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LevelUp app aims to keep coupon users coming back

John D. Sutter, CNN
LevelUp gives users deals and discounts automatically when they pay with the smartphone app.
LevelUp gives users deals and discounts automatically when they pay with the smartphone app.
STORY HIGHLIGHTS
  • LevelUp is an app that offers deals and payments
  • The app launches in New York and San Francisco on Wednesday
  • Users link a credit card to the app; when they pay, they automatically get discounts
  • The app also builds in an incentive for you to return to a business

(CNN) -- There's a problem haunting the digital-coupon world: Once people use a coupon, they usually don't come back.

But Seth Priebatsch, the young founder of a game-life app called SCVNGR and one of the foremost thinkers on using technology to make life more of a game, says he has a fix for that.

It's an app called LevelUp, and it's launching in two new cities -- New York and San Francisco -- on Wednesday, Priebatsch said.

"The data (about the app's use) has been just so freaking off-the-charts amazing," he said.

In pilot cities where the app is already available -- Philadelphia and Boston -- more than 40% of the people who used the app to make a purchase came back to the same retail store within a month, Priebatsch said.

Other coupon sites are reported to have lower return rates.

A Groupon spokeswoman declined to comment or provide statistics for this story.

The difference with LevelUp, says Priebatsch, is in ease of use and game mechanics.

Here's how you use it: LevelUp users download an app and link it to a credit card. The app generates a unique QR code (those black-and-white checkerboard things), which can be scanned at stores to make a payment and to earn LevelUp deals.

This happens all at once. If you're at the Kingston Station Restaurant in Boston, for example, and you pay with LevelUp, then you automatically get a $10 discount that's offered through the app. Compare that with Groupons, which you have to buy in advance, print out and take with you to the store or restaurant. LevelUp works right in the moment.

The app also builds in an incentive for you to return to that business. As its name suggests, customers "level up" when they make purchases, letting them unlock better and better deals as they return to a location over and over again.

In the Kingston Station example, you'll earn a $20 discount after you've spent a total of $150 at that restaurant. It's a digital version of those punch-card coupons, but there's not a paper card to lose, and it gets punched automatically when you pay with the app.

The app is also toying with more game-like features in the future. This makes sense in part because Priebatsch is also the founder of SCVNGR, a real-world game app that takes users on scavenger hunts through parks, museums and businesses.

If you take a friend to lunch and pay with the app, each of you gets a $5 coupon, for example. And, in the future, the company is working on a promotion called Make It Rain, in which you'll get a special discount if you make a purchase at a LevelUp merchant while it's raining in your city, since that's when restaurants are slow.

The app is adding social and game-like features slowly to avoid "the Blippy dichotomy of doom," he said, referring to a social site that lets users automatically share their credit card purchases on Twitter, freaking many people out.

It's also worth noting that LevelUp doesn't take a cut of your purchases, which, according to Priebatsch, makes it a better deal for the businesses that use it.

"The coolest part -- and there's some magic here -- is that when you pay with LevelUp, the merchant actually pays about 50% less in their payment processing fees than the card that you would have paid with in the first place," he said.

Instead, he said, LevelUp charges participating businesses a monthly fee of $55 after an initial three-month trial period during which the service is free.

The app has 100,000 users in Boston and Philadelphia, he said, and LevelUp deals are available in about 500 businesses in those two test cities. About 800 businesses in San Francisco and New York have signed up with the service, he said, but not all will be active at the time of the app's launch in those cities Wednesday.

If you give the app a try, let us know what you think in the comments section.

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