IdeaLab Launches Punchcard: ‘Loyalty, Not Transactions’

Companies are beginning to focus on loyalty programs for existing customers, rather than simply using deal a day to acquire new customers. Closely and WildFire App are both pursuing loyalty programs.

A loyalty start-up we like is Punchcard, which launches today. The brainchild of MerchEngines founder Andy Steuer, Punchcard is a smartphone app that provides a virtual facsimile of the loyalty cards that customers are familiar with from their favorite coffee or ice cream shop (get 10 purchase stamps or punches, get one free).

Punchcard has gotten $1 million in seed funding from IdeaLab, and has hired five people, including local business development executive Dawn Padungian (Local.com, Charter Cable.)

Consumers sign up for Punchcard on a store-by-store basis, and receive a virtual punch after snapping a photo of their receipt. They can sign in via Facebook Connect. The service is currently available for iPhone users, and an Android version will launch in January.

Steuer tells us the card’s virtual nature gives it real flexibility in terms of incentives, or what he terms “offer triggers.” After their 10th purchase, for instance, customers can get cash or credit. The amount would be based on their average spending. That’s the standard offer. Since it is all electronic, however, merchants could opt to provide rewards after a certain number of purchases in a given month, or after a certain amount is spent, etc.

The company will also be in a good position to leverage behavioral data, and make nearby recommendations. It doesn’t have to worry about email fatigue issues since all its communications are via the app, rather than email, notes Steuer.

To rev up the market, Punchcard is seeding the market in Southern California with a prepopulated list of 147,000 merchants. During the trial period, it will pay the credit for the merchant’s 11th sale (up to $30.). The company’s actual revenue model, however, is based on monthly fees ranging from $29 to $129. At launch, 40 companies are already paying.

If Punchcard is successful in winning 5 percent more local users, research from The Center for Retail Management shows that can translate to 60 percent to 100 percent gains in revenues, adds Steuer.