BetterWorks Offers Employee Discounts For Small Businesses

08/23/2011 04:41 pm ET | Updated Oct 24, 2011

Earlier this year, David Segura walked into a popular burger joint near his office in Santa Monica, Calif. to see if he could negotiate a corporate discount for his team.

The six employees at Giant Media, Segura's online-video startup located around the corner, were obsessed with the restaurant. Something about the beef patties topped with manchego cheese and aioli kept them ordering at least once a week. A small percentage off future orders would all but guarantee that Segura and his co-workers remained regulars, he told the manager. He even flashed his iPhone to show that he was the restaurant's "Mayor" on Foursquare, the ultimate sign of customer loyalty. But the burger joint wouldn't budge.

Giant Media's team simply wasn't large enough to snag a corporate discount. Such deals are usually reserved for corporations, not startups, which typically have too few employees to make preferred pricing arrangements lucrative for vendors. What would a small business have to do, Segura thought, to get employees the same kinds of perks offered by large companies?

BetterWorks just might be the answer. The Los Angeles-based startup, which launched earlier this year, has created an online platform designed to help small companies build perks programs and nab local deals for their employees.

"Small-business owners can't afford to bring in a six-figure consultant to build a perks program, and they don't have the time to design one on their own," says BetterWorks founder and CEO Paige Craig. "We've emphasized building a product that only takes a couple of minutes to set up, and decentralizes the use of the product to the employees themselves."

Businesses subscribe to BetterWorks for $30 to $500 a month, depending on the firm's size, then plug in the office's locale and drop an allowance into accounts for each employee, who can use the allowance at participating vendors, which also offer percentage discounts. If management so chooses, that's where the work ends. The platform aggregates participating vendors within a two-mile radius, offering everything from burgers to back massages.

"There are a lot of social buying cues that come from your business environment," Craig says. "You find out where to get your suits dry-cleaned, where to work out, a favorite breakfast or a coffee spot."

BetterWorks aims to centralize and streamline those purchases. Its platform handles the billing, the delivery and the haggling, with pre-negotiated discounts on its marketplace ranging from 10 to 70 percent off.

To date, around 17,000 employees from 184 companies, mostly based in Los Angeles and San Francisco, receive discounts for using the service. Vendors, which sign up for free but hand over a percentage of each transaction to BetterWorks, now total close to 2,400. BetterWorks says it's signing up hundreds a week.

Upon first glance, some vendors may see the service as nothing more than another Groupon clone. Following the three-year old daily-deals site's meteoric growth, Groupon spawned a wave of copycats partly because its business model is easy to replicate: Team up with vendors, publicize a discount for the vendors' products or services and then take a chunk of the revenue that comes in.

Business owners have become increasingly wary of such partnerships, as reports surface that users of Groupon and similar services are just one-off deal seekers who don’t become repeat buyers, leaving participating vendors with minuscule margins on oversold orders and no new customers to show for it.

"I've heard some Groupon horror stories," says Ed Park, the general manager of Klothes Apparel, a Los Angeles-based print screening company currently in talks with BetterWorks.

But despite the similarities, Craig says he hasn't had any trouble recruiting vendors. Park, for his part, is strongly considering doling out discounts on the BetterWorks platform, encouraged by the company's policy that only users within a two-mile vicinity of participating vendors can see their deals. These are the users, Craig tells prospective vendors, who are most likely to be repeat customers.

In Santa Monica's burgeoning community of young technology startups, which locals have begun calling "Silicon Beach," Craig is considered somewhat of an entrepreneurial heavyweight. In 2007, the 36-year old ex-Marine built a public relations firm on the front lines of Iraq that sought to improve Iraqi public opinion of the United States and the war. Since 2009, he's invested in more than 40 startups. His two partners are also marquee players in the tech space: George Ishii was an early employee at PayPal, while Zao Yang, the creator of FarmVille, one of Zynga's most popular games, reportedly turned down an eight-figure restricted-stock package at the social gaming behemoth to start BetterWorks.

The trio, which picked up an $8 million investment from Redpoint Ventures earlier this month to fuel a 20-city expansion, regularly revamps the site with new features. Algorithms now track purchases on the platform, which automatically recommends deals, much like Amazon suggests books. The service also sends office-wide alerts when orders are placed, allowing co-workers to tag along.

Giant Media, which started using the service several months ago, now gets 10 percent knocked off its orders from that burger joint. Along with the savings have also come changes in behavior, says Segura, who, soon after signing his employees up for BetterWorks, noticed that with the convenience at their fingertips, "lunches got shorter, folks stayed in the office and the team became more productive." It also didn't hurt that employees started joining the same gyms and checking out the same shops together after work.

"A big reason employees stay at companies is because they develop social connections there," Craig says. "If you're letting everyone run out the door and go to their own gym or their own favorite restaurant, it's harder to create those bonds."

Employee retention may be a less of an issue in most sectors, with high unemployment rates stifling worker mobility. But startups in the tech sector are fighting hard to attract and retain tech talent amidst a hiring boom that's created a shortage of software developers, engineers and telecomm specialists.

Born out of this very sector, BetterWorks and its platform of perks might be one tool for its peers to lure in and lock down talent.

Correction: An earlier version of this report incorrectly stated that Zao Yang joined BetterWorks. However, Yang is one of the three co-founders of BetterWorks, according to a company statement.

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