BeepXtra is a company that has been getting a lot of buzz over the last few months and one that I have looked at throughly.
BeepXtra is a new cloud based discount & loyalty system. When I visited BeepXtra.com there was no mention on the site as to where the company is located and no phone number posted on the site in order to ask questions. The only way to contact the company is by completing a contact form which immediately raised a red flag. After doing a bit of online research I discovered that BeepXtra.com was registered in the British Virgin Islands.
From a consumer point of view BeepXtra is an absolute can’t lose. It is free to join and free to receive a BeepXtra card. By using the BeepXtra card you are able to visit participating merchants and receive cash back of starting at 2.5%. However, looking at BeepXtra from a business opportunity point of view I have a few concerns with regard to the product.
Customer loyalty programs are not new by any stretch of the imagination. Although not all merchants have customer loyalty programs in place there is no denying that customer loyalty programs work. However, I can’t correlate how receiving a discount every time I patron an establishment would make me a loyal customer. From my point of view it would make me loyal to the discount itself not loyal to the establishment.
From a merchant point of view I can’t see what the benefit. As a merchant I pay a fee in order to integrate with BeepXtra. I decide on a discount that is affordable to me, minimum of 2.5%, and whenever a customer presents the BeepXtra card I pay this discounted fee in the form of cash back plus a 2.75% processing fee to BeepXtra. When you sign on as a merchant you receive Beep Cards which you are to distribute to your customers. As the Beep Card originated at your store you will than receive a commission whenever that card is used at other participating BeepXtra merchants. However, as a merchant I would have to ask what merchants in my area are currently integrated with BeepXtra. At this point in time I have no idea. All merchants are supposed to be searchable at BeepStores.com which raises yet another red flag.
When I visited BeepStores.com and attempted to conduct a search so that I could find participating merchants I was presented with the below;
BeepXtra has been marketed for months yet there is no way to search for merchants? Based on my online research many people are claiming that they are signing up merchants every day. If that is indeed the case there is nothing preventing BeepXtra from loading these companies onto the site and opening up the search functionality. As a representative of BeepXtra it would be beneficial to be able to pull up the search function on my smart phone in order to show the merchant that there are many businesses that are signing up with BeepXtra and that those businesses are receiving Beep Cards which could result in new business for that merchant. Unfortunately as the search function is not available I, nor you, would be able to use the selling proposition. This brings me to yet another point, what exactly is the selling proposition?
From another merchant point of view, when I sign up and pay the integration fee I am to distribute the Beep Cards I received to my customers so that I can not only provide my customers with a cash back discount but so that my customers can use the Beep Card originating at my store at another merchant which would in turn earn me a commission. The commission that I would earn as a merchant would be 12.5% of the 2.75% transaction fee. Of course, with enough volume this could potentially turn into a serious revenue stream which I feel is the actual selling proposition of BeepXtra. In my opinion a merchant may be hesitant in providing a discount to customers that are already loyal to their store. As a sales representative it would be in my best benefit to lay that concern to rest by pointing out that although they would be providing a discount to their customers that a stream of revenue that did not previously exist would now exist of they became a BeepXtra merchant. What would the benefit to the merchant be? The benefit would be earning a 12.5% commission on the 2.75% BeepXtra transaction fee. As a merchant this would not sound appealing and as a sales representative this is a difficult selling proposition as math does not lie.
Let me provide an example. You are a merchant that is in the carpet cleaning business and your average ticket is $150. You decide that you will become a BeepXtra merchant and provide a discount of 10% meaning that the discount would be would be $15. In addition you would have to pay a transaction fee to BeepXtra in the amount of 2.75% or $.41 cents for a total cost of $15.41 leaving you with a gross profit of $134.59. You signed on with BeepXtra as a new revenue stream as you found it to be appealing. You provided a customer with a Beep Card and that customer uses that Beep Card at a car wash that offers Beep Card holders a discount of 20% on their $12 car wash. The BeepXtra transaction fee of 2.75% on the 20% of that $12 car wash means revenue to you in the amount of $.008. Even if 1,000 customers used the Beep Card that originated from your carpet cleaning business at that car wash your new revenue stream would be a grand total of $8. Of course the possibility of those 1,000 cards being used at other BeepXtra merchant locations, opening a lucrative revenue streams for you, exists the probability is low. Would discounting your service in the amount of $15.41 to customers already buying your service be appealing if the new revenue stream would result in monthly profit of $8?
Another issue is the fact that people tend to patron establishments based upon proximity to where they live. Based on my research I found that people tend to patron establishments within a 5-10 mile radius or 10-20 mile radius depending on the source of information. After coming across this information I thought long and hard about where I shopped and why I chose to shop at those locations. The end result was that I discovered that the determining factor was indeed location. I stop at the same gas station that has a mini mart often, sometimes for the occasional refueling, but more often for coffee on my way to work. Not because they have great coffee but because it’s on my way to work and convenient. I have been getting a haircut at the same barbershop for the last 4 years not because my barber provides the best haircut but because I’m satisfied with the price and look of the haircut and it’s a short 2 minute walk to get there. I’ve been purchasing groceries at the same location for the last 12 years, not because it’s the cheapest place to purchase groceries but because it’s the only supermarket right around the corner from my home and it’s convenient. I get my oil changed at the same place not because they are the best but because the price is reasonable, I like the service and it’s close to my residence. I believe if you do the same as I did you will probably arrive at the same result. Would a discount of a 30% on a $12 haircut, a 15% discount on your oil change and or a 35% discount on your morning cup of coffee change your habits?
This is an issue for me, although it may not be for you, but I already enjoy cash back discounts starting at 1.5% through my credit card. Although the percentage of cash back is dictated by category I use my cash back credit card wherever I shop. Just last month I cashed in my points accrued over the last few months into over $130 in cash. Looking at my credit card statement I discovered that not only did I not change my shopping habits but the end result was that my cash back on average was approximately 5%.
BeepXtra seems like a good opportunity for the aspiring entrepreneur. However, based on the inability to use BeepStores.com as a selling tool, a weak selling proposition of an additional revenue stream, the fact that most people shop where they do based upon proximity to their residences and the fact that there are cash back credit cards available that are not contingent upon where you shop in order to be rewarded is enough for me to pass on the BeepXtra opportunity. Do I believe BeepXtra to be a scam? I do not believe that BeepXtra is a scam but I do not find BeepXtra to be a viable option for the aspiring entrepreneur.