July 17, 2012

Belly Up: A Rewards Program for the Digital Age

There are two things that hand-held hole punchers are made for: art crafts and rewards cards -- you know --the buy-10-get-1-free card that you have to fish out of your wallet among your insurance card, neglected business cards and that one sheet of stamps you hold onto like Armageddon’s coming. The card that you keep but never really use until one day, that single card has turned into five different cards and now, you’re that person at the register who unloads their wallet every time just to garner your spot for that one free cup of coffee.

Enter the most recent Chicago-based tech start-up lead by Logan LaHive (which may or may not be a name that you will know in the future) -- Belly -- a rewards loyalty concept that takes away the hassle of the punch card and replaces it with the iPad and smartphone, giving small to medium size businesses the opportunity to offer a better loyalty program.

It works like this: Belly supplies the business with the iPad registration dock and the scanning cards for those like me who don’t have smartphones and can’t use the app (in my defense I have one, I just chose not pay data on the damn thing). The business gets to customize the rewards it will offer customers, like the ability to throw cupcakes at the owner or tend bar for the night. Every time the customer “taps to Belly” at the point of sale, they automatically earn points no matter what they bought. When they reach the first level for a trade-in, they are notified. The consumer, normally used to the punch-a-card system, now has a whole new digital experience to gain their rewards by either swiping a card or the app on their mobile phone and a centralized online dashboard to check where they stand with points.

Courtesy: http://tipchicago.files.wordpress.com/2012/06/photo-1.jpg

Of course, money has to be made, (especially when  Belly has raised so far upwards of $11MM with the majority of that change coming from the recent $10MM from AndreessenHorowitz). For that to happen Belly charges businesses a $50 monthly subscription after the month trial. In return, businesses get the in-store iPad, an unlimited amount of cards, promotional materials, and online analytics, including email, with additional add-ons that vary in cost.

I first learned about Belly back in January at my local fish market when I met up with a shiny new iPad at the register. Being the iPad, of course I was immediately intrigued – I had something to play with which means that I ended up signing up and walking away with my new Belly card, earning 5 points in the process. Why didn’t I think of this idea! Since then, whenever I notice the signature dog in a store or see that familiar little iPad, I pull out my card and scan it like a four year old whose found a chocolate chip cookie jar -- oh the rewards! and the little dog does tricks for me, too.

Since January, here’s where I stand with Belly:
  • 30 points away from a free sushi roll at Dirks, which means 6 more visits (last one was January)
  • 20 points away from 10% off from a place I’ll probably never go to again this year
  • 10 points away from 20% off my next hair cut – which means 2 more hair cuts away
  • 40 more points away from a free cup of coffee at Dunkin Donuts, which means 4 more visits (and do note that Belly differentiates between a Dunkin Donuts and a DD/Baskin Robbins store, just saying).

Point being, I've had the card for almost 6 months, yet I haven’t received my “return” yet. Not because the system doesn't work, but because they are not in enough stores yet in their largest market. Meanwhile, at the local overly priced lunch spot I frequent at least once a week, my hole punch card is almost ready to get me a free $10 lunch, and that motivates me when making my lunch choices. Does it mean I don’t like the program, of course not, does it mean the experience might be more valuable to me right now? Probably. Does it mean that, like most things, without a tangible reward, the novelty of the experience will wear off? Most likely.

Let’s look at the business model:

At a $50-$100 monthly fee, the average customer, assuming they stick with it, brings in $600 - $1200 annually. As of June Belly had 1,600 merchants making them on target to hit $1M in revenue on their first birthday if they haven’t already, which ain’t shabby, and they’re scaling up pretty quickly beyond Chicago into New York, Boston, Austin, Milwaukee, Madison, Wis., Washington D.C. and Phoenix.

I’m sure Belly’s business model is built around up selling these additional services. I’m also assuming that Belly has a discount agreement with Apple for the iPad’s but I’d be curious to see the cost of onboarding one merchant. (Assuming that it’s $300 - $400, Belly’s still making a pretty good profit margin). But, even while it’s genius, I’d question how easy it would be to manage costs (If the business needs a new iPad does Belly replace it? And what about customer service, does Belly maintain all aspects of the program so that merchants don’t have to?) From a business standpoint, I could see the range of $600 - $1200 annually to be a reasonable sell to merchants who find value in the data Belly offers so I only see an issue with merchants who might feel like a loyalty program doesn't fit their brand and consequently, won't buy into the idea.

It’s a genius idea and the key will definitely be to driving consumer's to create demand while getting feet on the street to get more small-medium sized business on board with a data backed value proposition story so that the program actually starts giving out relevant rewards. That's what the $10MM is for, question is, can Belly grow fast enough so that I can start seeing a return on my experience? Or will Belly (formerly called Bellyflop, nonetheless) . . . flop?

I’m just looking forward to when I can finally get my $30 haircut -- in December.

Thanks for reading!

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