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Could LevelUp Change the Way People Pay?

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Could LevelUp Change the Way People Pay?
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Loyalty marketing is about much more than “marketing”. The essence of influencing consumer behavior has its nexus at the intersection of marketing, payments and technology. If Hanifin Loyalty had a business address that was indicative of focus rather than where we receive our mail, it would be at that interesting little corner of commerce.

As smartphone penetration increases across Consumer 2.0 (nearly half of the US population) and as new payment technologies continue to emerge as challenges to the legacy payments networks (principally Visa and MasterCard), the way consumers shop will change dramatically.

The famous tagline from American Express “don’t leave home without it” referred to their own portfolio of credit cards. The new moniker that will catch the attention of consumers might be something closer to “leave everything at home except your phone”. Lousy copy-writing, I agree, but at the least, the thing we can’t leave home without will be transformed from a plastic card to a mobile handset.

LevelUp is a reasonably new market entry that combines a network of local merchants with a smartphone enabled payment device that seeks to add speed and convenience to the consumer shopping experience while offering rewards to consumers who play the game. The first three markets opened up include Boston, New York, Philadelphia, and San Francisco.

Signing up for a LevelUp account gets the user a personalized QR code like the one shown in the graphic to the right. The QR code can be displayed at participating merchant locations to complete a purchase transaction.Merchants participating in the program offer rewards for first time visitors (for example $10 off purchase of $50 or more) and receive subsequent offers as they continue to shop within the network.

Users are required to register a credit card with their LevelUp account and payments made using the QR code are charged to the affiliated card. That points to a conundrum in this concept – the card is not eliminated, only pushed to the background and not physically required to be presented at the time of purchase. In other words, its not really an alternate payment system, unless we agree to redefine that term. On the plus side, LevelUp members can “double-dip” as they earn whatever rewards are offered by LevelUp merchants in addition to those from a rewards card linked to their account.

LevelUp is something that Foursquare could have built as an enhancement but has not done to date. I’ve read recently that the future of pure location based check-in systems like Foursquare is dim. All I can say is that they may have missed a huge opportunity if this is true. Foursquare was there first but never gave merchants the tools needed to really turn the system into a marketing channel nor added payment or other features.

Dwolla is another location based system that offers an alternative payment method, but in their case they truly offer an alternative to credit cards. I’ve done a comparison of several social shopping methods and will have a report for you next week or so. Meanwhile, give thought to whether the future of social shopping lies in registered card models, smartphone enabled payment methods, or channels using ACH that are low cost but still hard to understand for some people.

One aspect of social loyalty that seems clear is that the value proposition will certainly go beyond points. In fact points may be the third or fourth element of the value proposition behind mobility, payment methods and offers which are instantly redeemable. Throw in the increasing importance of recognition and status within online communities and we might see “Whuffie” become an alternate online currency.

The only thing we know about this changing loyalty market is that it is sure to continue to change.

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