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updated 11/18/2012 7:17:06 AM ET 2012-11-18T12:17:06

Regardless of what a small business sells--sandwiches, car washes, dog food--its customer-loyalty strategy usually consists of some variation of "Buy 10, get one free." But after that free coffee or frozen yogurt, what's next?

At FoBoGro (short for Foggy Bottom Grocery) in Washington, D.C., what's next is a ring toss for the opportunity to win a discounted bottle of wine, a spin with one of the founders in his Porsche or a 30-second shopping spree.

"The best rewards are experiential," co-founder and COO Devlin Keating says."It's a fun way to interact with customers, and it helps build new clientele."

FoBoGro offers these perks through Belly, a digital platform that resides on an in-store iPad near the cash register. Customers check in at the store using a smartphone, or a plastic Belly card; the system tracks their points. Keating doesn't have to do anything. Belly supplies the iPad and the program and charges FoBoGro a $50 monthly fee to manage the system. (Fees range from $50 to $100.)

"It's a conversation starter," Keating says."A customer sees that they've reached a reward, and they'll ask us or their friends whether they should cash in or work toward the higher-level reward."

Chicago-based Belly claims to pick up where Groupon's one-and-done deal model stumbles: creating and nurturing repeat customers.

"Having an emotional connection with a business in some way is what fosters true loyalty," says CEO Logan LaHive, who launched Belly with the goal of reinvigorating customer rewards with an easy-to-use system for business owners. Belly handles both aspects with an army of field reps, who can set up the system and help create a unique ladder of prizes."Rewards that are memorable can create viral content, with their customers posting and tweeting about what they've earned," LaHive says."That generates great word-of-mouth for any business."

One year after its August 2011 launch, Belly had signed up some 3,000 businesses in 10 major markets and was expanding by more than 150 businesses per week. More than 500,000 users check in to those systems 25,000 times a day; about 50 percent of users check in to more than one a day--reinforcing LaHive's goal of creating a "universal" rewards program.

The iPads, programming, signage and field reps represent a "considerable" upfront investment in each new business that signs up, but LaHive's long-term strategy is to collect the monthly subscriptions--and the eventual profits--for years to come. He's well funded for the task, with $375,000 in seed money from Lightbank (the Chicago venture firm created by the founders of Groupon) and a $10 million investment from Andreessen Horowitz.

FoBoGro is about six months into the program and has seen 1,000 customers check in roughly 5,000 times using Belly. In addition to giving away joy rides, Keating has used the system to help the community."One of our customers asked us to donate to the D.C. Charter School fund," he says. "We thought, let's make it a reward and donate $10 every time someone reaches a certain point level. It was a really cool idea, and we just ran with it." 

Copyright © 2013 Entrepreneur.com, Inc.

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