May 27, 2014 | by Will Hernandez
An inside look at what drives LevelUp

Seth Priebatsch might be the most well-read executive in the payments industry.

The Chief Ninja (or CEO, whichever you prefer to call him) of mobile-payments provider LevelUp read the Durbin Amendment, along with 220-plus pages of opinions from the Fed's open comment period about debit interchange, not once, but twice. In an average month, he reads thousands of pages of text on everything from technology to payments.

Priebatsch does this to help him decide what is best going forward for LevelUp, which has experienced steady growth since its debut in 2011.

LevelUp views itself more as a marketing company that uses transaction data from QR code-based mobile payments to improve merchants' advertising with loyalty campaigns. Merchants, and their customers, are buying into the model.

In a four-month period from January through April, the number of locations accepting LevelUp for payment increased 40 percent from 10,000 to 14,000. LevelUp app users who average five-plus orders per month at participating merchants were up 35 percent to 110,000 from 80,000.

LevelUp also offers a white-label service, and companies like Equinox Gym and QSR chain Sweetgreen have the provider's capabilities built into their respective mobile apps.

The company now is adding more personnel as it grows and in May moved into a new space in downtown Boston. LevelUp last week hosted an open house and invited Mobile Payments Today to tour its new digs and chat with the Chief Ninja himself.

"We're trying to build a multibillion-dollar company, a multibillion-dollar consumer-facing company in Boston, which has been done, but there aren't as many here as there are in New York and San Francisco," Priebatsch told Mobile Payments Today during an interview inside one of the new office's many conference rooms. "We want to be more part of the community now that we are more centrally located, so we invited people in to have some drinks, and show them what we've done with the space and get to know the community more."

What LevelUp did with the office is impressive.

The company invited local artists to paint murals throughout the office. The most eye-opening of the bunch might be Darth Vader holding a smartphone with the LevelUp logo on the screen. LevelUp used the Vader mural when it sent invitations to the open house.

Priebatsch's team decorated conference rooms and collaborative work areas based on certain themes. One such room is dedicated to Boston's rich sports culture, while another has a "Game of Thrones" theme and is named Winterfell after one of the Seven Kingdoms in George R.R. Martin's popular fantasy book and HBO series.   

LevelUp's engineering and lab area is littered with QR code scanners and other related materials. There's also a separate area where engineers test how scanners work with various point-of-sale systems.

From buffalo wings to mobile payments

The story about how LevelUp came into existence is a simple one on the surface and a lesson in selling an idea short of its full potential.

When the company was better known as SCVNGR with a social location-based gaming platform as its centerpiece product, it partnered in early 2011 with Buffalo Wild Wings in what Priebatsch said is still the largest location-based campaign to date.

Buffalo Wild Wings and SCVNGR deployed the campaign in over 700 locations, and more than 180,000 customers played it over an eight-week period. The campaign generated 17 million impressions across various social media channels, which was what Priebatsch and his team was focused on.

"We put this together in a package, went to Buffalo Wild Wings, presented it to them and said here is what we've done," Priebatsch said.

What SCVNGR did for Buffalo Wild Wings was help the restaurant chain earn a significant amount of dollars in revenue, of which the $25,000 invoice Priebatsch billed them was only a small fraction.

"It was a real ah-ha moment for us," he said. "We clearly understood mobile, how to work with merchants, understood how to engage with consumers and we were dropping the ball on the last foot and not tying into the transaction — and that was kneecapping us and ending all the value we could provide."

Priebatsch pulled the company together after the Buffalo Wild Wings revelation and told his team he was not exactly sure at the time how it would be done, but that they would somehow get into payments. LevelUp was born shortly after his proclamation.

Measured, purposeful approach

At the moment, LevelUp appears to work best in tandem with the QSR environment. The company chose that merchant segment for multiple reasons.

“LevelUp works anywhere, but QSR is the [area] that succeeded in the sense that it has the ideal characteristics for an ideal mobile payment network: lots of [customer] frequency, lots of revisits, low average ticket prices, very little fraud and the ability to influence behavior,” Priebatsch said.

When LevelUp fine tunes and perfects its approach with QSRs, only then will it entertain other merchant segments, and the company is thinking ahead to support less frequent consumer purchases such as grocery and convenience stores and then maybe large retailers.

"[QSRs] helps set a market for us," Matt Kiernan, LevelUp's marketing manager told Mobile Payments Today at the open house. "It's important for us that we take steps incrementally and accurately.

"Going after a giant retailer without fully testing it or implementing it, training staff and other things, is a recipe for failure."

Priebatsch believes LevelUp’s approach is different from what Isis, Google Wallet and others are doing and does not shy away from addressing the differences.

"I think you'll see people really realigning [their thoughts about] how do I get money off [a smartphone] and into the merchants hands," Priebatsch said. "Exactly what [technology] I use to do that may not matter. But how can I do it cheaply, because no one wants to pay for this, and how can I get the data and use it for something interesting?"

One amusing and interesting marketing campaign LevelUp is just diving into is the "Make It Rain" promotion, which was created based on a merchant's suggestion.

That merchant told LevelUp business is slow during bad weather. LevelUp merchants will soon be able to entice app users in the area to leave their homes with special offers to visit restaurants when the weather is not so great.

"We believe the flavor of mobile payments we're using is better and provides a lot of value for the merchant and the consumer," Kiernan said. 

Consumers still see value in LevelUp even when merchants are not running campaigns, according to Priebatsch. And that might be what helps LevelUp grow going forward.

"I think there is a portion of the population that just wants to pay with their phone because they think it's awesome," he said. "But the majority of people don't want that, but they do get some utility out of it. I view the catalyst to be the loyalty, the rewards and the savings, but then once people get into the habit of it, [paying with a mobile phone] is just better."


Topics: In-App Payments, Loyalty Programs, Mobile Marketing, POS, Restaurants

Companies: LevelUp



Will Hernandez
Will Hernandez has 14 years of experience ranging from newspapers to wire services and trade publications. Before becoming Editor of MobilePaymentsToday.com, he spent two years as the content manager for PaymentsJournal.com, a leading payments industry news aggregator and information hub published by Mercator Advisory Group. Will spent four years covering the payments industry as an associate editor for multiple publications in SourceMedia's Payments Group based in Chicago. View Will Hernandez's profile on LinkedIn

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