Is this the end of tattered, gummy, loyalty cards stuffing wallets to the brim? Perka Inc., a new loyalty card system that works with "dumb" mobile phones, smartphones, and the iPod Touch, wants to make it so.
Perka (the website is GetPerka.com) was founded in Portland by Joe Stemlach, Alan Chung, Rob Bethge, Rob Coury, Jay Harlow. Here's how their app and system work: When a customer walks into a participating merchant, at the moment they make their purchase, they get an electronic validation via an iPhone or Android app, or can get it via text for those still without a smartphone.
Perka faces significant competition in this market. Other local marketing solutions that now reward loyalty include: Groupon, FourSquare, Punchd (acquired by Google), and newcomers like Tagtile and Perkville.
Like many of its competitors, Perka is focused on the old adage that it’s cheaper to keep an old customer than to get a new one. Most every coffee shop knows this, so they offer punch cards. Perka has taken the paper out of the loyalty card and expanded it beyond coffee shops.
In a Portland-area pilot effort, the company's founders were surprised that sports bars were one of their most enthusiastic and successful client types. "In mindshare space we’re definitely competing with the daily deals, so the first thing is disabusing the merchants of the idea that we’re a daily deal, and this is not a one-time-offer," says Rob Bethge, cofounder of Perka. "It’s something that works every single day for your best customers, not to get somebody new in the door, but to get the most out of existing customers."
The system works like this: Perka develops an individual marketing solution for each merchant—like buy nine lattes and get the tenth free, for example. The company provides them with an iPod Touch to keep at the counter to register transactions. When a loyal customer walks in the shop, he or she pulls up a smartphone with the Perka app loaded, or sends a text, to notify the shopkeeper he has entered the store. The iPod Touch at the store contains Joe’s loyalty history, his name, and even a rough view of his ordering history.
Unlike many of its competitors, instead of relying on the integrity of the public, the Perka app and system validates. A customer can’t just shoot a QR code over, type in their email at the shop as a "check in" without making a purchase, or stand outside the shop’s window to earn a reward. (You don’t get "punched" by standing outside the coffee shop and looking good nine times, so why should you get a free latte for doing so electronically?) When a Perka customer checks in the shop is notified. Only after a purchase is made is that purchase validated, and a loyalty reward granted.
Perka also lets merchants set up discounts, not just freebie rewards. A sports bar, instead of offering an eleventh beer free, could offer a loyalty program that gives a customer a stamp for every $15 spent, and after a customer collects 10 a regular get a $20 coupon. Perka also offers a multi-tier system in that after you’ve purchased ten slices and gotten the eleventh free, the next time you might only have to buy nine to get the tenth free. Or, if a customer spends $300 at a restaurant, for example, they get an added benefit that someone who has only spent $150 doesn’t.
Fundamentally, this allows merchants to turn some regulars into VIPs who receive an even higher perk. "It gives an incentive for people to come back more frequently, and we see that in effect," says Bethge. "But we’re essentially qualifying and assigning a lifetime value...we’re also grouping important customers into different tiers to reward them appropriately."
Because many of their clients are merchants who sell products at low price points—sales that aren't typically made with credit cards—Perka is able to capture important data about cash transactions. And, because Perka merchants are capturing this customer information along with their visits, they can push specials to customers who pay cash, haved opted into Perka, and who haven’t visited in a while. On the iPhone app, for example, a consumer might get a little red badge that announces a special. (In the text message solution users will get a tweet-length message that works as a coupon.)
Perka is free to download and use for consumers, and available as an iPhone or Android app, now. It costs merchants a flat fee—$85 per month in Seattle, today—which includes the price of the iPod Touch. There’s no additional per-transaction fee. The flat fee has produced a lot of positive feedback from merchants. "All the other systems they’re being pitched want some percentage of their sales. No matter what the percentage is, they hate the idea that there’s some random number that they have to pay to some organization," says Bethge. "The fact is that it’s a utility service for them; they know the monthly fee; and we don’t keep sticking our hands in their pockets every time somebody walks in the store."
The goal, he says, is to get the merchant’s customers to come back—twice as frequently as they’ve done in some cases—or to buy more product. "The nominal subscription fee that we charge we more than make up for in the amount of business we’re able to drive," says Bethge. What makes Perka really unusual is that while the benefit is to the customer, the service is really designed to increase revenues in a sustainable, long-term way for the businesses.
In fact, Bethge likes to think of Perka as essentially a marketing arm for merchants. "The fact that we’re actually able to change customer behavior is really affirming," says Bethge. "That simple little loyalty programs can make a meaningful difference for pretty small businesses—if they’re making $100,000 over a couple of quarters and you’re able to boost that by 2 or 3 percent that makes a difference. With a lot of these small merchants, the owners are the last person in the store to get paid.
Perka launched quietly in its hometown of Portland in the spring of 2011 and is privately funded by its founders—they are seeking funding to support a national rollout, though. Over a five month pilot program, Perka signed up 26 merchants in 30 locations and was used by more than 2,000 consumers. The company emerged from stealth mode this month, with a Seattle launch. It aims to be in an additional 25 U.S. cities by the end of 2012. Those locations are yet to be determined, but the company's gotten inquiries from shops in Sarasota, Ann Arbor, Atlanta, Chicago in the U.S., and even some from New Zealand and England. They also expect to offer a plug-n-play, or a simpler version of their product, down the line that merchants can implement and manage independently.
[Image: courtesy Perka, Inc. L to R Joe Stemlach, Alan Chung, Rob Bethge, Rob Coury, Jay Harlow]