December 28, 2011, 12:11 PM

A mobile app simplifies loyalty programs for smaller merchants

Consumers earn rewards while merchants eliminate the hassle of issuing cards.

Lead Photo

The app's built-in location function taps into the smartphone's ability to locate itself to find participating merchants.

Swirlz Cupcakes honed its cupcake recipe years ago, but its search for the right way to reward its loyal customers has taken a little longer. Now, with the emergence of smartphones and mobile commerce apps, Swirlz Cupcakes has cooked up a loyalty scheme that tastes just right.

“We always wanted to incent our customers with some type of rewards program,” says Jamie Finnan, manager of the Chicago-based bakery. “We really hated the idea of printing cards.” Many retailer loyalty programs use plastic cards that contain a bar code or magnetic stripe to identify customers to retailers. Not wanting the hassle of issuing cards to customers, Finnan opted for a smartphone-based rewards program called Paycloud offered by Sparkbase, a stored value services company.

Finnan wanted something that was simple for customers and his staff to learn. Customers download the Paycloud app to their iPhones or Android devices. Upon opening the app, users are prompted to create an account, which is necessary to track eligible transactions at Swirlz and other participating merchants. Paycloud works with multiple merchants, which means consumers can enroll in loyalty programs offered by merchants, but they only need to supply their personal information once when they set up their Paycloud account.

Swirlz Cupcakes promotes the program with a Paycloud decal on its door, and signs at the checkout counter.

Users can find participating locations via the app’s locator feature that employs a smartphone’s built-in location services function to display locations on a map. Users also can search by a city’s name or ZIP code. Participating merchants appear on the map with a green or orange circle. Green signifies the user is enrolled in the merchant’s rewards program; orange means not enrolled. A white star inside the circle indicates the merchant has special offers.

Paycloud transactions are tracked when the user holds the phone near a special device that emits a high-pitched sound inaudible to humans. The phone picks up the signal and can load offers or redeem offers via the device, which costs shopkeepers $50. It plugs into existing point-of-sale terminals. Paycloud does not track items consumers purchase, just their reward redemption transactions, Sparkbase says.

Paycloud simplifies loyalty programs for consumers, says Douglas Hardman, Sparkbase CEO. “They don’t have to remember their cards when they leave their houses,” Hardman says. And for merchants, the elimination of buying and issuing plastic cards makes Paycloud simpler and cheaper. A merchant could expect a Paycloud program to cost between $200 and $500 annually, Hardman says. He declines to say how those fees are generated.

So far, Finnan is pleased with Paycloud. “We have seen more of our customers use it,” he says. “We have a lot of regulars. That’s who we’re trying to reward.” Spending $200 in cupcakes earns the user $20 in credit redeemable for more cupcakes.  Swirlz Cupcakes has been a test merchant for Sparkbase this fall.

Currently, Paycloud is available in Chicago, but Sparkbase says it will launch nationally in January. Merchants sign up for the service through their payment processing provider, although Paycloud tracks transactions made with the service regardless of the payment method the customer uses. Sparkbase sells its services through 150 third-party companies, which Hardman says serve about 2.5 million merchants.

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