progression dynamic they are typically returning within 8 days. We definitely have seen that metric very regularly with our merchants. The credit rewards are automatic and accounted for rather cleanly. The accounting is much easier to attract than other loyalty programmes. We see a lift in spend as well so it is not just the frequency but the spend.
Loyalty is an experience between the consumer and merchant that engenders a visit and a desire to more frequently visit and spend money with that merchant or brand. It's a measurable on-going result to us, which makes us quite different than a lot of loyalty solutions out there, which are more about broadcasting a message.
Is this the future of loyalty rewards or is this a supplement to existing programmes?
There's a hybrid period where we work together with the merchant. Like all shifts, and mobile is a shift and a lifestyle for all people, different audiences are going to adapt different technologies so there is an assimilation period that we have with merchants where they are going to use both systems. That will be true for any solution. Not 100% of all people that go to any place will be using cell phones regularly to pay until some point in the future. That is just a practical point. From an experiential, cost and impact perspective, our solution is way more effective than a lot of the existing products out there. LevelUp is an experience that fits into people's pocket. This loyalty system and integrated payment system sits on the device that outside of my family and friends is the most personnel thing I have so it's a great way to really be convenient. When you tie it to something like payment, which is something we do every day and is just part of our lives, it is just right up the consumer's alley.