As you may have noticed, there are a ton of companies with a smartphone app for customer loyalty. When I type in the word ‘loyalty’ on the Android app store (Google play), the query returns ‘at least 1000 results’.

The vast majority of these are applications that allow you to simply store loyalty cards inside your smartphone. The best of these apps may even allow you to check the current balance on your card. At a minimum, they are a handy way to store your card number to lighten the load in your ‘physical’ wallet. These apps are generally free and are monetized by display advertising.

A more exclusive category are apps that are sold directly to merchants wishing to replace their paper punch card programs with something that will provide more robust reporting around the visit and/or spend behavior of their best customers.

The challenge for these ‘local’ apps is to get enough merchants enrolled in the program so the consumer has the motivation to download- and regularly use- the product. Though app development can be done on the cheap, expanding the merchant footprint requires hiring a sales force, which can get expensive in a hurry. Therefore, the smaller players generally start by gaining traction is a single location before expanding regionally or nationally.

Another challenge these app providers face is that unlike offerings from the big players such as Square, the consumer generally cannot use the local app as a payment medium.

That doesn’t mean the app has to lack sophistication. ‘Perka’ is a local company here in Portland, Oregon that has built one of the more elegant solutions I have seen in the small merchant loyalty space.

On its face, Perka is simply a high tech replacement for the paper punch card. But like any good app in this space, what makes Perka compelling is the lack of friction. First, the consumer ‘checks in’ at the business. This is easy enough to do while you are in line. When you get to the counter, you tell the clerk your name and she credits you a virtual ‘stamp’ by validating the check in on an iTouch (optionally rented from Perka) that sits behind the counter. The bonus? The merchant gets to know its customers by name.

I used Perka at local coffee merchant K&F Roasters, and aside from some of the usual bugginess with the location finder, this application has proven dependable and easy to use. POP materials describing the program was prominently displayed, and the staff I talked to were aware of how it works. (I wasn’t popping up on the screen in their version of the app – turns out I had checked into the Perka demo site – doh!) I haven’t earned enough stamps to get my free coffee yet, but this should be seamless: the merchant will see that I am eligible for the reward, inform me of this fact, and discount my order.

According to its website, Perka now has merchants in 17 states- though 66% of its total merchants are in the Pacific Northwest.

Most of the companies with app based loyalty offerings will fail to grab sufficient market share, and will likely die off within the next year or two. If they can continue to scale, and maybe even add payment, Perka may well be one of the survivors.

In the mobile payment arena, nobody has come close to the success of Starbucks. Given that Starbucks had processed 42 million payments as of April, it is probably safe to assume they have now crossed the 50 million mark.

A few months back I was doing an Android vs. iPhone comparison of the Starbucks app, and discovered that from an available feature standpoint, the iPhone version is far superior. Only the iPhone version allows you to send an Egift – adding money to a recipients virtual card. There is also a cool ‘Drink Builder’ with a clever graphical interface. The iPhone also gives you the ability to tour the food and drink menu, including the calorie content. (As an aside, this is the reason I no longer eat the blueberry scone). And for the kitchen sink effect, the iPhone app throws in a QR code scanner, presumably so you don’t have to leave the app if you are browsing magazines at the store.

As an Android user, I’ve been missing some of these cool features. As a result, I was pretty excited when Starbucks announced an upgrade to the Android app last week. Turns out that besides adding a store finder and a superfluous ‘widget’, the upgrade does little to bridge the feature gap between the two platforms. My guess is that while these other features have a ‘cool’ factor, they simply weren’t used often enough to justify the development costs of building the Android version. In the meantime, ‘Small Society,’ the Portland based agency that built this module of the Starbucks application, was bought by @WalmartLabs. So as cool as they are , the advanced features of the Starbucks iPhone app end up being a case study in the decadence prevalent in the early days of app development.

What people do use the app for, 50 million times and counting, is to pay and earn rewards. And really, if not for the desire to accrue rewards, there would be no reason to use the app. In this realm, my primary complaint is the added friction of requiring the user to reload the card to pay for the drink and earn a rewards credit.

So, when the press release heralded the ability to ‘Pay and reload your Starbucks Card via PayPal,’ I read this to mean that I could link the app to PayPal account and then ‘pay as I go’ to pick up rewards credits, and that it would no longer be necessary to first reload the Starbucks card. No such luck. You can link your PayPal account, but you do this in the same way that you use your credit card: to first reload the Starbucks card before paying. Bummer because I’d love to capture rewards on my Starbucks card regardless of my payment method.

One final request:
Starbucks, thank you for sending me a personalized gold card for reaching the highest status. Why not just add my name to the virtual card in the app?

The article continues: “You grab your credit card out of your wallet in your pocket, and swipe it through the reader (or in some cases tap it, just like the phone). In the case of NFC, you grab your phone out of your pocket, open Google Wallet (or whatever), and tap it to the reader. It’s the same exact motion.”

I’ve been thinking about this for a few days and feel that focusing on the ‘motion’ alone is missing the larger point. For example, it required basically the same ‘motion’ to pop a cassette tape into the player as it did to do the same with an 8 track. Later, it was the same ‘motion’ to put a CD or DVD or BluRay in the player.

Though the motion was the same, the arrival of the CD ushered in the era of digitized music, which in turn set the stage for mp3’s, which was the precursor to all the streaming services we enjoy today. And we no longer have to hit play.

I look at the motion of the credit card swipe in much the same manner. Granted, using a credit card is not terribly inefficient from a motion standpoint, but it is an ‘analog’ step in a world that demands that everything be digital.

Think about how often you are asked “Would you like a copy of your receipt?” I usually decline. Why would I want to carry around this analog scrap of paper? Especially since it stores little information of value, beyond what the total charge was.

In a world frictionless payment, be it via NFC or an app like Pay with Square, the clerk will no longer have to waste their breath or my time. The receipt will be automatically sent to my phone with detailed SKU information.

Or have you ever had a clerk tell you they need to swipe your card again because the “card reader is acting up?” Bygones in the NFC era. Of course, much like a fact that compact discs get scratched and skip, there will likely be some technical glitches as contactless payment is rolled out en masse, but these problems will be worked out in time. You never hear a song skip on Pandora or Spotify.

I agree with Jordan that it will be a challenge to get merchants to make the switch. After all, there are still merchants, like the Sisters Bakery in Central Oregon, that don’t even take credit cards! That doesn’t keep us from stopping there on our way to Sunriver.

For Marionberry Pie that good, we’d pay with wooden nickels if we had to. . . .

Foursquare, the popular location based social network, released version 5.0 of the app last week. A core tenet of the redesign is a de-emphasis on check-ins and the other gaming features of the app. In a story profiling the ‘Connected Apps’ feature released with version 5.0, Sarah Perez at TechCrunch was in support of the changes, opining that they “give the user a new reason to check in”, one that is “more engaging than the now-tiresome mayorship quests, points and badges.”

After reading this, I paused to reflect on some of the classic arcade games I enjoyed as a kid. One of the best known games from this era is ‘Galaga’, released by Namco in 1981. Thirty years later, Galaga remains relevant due in large part to the genius of its scoring conventions.

For example, letting your ship get captured by the ‘Boss Galaga,’ allows you to rescue the ship and have double firepower. There is also a scoring benefit to rescuing your ship from two red escorts (1600 points) vs. without any escorts (400 points). Or the many different ‘Challenging Stages,’ with the ‘Perfect Score’ bonus for hitting all the aliens (tip: it helps to have double firepower). The game evolves naturally, keeping the same basic elements but always adding a few surprises. As a result, 30 plus years after its release, Galaga is still fun to play.

So how did the gaming aspect of Foursquare, released in 2009, grow tired in three short years? The fact is, the developers at Foursquare did little to evolve the game mechanics to create continued engagement.

For example, the first check in to a venue can net you as many as 14 points. Are you the first of your friends to check in? Is it your first Sushi bar? Etc. Upon your second check in you get 1 measly point. As a result, I mostly check in now only when I am traveling. Partly for the increased points, and partly to keep a trip log.

Back at home, if you decide to keep checking in anyway to pursue a ‘mayorship’, good luck. Most the coveted mayorships are out of reach – meaning you don’t get a pop up telling you how many days you are away from becoming mayor. (Answer: plan to get a job here). I have had a few ‘surprise and delight’ moments: stealing the mayorship at a popular venue, etc., but the mayorship is generally stolen back within a few days. Despite my competitive nature, I’m unlikely to check in to a venue just to recapture the mayorship. I also try to play by the rules, which means I have to actually be at the location in question before checking in. I imagine most people operate in this manner, but there are few safeguards against those that decide to go rogue.

Finally, the badges. This is perhaps my favorite part of the game. And in fairness, Foursquare has done a pretty good job here. Until they seemingly ran out of ideas.

For example, I drink a lot of coffee. I’ve now unlocked the Fresh Brew badge, Level 5. When I unlocked the new level, I received the following message:

“Look at you, Juan Valdez! That’s a lot of coffee. Now that you’ve had your caffeine fix, get out there and conquer the day – one twitchy step at a time.”

Which looks awfully similar to the message I received when unlocking the Fresh Brew badge at Level 4:

“Look at you, Juan Valdez! That’s a lot of coffee. Now that you’ve had your caffeine fix, get out there and conquer the day – one twitchy step at a time. ”

Really Foursquare? You couldn’t come up with any new copy? If there is nothing new to add, why even have multiple levels of the same badge?

To use the analogy of Galaga, this would be like the Challenging Stage at Level 3 being identical to Level 7. Which it most certainly is not.

And it’s one of the reasons why people continue to play Galaga, even as they’ve stopped playing Foursquare…..

Sometimes field testing new mobile payment apps means you have to make certain sacrifices. Today it required I eat a donut.

A few days ago, ‘Square’ announced the introduction of a merchant loyalty platform inside of the ‘Pay with Square’ app. Square is the credit card processor that revolutionized the payment industry by allowing merchants of all shapes and sizes take credit card payments by inserting a square dongle in the headphone jack of their smart phones. In the food cart/ arts and crafts mecca that is Portland, there are lots of Square users. With the release of ‘Pay with Square,’ that number is likely grow much larger.

Simply put, in the convergence of mobile payment and customer loyalty, Square has just raised the bar.

Here is how it works:

When launching the ‘Pay with Square’ app the user defaults to a ‘Directory’ that lists all Square merchants within a ½ mile or so radius. Any merchant that is close enough to the users current location has a green ‘Open Tab’ button next to the merchants listing. Conversely, a merchant that is outside of the acceptable radius has a listing, but does not have the ‘Open Tab’ button. As it turns out, this is a nice security feature.  Ditto the requirement that you upload a picture to prove your identity to a merchant. And since I decided to link my credit card to the app, and since none of us are sure that mobile payments are completely secure (what is?), I appreciated the extra security.

Of the businesses within walking distance of my downtown Portland office, I settled on Coco’s donuts. A great facet of this ‘Directory,’ from the merchant standpoint, is that it allows customers to discover your business. Prior to launching the ‘Square’ app, I had never heard of Coco’s, even though it was only a few blocks away. In addition to the listing, merchants can also entice new customers by advertising a discount.

As I arrive at Coco’s I discover that it is not a food cart, but a bona fide ‘brick and mortar’ business. As such, they have a full implementation of Square, including an iPad with the free ‘Register’ app installed. This combination allows a merchant to do away with a traditional POS (point of sale) system. Given the expense of a POS, why would a new business like Coco’s NOT do this?

Once inside the store, I click the ‘Open Tab’ button, walk up to the counter and order a Maple Bar and a cup of drip coffee. The clerk taps the iPad twice and says ‘That will be $2.50.’ I reply ‘I’m Brandon’.  She taps the iPad once more and says ‘have a nice day’. Huh? While I stand there stunned, my phone buzzes with a push notification and a link to my receipt.

The disruptive landscape:

There was no need to swipe the credit card, as the merchant has this on file via the Square app. No need for a paper receipt, a complete listing of all items purchased was sent directly to my phone. And finally, no need for a paper punch card, as my visit earned me my first virtual reward, neatly stored inside the app on the merchant’s digital ‘card.’ The user can also add a ‘shortcut’ to their phone’s desktop. . .which has the appearance of a custom merchant app. . .for businesses that they frequent on a regular basis. Wow.

As great as this app is, it is not perfect. Abuzz from the frictionless payment experience at Coco’s, I set out in search of a brewery and tasting room that, according to the Directory, is on my way home.  When I arrive at the address listed, there is no brewery or tasting room to be found. So I switch gears and click on the wine shop that is listed, but they have not listed their address (which begs the question of how and why the app thought it was close by). As the number of merchants in the app proliferates, some better filters would be nice to help the user focus on the need at hand.

And at the moment, that need is food. Off to the food carts.

In hindsight, I get it.  It was a mentor who told me in the hallway after the initial pitches that he ‘liked my idea,’ a much needed pick-me-up when it appeared I wouldn’t get the votes qualify for official participation. It was a  mentor, who despite not really digging our idea, helped  us get organized by pointing us to website with a ‘pitch outline’  that served as the framework for our presentation. It was a mentor who told us the idea was cool,  so cool  that we should check out a company from his native Seattle (arrgh!) that just landed $300k in financing to do something similar- and that this was a good sign!  So even though I joked that the mentors should be outfitted with T-shirts reading “prepare to pivot”, I humbly thank them for their input and time as they made the Startup Weekend experience much better.

Sun Morning.

All that said, we now declare a ‘mentor free zone.’  We simply cannot afford to pivot again!

While Marcie and I work on the presentation,  Yevgeniya is busy coding a prototype website. We collaborate back and forth- me finding Google images while Yevgeniya  tweaks code that makes those images rotate like horses on a carousel. The site won’t have any real functionality, but it’s starting to look pretty. It’s starting to look real!

I fall into my comfort zone of putting together a deck, something I do regularly for the restaurant chains I work with at my regular job. By now, Startup Weekend  feels like my regular job! And I’m liking it. A lot. Especially the other participants. In the natural course of events, I mend fences with my original team. Keith, the leader, ‘totally understood’, and we note some interesting overlaps in what our respective teams are developing. Another participant, Josh, helps us create our logo. We have picked up some twitter followers and facebook likes!  Let’s do this!

More tweaks to the preso. Each team has five minutes to present, followed by three minutes for Q&A with the judges. Marcie is making notes on a separate piece of paper. I insist that whatever we are going to talk about needs to be in the deck. From the creative tension we fashion the opening remarks. Then we begin to allocate slides that each of us will cover.

With the deck nearly complete, we suspend the mentor moratorium and ask Ravi to give us some feedback on the dress rehearsal. His advice: make the bullets in the Powerpoint more succinct, and speak more   s l o w l y.  We finish the third rehearsal with about 15 seconds to spare.

”Health Carrot’ is the 15th (of 17 total) presentations tonight, and we’re up next. . . .

I arrive at PSU Business Incubator with the intention of joining the ’12 carrots’ team. I do a walk of shame (unnoticed)  past the room of my former team in search of Marcie , the team lead, but she hasn’t arrived yet. I find the other two teammates in an open cube area and so I say:  “Hi, can I join your team.” They agree to take me in.

At the moment, we were a team of three. In addition to myself, there was Yevgenia, an engineer;  and Rob, a grad student interested in business development.   Marcie arrives about 15 min. later, wide and and hopped up like everyone else on the energy from the night before and quickly realizing that by tomorrow evening at 6 p.m., were supposed to have not only the idea baked but a functioning proof of concept. She can be forgiven for not recognizing that a new member had joined.

The first pivot

The original idea for ’12 carrots’ was presented the week prior at the Spokane startup weekend, by Marcie’s friend and business partner, Emily.

We decided over the next few hours that the product would be something that allows you to sync the data from your various fitness devices, such as Nike+ or RunKeeper, into a portal that would offer targeted rewards in exchange for reaching certain milestones. We thought it would not be a great idea to have one more app where you have to key the data. Marcie has a background in Health Counseling, so the idea would be to also have a dashboard on the site and some value add recommendations to the user. Using open API’s, users would  have a portal that combine disparate sets of data from their various devices and apps and get a clearer picture of their overall health. Hence our slogan: ‘Total Health, Total Rewards.’

@12carrots becomes @myhealthcarrot

Meanwhile, we fire up the marketing department, and try to create some buzz. I ask Marcie for the ’12 carrots’ twitter login and facebook admin privileges .  “@12carrots  Are you a Nike plus user? Have you been logging runs? Let us friend you! Just need your email address. . . .#pdxsw”

Crickets.

More tweets. Hilarity ensued, as it turns out we had linked the ’12 Carrots’ twitter account to Emily’s personal facebook account!  As we scrambled to correct our first PR nightmare, we did a name pivot and re-branded ourselves as “Health Carrot,” picking up a new twitter handle and facebook presence in the process.

Afternoon

Now that we have the basic concept in place, Rob and I take to the streets to do a little market research. We hit a few running stores to get the vendor perspective. The vendors seemed to like the idea. We thanked them and promised to be back with a contract.  Then we headed up to Leif Ericson trail to try to get some runners’ opinions about the idea.  We spoke to precisely one, but it was positive. Meanwhile, a mountain biker rode past and asked if we were the parking lot monitors. In fairness, we did look a little ridiculous standing at the trail head with pens and lined yellow legal pads in hand. This was a sure sign it was time to head back to headquarters. Besides, it was almost time for dinner.

Lockdown

While Rob and I  were gone, there was some drama. In addition to the fact that Marcie and Yevgeniya had met with three more mentors and made as many pivots, one of the participants became disruptive when he was asked to leave for refusing to join a team and participate in good faith. Oh yeah, and he made a bomb threat. When we showed up back at headquarters there were cops in the lobby and the event participants were getting debriefed in the main room.

Under cover of feeling unsafe, Rob’s classmates – and with them Rob himself – decided to bail out on the event.

There were 24 hours left to build a prototype and develop a five minute presentation, and we are back down to three members.

And in a sense, he was right. It was a lot of work. At the same time it was the most fun I have had in a long time. While in the thick of it all, there isn’t a whole lot of time to reflect on the experience. In fact, I didn’t even take any pictures. I know from a recent trip to the Caribbean that it is a matter of days before you lose the tan. So, I decided to do a blog post about the experience before the memories fade.

How I ended up at #startupweekend in the first place

Everyone has a different reason for arriving at Startup Weekend. I first heard about it about a year ago from my friend Skip, who participated in the two previous events and was spending this one, his third, as a mentor. One of the teams he was a part of previously went on to get some funding from Portland Seed Fund. He and I have spent a fair amount of time dreaming big over expensive cocktails (we both have day jobs), and he encouraged me – dared me! – to attend. When the latest event was announced I signed up before I could back out. Good thing too as it eventually sold out.

Friday Night – Pitching or Catching?

I arrived without any plans to ‘pitch,’ which entails getting up in front of the audience and selling your idea in 60 seconds or less. Once I got there and felt the electricity in the room, and came to the realization that about half the audience would be pitching, I decided to throw my hat in the ring. I’m not sure I recommend doing this unrehearsed! As a drummer, I’ve spent a good part of my life behind a drum kit focused on entertaining folks, and this context, I have no problem grabbing the mic and talking up the crowd, but this felt different. There were no props. No music. If I were about to sing the National Anthem , I’m certain I would have fucked up the lyrics. I did it anyway . Though the votes for my idea didn’t qualify me for the 17 team cut, (Note: it helps to have a catchy name thought up in advance), It was definitely the right thing to do as a way to introduce yourself.

Then the time came to partner up with one of the 17 finalists. This was a nerve racking process of chatting up prospective pitchmen (and pitchwomen) and deciding who you think you should spend the next 48 hours hanging out with. I ended up on a team called ‘Habit Coach’. I liked the leader, but when I ended up in a room with nine people (larger than average), at least three of whom had strong opinions about what the product should or shouldn’t be, I had my doubts. I got home the next morning at 1 am, and as I replayed the nights events, didn’t fall asleep til about 2.

Saturday Morning Free Agency

I have two small kids, and so I was up the next morning at about 6. I went on a run, and despite the lack of sleep felt great from the buzz of the event. Better than great. I was pumped. I got in at about 8:30 and asked one of the organizers if it was ‘cool to defect’. He said simply “that’s what this is all about.” And so it was I joined the 12 carrots team. I became their fourth member.

To be continued. . . .

Thanks hashtraffic!

If Google has any say in the matter, perhaps the only thing left in your wallet will be a driver’s license. But before you go short selling stock in leather accessory companies, let’s take a closer look at how Google Wallet really works.

I finally had a chance to explore ‘Wallet’ up close and personal at Peet’s coffee in downtown Portland, which began offering the service this week. When I read the press releases about Wallet a few months back, I was so excited that I must have forgotten to read the fine print.

As it turns out, you have to have to be a Sprint customer with a Nexus S 4G Phone for it to work. A cursory Google search reveals that Sprint has about a 16% market share. Let’s be generous and say 5% of their customers have this phone (50% smart phones * 10% of the smart phones). That means that .8%, or eight tenths of 1% of Peet’s customers are able to use Google Wallet to pay for their coffee. Oh yeah, and you also need either a Citi MasterCard or a Google Prepaid Card locked and loaded on the phone as your payment vehicle.

Given the barriers to entry, it came as no surprise when my barista informed me that on this busy morning in the heart of tech savvy Portland, not a single customer had used their phones to pay for their coffee. (Though about 10 people had used their PayPass Master Card to pay).

Okay Google I get it, you want to be first to market. It’s a great idea. It’s as sexy as it is disruptive. And though I didn’t get to see it first hand, I’m sure it works as advertised. Still, I’ll hang on to my leather version, because it’s not going away anytime soon.