Technology August 26, 2010, 5:00PM EST

The Retailer's Clever Little Helper

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Users of Stickybits or a competitor like Barcode Hero scan bar codes and compare prices, win prizes, or write reviews. Campbell Soup (CPB) is offering Stickybits users a chance to win a $500 prize by scanning the bar code and posting a photo of one of the company's redesigned soup cans.

These startups acknowledge that scanning soup cans may come across as odd to some consumers. To make the process more appealing, many fill their services with "game mechanics." The term refers to interface and design flourishes—including competition for points and virtual badges—that originated in the gaming world and can make for addictive experiences. Users of Foursquare compete to become the "mayor" of a bar or coffee shop, just as Barcode Hero's users jostle to become the king, queen, or duke of a product category&mdash"the queen of lipstick," for example.

Game mechanics is the concept du jour in Silicon Valley. "You talk to venture capitalists here in the Valley, and they'll tell you that every new startup coming in has game mechanics as part of their pitch," says Rajat Paharia, chief executive of Bunchball, a San Jose startup that helps other companies build game-like features into their websites. "Most of the startups don't know why. They just know that they need game mechanics."

Scvngr, a year-old Cambridge (Mass.) startup that received a $4 million investment from Google's (GOOG) investment arm, Google Ventures, is the most avid of the companies embracing game mechanics. It gives guidance on game design to its partners, including Sony (SNE), AT&T Wireless (T), and the New England Patriots, and helps them devise challenges for customers using a Scvngr smartphone app. At AT&T stores in four Midwest states, for example, customers can earn $50 off the price of a new Samsung smartphone by completing challenges like checking into the store and taking a picture of themselves with the phone.

Facebook's new check-in service, called Facebook Places, may be the best evidence yet that the real world is getting a digital overcoat. With Places, people can check themselves and their Facebook friends into any local business. Those establishments will ultimately have pages on Facebook and be able to communicate directly to their customers. If the service catches on, businesses may know exactly who their customers are, where they are, and in some cases, when they are nearby and ready to spend—just like an e-commerce site. "Once you have the ability to target specific consumers based on what they told you about themselves, you change the entire retail dynamic," says Paul Gunning, chief executive of ad agency Tribal DDB Worldwide. Or, as Shopkick's Roeding puts it: "The real-world click has arrived."

The bottom line: Location services like Foursquare and Facebook's Places let real-world stores offer deals and other enticements to nearby shoppers.

Checking In:

A Sample of the startups building location-based services, and the retailers and brands they're working with.

Scvngr
Brands: AT&T
Scvngr designs smartphone-enabled scavenger hunts that bridge the digital and physical worlds. A current AT&T promotion offers $50 off a Samsung phone for completing certain tasks, like taking a picture with a store display model.

Foursquare
Brands: Starbucks, Sephora, Gap
Foursquare is a check-in service with nearly 3 million users who compete to become the virtual "mayors" of real-world places. In early summer, users had a chance to win a $100 gift certificate at Sephora.

Stickybits
Brands: Pepsi, Campbell Soup
Use the Stickybits smartphone app to scan product bar codes and attach digital information—like reviews or pictures—visible by other users. Scan a Campbell's soup can for a chance to win $500.

Gowalla
Brands: InCase, TOMS Shoes
Gowalla is a check-in service similar to Foursquare, with photo uploads and badges to earn. Check-ins at Apple stores earned users a chance to win an iPhone case in a promotion that ran earlier this year.

Shopkick
Brands: Macy's, Best Buy, American Eagle
The Shopkick app rewards users with gift certificates and discounts when they check in to retail spots and scan products. American Eagle offered a deal on jean leggings in mid-August.

Booyah
Brands: H&M, Pantene
Booyah's MyTown app is a blend between a check-in service and a virtual game, and has over 3 million users. Use the app's bar code scanner on a Pantene product for bonus points to use on virtual goods.

Stone is a reporter for Bloomberg Businessweek. Sheridan is a reporter for Bloomberg News.

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