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A Different Way To Coupon

Shoppers love a discount – pretty much always. There is little not to love by the notion of paying less money for something one wants to buy.

For the retail shops, however, the discounting is less an absolute good and more a double-edged sword.

In theory, a discount draws a consumer in and exposes them to the myriad of wonders the merchant has to offer so that that shopper goes on to buy a wonderful collection of non-discounted goods.

The reality is that we all know how these stories end more often than not. Coupons or promo codes are great for selling discounted goods, and attracting a discount hunter – who will never return. Or, worse yet, give a loyal, full-price paying customer a discount who was likely to pay full price anyway.

“Ninety percent of people who use a promo code today are people who were already on the merchant’s site within the last 30 minutes [of a visit]. This means retailers are giving away margin to people who are already in your store – and that’s not good business,” Ibotta CEO and founder Bryan Leach told MPD CEO Karen Webster in a recent discussion.

Ibotta is a tech company looking to reinvent the relationship between consumers and the brands they patronize by reimagining the “coupon” for the digital age.

“We’re trying to take a giant step back and rethink how brands and retailers can better provide value to consumers. Instead of just taking the 120-year-old coupon technique, and transporting it to a mobile screen, we are really trying to think of a new way for brands to leverage the real potential of mobile,” Leach explained. “A mobile device allows a consumer to have a totally different kind of interaction. We are looking to build something that can really generate awareness and loyalty and that is more effective than just reinforcing a transactional relationship.”

The situation, Leach noted, is similar to what advertisers faced in the early days of television. Unfamiliar with what it was, they went back to the tactics that they were most familiar with: radio. The result is that the first decade of TV commercials were essentially radio commercials that viewers could see.

“Retailers are no longer satisfied to offer a one size fits all discount for every conceivable person such that I can just open a promo code in line. That hurts retailers. They want to treat audiences in a different way,” Leach said.

And Ibotta aims to be that different way. To get started, consumers download the app (for free) from their app store of choice (Ibotta is available for iOS, Apple and even the Amazon app store). After creating an account, users can peruse the hundreds of offers Ibotta’s partner have available for them.

And those partners range widely. Though the company got its start in grocery when it launched three years ago, it has since expanded into cosmetics, outdoor goods, alcohol sales, you name it.

However Ibotta is more than just clipping a coupon or copying a promo code. Ibotta’s secret sauce, Leach said, is the way it guides the consumer to really interact in a meaningful way with the brand and its content.
“To unlock an offer, a user might be asked to do all kinds of things. They might have to read a recipe, or watch a video, or do a quick one-question study or read an article,” he explained. “This is a different type of quid pro quo – instead of just giving someone a temporary price reduction, we are giving them a cash back payment or reward to get their attention. They don’t earn the money until they go purchase that item.”

Hence the business name.

Ibotta is the phonetic spelling of “I bought a…”

After the consumer goes to purchase the item, they can then snap a picture of their reciept, and send it back to Ibotta, which then coughs up the cash back.

“Within a matter of minutes, we send cash straight to a consumer’s Ibotta account, with no transaction fees,” Leach said.

That account is held within the app. Users can then move the funds to a bank account using Venmo or PayPal, he notes. Or users can use their cash back to shop directly by purchasing gift cards from the app’s merchant partners.

“Every offer we have is completely exclusive and one in which we have a direct relationship with the merchant who’s making the offer,” Leach said. “We don’t collect or aggregate discount codes.”

That makes Ibotta, Leach said, not just about finding a more efficient way to distribute discounts, but changes the entire model for merchants who are using it in a way that helps build loyalty. The app allows retailers to more than reach consumers, Leach explained, it allows them to tailor their offers by age, by zip code, by income level – or whatever other demographics they need to better target the offers and content.

“The reason the company is called Ibotta, it is about knowing the things consumers buy. By knowing what they’ve bought and what they’ve put on their shopping lists, the app is better able to match content with consumers,” Leach told Webster. “The bottom line is we have a very young audience. The average age of the paper coupon user is 50 years old, the average age of the Ibotta user is 28. You are talking to a completely different audience than the market that coupons reach and this is a very different way to reach them.”

Leach is an interesting addition to the world of eCommerce. Before trying his hand as an entrepreneur, he was a lawyer — a fact of his existence he chalked up to an enthusiasm for making arguments and having a seen the movie “A Few Good Men” one time too many.

And it seems worth noting that it was a rather sparkly and impressive career that Leach left behind. His first gig out of law school was as a clerk for Supreme Court Justice David Souter and his second act was as a partner at a prestigious law firm, where he learned something important about himself.

“What I found out about myself is that what I enjoyed was the building of the practice [rather] than the practicing of the practice,” Leach recalled.

Realizing he couldn’t fight off the entrepreneurial bug, he decided to do the next best thing: raise $3 million in angel investments and build a company.

“We are, by our count, the third largest mobile shopping app in the United States. Our users spend $2 billion a year that we are tracking. We are one of the 20 most frequently used apps in the U.S.,” Leach told Webster.

So what’s next?

Well, who wants to be in the Top 3 when you could be No. 1?

“We want to become the dominant, prevalent shopping app on the front screen of every mobile device in the world. Until we do that, our work is unfinished,” Leach mused.

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Latest Insights: 

The Which Apps Do They Want Study analyzes survey data collected from 1,045 American consumers to learn how they use merchant apps to enhance in-store shopping experiences, and their interest in downloading more in the future. Our research covered consumers’ usage of in-app features like loyalty and rewards offerings and in-store navigation, helping to assess how merchants can design apps to distinguish themselves from competitors.

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