LevelUp is a newly launched social deal platform that is the tech savvy first cousin to Groupon and LivingSocial. It’s also the kid sister to real-life gaming platform SCVNGR, which adheres to the philosophy that if you pass “Go” in life you should get your $200.
Both SCVNGR and LevelUp want to influence behavior and actions through incentives, and LevelUp’s model features a twist that differentiates it from the crowded daily deals market.
Here’s how LevelUp works: users get a free credit (obtained by signing up and providing credit card information) to spend at participating small businesses. If customers pay with their LevelUp QR code, they build points to unlock bigger deals to use next time they visit.
To get a merchant’s perspective, I picked up the phone and called HeaD AreaA salon, which is featured on the LevelUp Philadelphia page (deals are currently available in Boston and Philly). I had the good fortune to get Maura on the phone; she writes the best hair blogs I have ever seen - “freedom rings in ringlets”? Genius.
Here’s what she told me about her salon’s experience using LevelUp:
- Participating merchants use a LevelUp-supplied device to scan QR codes - locked-down phones serve this function well. (Other deal purveyors ask merchants to enter coupon numbers into spreadsheets.)
- New merchants get three months of no fees. After three months, LevelUp charges a transaction fee that is less than credit card swipe fees.
- LevelUp takes no part of the deal offering (Groupon and LivingSocial can take as much as 50%), so the merchant gets to keep more money from the transaction.
- LevelUp is different in that it encourages longer-term customer loyalty.
- Before HeaD AreaA used social deals, they didn’t do much in terms of advertising. Deals have become their default marketing channel.
Smart merchants are using daily deals for different things: Groupon and LivingSocial are good advertising engines; and now LevelUp can manage their loyalty program for them. As long as businesses use deals strategically, they can derive value; otherwise, deals can be a costly and ineffective instrument for growing sales.