A year from now, Sionic Mobile will have distributed 100,000 free iBeacons to small businesses, a $1 million marketing play the company hopes secures its place among local stores as they start to adopt mobile technologies.
"These businesses can generate foot traffic not just through rewards but through all parameters," said Ron Herman, CEO of Sionic Mobile.
The Atlanta-based mobile marketing and payments company is starting a national rollout of Apple iBeacons, with 20,000 beacons expected in the market by the end of the year and another 80,000 in place by next summer.
Sionic will host the technology, and merchants will activate the beacons via the Sionic app and a QR code. The app will provide instructions on how to place beacons in the store. In the coming weeks, Sionic's consumer app, ION Rewards, and the company's merchant partner apps will be updated to accommodate iBeacons.
The iBeacons have a five year battery life and a "heartbeat" feature that notifies Sionic if the beacon is not operable or has left its originally deployed location. The merchants then receive an alert from Sionic describing the malfunction.
Apple's iBeacons use Bluetooth technology to detect when a consumer has entered a predetermined location, typically a store. The system enables improvements in location-based marketing, payments and other services. Beacons got an early nod from PayPal, and have since become a mobile location-based marketing staple among larger merchants like Macy's and Target.
This gives Sionic a chance to push into what it sees as a market gap among the smallest local merchants.
"We're looking at the SMB segment, but without the 'M'," Herman said, adding that hosting the technology will enable stores to deploy and use the iBeacons alongside existing Sionic services with little effort, and the revenue proposition is based on an increase of in-store activity such as sales; Herman said Sionic is not planning to earn revenue off of the actual beacons.
"They sell what they sell, and the Ion loyalty for merchants is already 99% on the smartphone or tablet," Herman said.
Consumers will get a welcome message when they enter a store, then receive information on available Sionic rewards. Merchants that use Sionic pay a 1% transaction fee and a minimum 1% reward to the consumer. Sionic Mobile provides a virtual reward currency called "Ions" which can be redeemed within the company's merchant network. Consumers earn an average of 3% at small businesses and 5% at national merchants.
The beacon deployment also detects the consumer's distance from the point of sale to enable single-click payments for transactions that don't include a gratuity. "You go right to the screen and the transaction happens as fast as it would on Apple Pay," Herman said
Sionic, like any other mobile tech provider, will be pressured to ensure consumer adoption in a highly competitive market.
"Adoption rates are not driven by the number of users downloading the application, but by how often the user can utilize that application and the value it delivers," said Tim Sloane, vice president of payments innovation and the director of the Emerging Technologies Advisory Service at Mercator. "Until they are broadly deployed and consistently deliver a noteworthy experience to consumers, beacons will have the same problem as mobile payments, which is low utilization."
To broaden its appeal among small business, Sionic has made several investments in the past year, including a feature that allows free advertising. And earlier this spring, it finished work on a system that uses a three-digit code to execute payments on a mobile device.