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The Power of Loyalty-Card Apps

A look at four companies working to reinvent customer loyalty programs

Loyalty cards, those punch cards or those little plastic fobs dangling from countless key rings, may soon fade into history, pushed out by smartphone apps that do more than just offer a high-tech alternative -- they also provide businesses with a trove of useful information about their customers. Several start-ups have recently launched loyalty-card apps to help businesses attract customers and reward their regular fans. At the same time, these apps ferret out marketing data, giving even the smallest shop access to high-powered analysis. Here's a look at four companies racing to reinvent loyalty programs.

CardStar
Andy Miller launched CardStar, in 2008, after he got tired of carrying plastic rewards cards on his key ring. CardStar allows users to register their cards; the bar-code information is stored on users' phones. CardStar provides purchase data that help merchants tailor promotions, and it shows the frequency of CardStar usage at competitors' locations. More than two million consumers have downloaded the free app. Businesses pay a few dollars per promotion alert, and large companies pay thousands of dollars a year for data management.

Number of Businesses Registered: 750

Cardagin
Founder Rob Masri has built a hyperlocal loyalty app, targeting mostly neighborhood businesses. Merchants ping daily coupons to individual customers, using information that each user has supplied to Cardagin. The service can supply, for instance, a customer's birthday or the type of sandwich he or she bought on a recent visit. The iPhone app launched in Charlottesville, Virginia, in July, followed by an Android app in October. The service costs businesses $80 a month, plus $1 per day to advertise online and 10 cents per alert, per customer.

Number of Businesses Registered: 27

Checkout
Shoppers can use Checkout as a loyalty card app or as a credit or debit app, provided they register their bank card information. Customers choose cards from Checkout's database or can register any new card, so long as it carries an ID number. Businesses can keep tabs on loyalty members' shopping activities and can offer promotions based on users' ages, locations, and card activity. Personal information remains anonymous. Since a beta version of Checkout launched in February, more than 10,000 users have downloaded it.

Number of Businesses Registered: 1,250

PlacePop
This service offers location-based check-ins linked to a rewards card. Since the beta version launched in July, users have checked in to 270,000 businesses to earn bronze, silver, gold, or platinum badges, depending on check-in frequency. Users can also suggest rewards they would like to receive; that encourages businesses to participate. Once they do, they can create their own electronic loyalty cards with daily discounts. When the site launches, there will be no cost for businesses to sign up, but PlacePop plans to charge for premium services.

Number of Businesses Registered: 0

The Line: Checkout's debit and credit card features give it a head start, but it isn't able to let businesses upgrade from traditional hole-punch cards to an electronic app. PlacePop users have checked in to more businesses than have users of the other services, but it provides business owners with less data on customers. In the end, CardStar may come out ahead, because it offers local and national businesses the ability to migrate their existing loyalty programs to an app. It also provides the broadest range of data on user behavior. If Cardagin catches on, though, and keeps offering local businesses the amount of information it does now, CardStar may face some tough competition.

Issie Lapowsky is a reporter at Inc. magazine. She has covered lifestyle and entertainment for the New York Daily News, and her work has been published in BlackBook magazine and The Brooklyn Rail. She lives in Brooklyn, New York.