Cellphone in new role: Loyalty Card

By M H Ahssan

Loyalty cards -- those little paper cards that promise a free sandwich or coffee after 10 purchases, but instead get lost or forgotten -- are going mobile. And merchants are looking for ways to marry the concept to games that customers can play to earn more free items and, it is hoped, spend more money.

Instead of collecting paper cards and fumbling through wallets at the cash register, customers are increasingly using their cellphones to track their visits and purchases, and receive rewards.

Some start-ups, like CardStar and CardBank, store existing loyalty cards on cellphones with scannable barcodes. And companies including Motorola and a start-up called mFoundry are providing retailers with the technology to build cellphone loyalty cards.

Loopt is one of several start-ups -- including Foursquare, Shopkick and Gowalla -- that are experimenting with ways to use cellphones to bridge the digital and physical worlds and turn the tasks of everyday life, like buying coffee and running errands, into a game.

On Tuesday, Loopt, one of the first services to let people use cellphones to share their location with friends, is taking its concept a step further by introducing Loopt Star, a mobile game that rewards people for frequently checking in to particular places. People will compete to earn "achievements" and become "boss" of certain locations, and Gap, Burger King and Universal Music plan to use Loopt Star to reward loyal customers.

For retailers, these games and apps offer a new form of mobile marketing that goes well beyond a minibanner ad by rewarding consumers, individually, for their loyalty. And unlike paper cards, stores can use the data they collect from people's cellphones to learn more about who their customers are and how they behave.

No one in advertising has ever been able to figure out how to do "one-to-one, real-time marketing," said Drew Sievers, a former advertising executive who is now co-founder and chief executive of mFoundry. "The mobile phone is where that will actually probably happen. It's the only thing connected and always with you."

Loopt has offered search or banner ads on its mobile apps, but advertisers told the company that instead, they wanted a mobile loyalty card, said Sam Altman, Loopt's co-founder and chief executive.

"Instead of advertising with a banner, it's offering users incentives for good behavior," he said. "They're trying to turn existing customers into better ones."

Loopt Star is Loopt's effort to play catch-up with some of these other services, particularly with Foursquare. Loopt, which started in 2005, was one of the first companies to popularize broadcasting one's whereabouts to friends. But Foursquare, founded last year, is a popular newcomer. It turned location-sharing into a game with its badges, mayorships and rewards, and into a marketing tool for businesses, including Tasti D-lite and Pepsi, to track and reward loyal customers.

Loopt has 3.4 million registered users to Foursquare's 1.4 million users. But Foursquare's gaming elements are quickly attracting new users. Mr. Altman said Loopt built Loopt Star in response, and last year acquired a start-up called GraffitiGeo that builds similar games.

"We respectfully just sort of knocked off those gaming elements, but added new things," he said.

People register for Loopt Star using their Facebook log-ins, so they can share their location and compete in the game with their Facebook friends and alert their friends about recent purchases and special deals.

Retailers can choose which actions they want to reward and what the prizes will be. Gap is sending customers a 25 percent discount coupon after they check in twice to a Gap store. Burger King is offering a soda with a sandwich or a coffee with a breakfast sandwich to people who check in three times. Universal Music will send five free songs to people who check into any bar along with two friends.

Stanford University is using Loopt Star over graduation weekend. When students check in to at least two of the official school events, they will get a prize. Once they have left Stanford, they will be able to use Loopt to find fellow alumni, said Ian Hsu, Stanford's director of Internet media outreach.

Starbucks will use Loopt Star to give frequent customers an honorary barista badge, symbolized by a green apron. Starbucks also offers a barista badge on Foursquare, where people compete to become "mayors" of places, and the coffee chain is giving mayors $1 off Frappuccinos.

Starbucks has its own iPhone loyalty card, built by mFoundry. Customers collect stars in a cup on their phones every time they make a purchase and get a free drink every 15 visits.

Starbucks could use the data from the cellphones to send personalized offers, like a chai Frappuccino coupon in the afternoon to people who drink chai lattes in the morning, said Brady Brewer, vice president at Starbucks overseeing brand loyalty and the Starbucks card.

"We've tried to build a program around recognition -- knowing who you are and what you like -- and in some ways, that relevance comes from knowing about purchases from data" collected from the loyalty program, he said.

Shopkick is creating a program, expected to begin later this year, that will reward people for showing up and spending money at any of the partner stores, which include American Eagle Outfitters, Best Buy and Macy's.

Cyriac Roeding, Shopkick's co-founder and chief executive, says these types of mobile apps are a counterweight to comparison-shopping apps, like RedLaser, that drive people to other stores. "You have to find new ways to keep your customers engaged and bring them back, because you know there are apps that drive them out of the store instead of into it," he said.

Another competitor, Gowalla, is getting traction. InterContinental Hotels Group is using Gowalla to give gift cards and airline miles to loyal customers of its hotels, and the New Jersey Nets gave prizes like jerseys and tickets to fans who checked into the arena or sports bars to watch games.

Tristan Walker, head of business development at Foursquare, said, "Everybody will be doing similar things in the future, but we hope to really build compelling solutions and innovate in ways that other people aren't." Businesses "see Foursquare as their new digital loyalty card of choice," he added.

Most users will eventually choose one service, because they are unlikely to pull out their cellphones and check in using multiple services each time they arrive at a destination. And many other people are uncomfortable publicly sharing their location at all.

Mr. Altman is convinced that they will change their minds if they are rewarded for their patronage. "People are getting more comfortable so fast," he said. "They see the upside is huge -- run-ins with friends and cool specials."