How To Make Discounting A Game Retailers Can Win

These days one can almost feel bad for the people who work hard to bring you television commercials each night. It is reportedly intensive, expensive, highly creative and very demanding work – which must make the ever declining number of eyeballs those commercials attract extremely frustrating to the Ivy League grads who toil night and day to produce them.

The oft blamed culprit is time-shifted viewing powered by Netflix, Hulu and other on-demand services – and the near ubiquity of the DVR. Conventional wisdom these days is if it’s not the Super Bowl, The Oscars or the Grammys – people aren’t super worried about seeing it in real time, especially if it means they have to sit through commercials.

The good news is that what’s just been described is something of an exaggeration – while time shifted viewing is prevalent and has drawn eyeballs away from the TV screen, it’s making less of a dent in viewing than most people might imagine. On average, more than 100 million Americans spend their evenings in front of the TV. The price of ads has dropped some – down about $1,000 per 30 spot from 2009 – but there are more ads (and ad revenues) flowing into television than ever before.

TV ads have another problem. The competition isn’t the refrigerator or bathroom run during commercials. People are now grabbing their iPads, smartphones and laptops the minute the commercials begin to engage in that all-American pastime, eCommerce.

“My wife and I watch TV together at night and I noticed that every time a commercial came on she would pick up her laptop and start shopping. And night after night she’s doing the same thing, but she isn’t really buying anything, she’s just thinking about shopping. But I had to laugh, because the millions being spent on ads are a waste since she isn’t even watching them.”

That’s Andrew Jones, Chief Technology Officer at Skinnyprice – a SaaS firm that’s all about gamifying eCommerce. Jones told PYMNTS in a recent interview that watching his wife windowshop her way through Prime Time programming caused a lightbulb to go off over his head.

“So I said to my wife, ‘if you were shopping and in exchange for watching the ads someone gave you a discount, would that motivate you to buy?’ And her eyes lit up and she said “oh that would be so fun.”

And so the idea for Skinnyprice was born. Two granted patents (with one still pending) later – and the small white label service has signed on its first major partner – online shoe retailer Heels.com – and it’s getting ready to launch gamified commerce for the masses.

So how does it work?

According to Jones – from the merchant end, it’s as simple as installing their plug-in. For consumers, they don’t really have to do much of anything different until they come to the end of their shopping experience.

“A customer goes to a website and the traditional way to interact is that they click “add to cart,” Jones remarked. “When they are done, they click “Checkout” and pay full price. What we do is add a new button that exists alongside “Checkout” that now says ‘Get Discount.’ Actually, the e-tailer can call it whatever they want actually – because this is white label – but after clicking on the discount button from there forward is our experience and our software takes over.”

And that experience goes something like this.

After hitting the discount button, a customer is prompted to complete a three-step process. First, they watch a 15 second ad. Then they verify that they actually watched the ad, instead of clicking over to Facebook while they wait for it to end.

“It’s very simple.” Jones noted on the verification process. “During the 15 second ad a random shape appears in the corner and all a consumer has to do is match up the shapes to verify that they watched the ad. If they’re a human it’s very easy, if they are a bot, it’s very hard.”

After verifying the ad, the game begins as the consumer is offered a discount of 5 percent to 50 percent.

“The third part is deciding if the consumer wants to keep that discount. And then comes the fun part,” Jones explained. “Once the consumer gets her discount, and it is guaranteed at 5 percent, the countdown starts. At 50 seconds a consumer can decide that they want to buy then at that discount price or they can decide to try their luck and hit “Try Again.” That loads another 15 second ad which triggers another variable discount offer.”

There are no limits to how many times a customer can spin the proverbial Skinnyprice discount wheel – though every new spin wipes out the old one and the user can only take the most recent offer. Consumers, however, as far as reports go, say that they enjoy this “casino” aspect to their eCommerce.

“We had one girl two days ago watch 611 commercials before she got her 50 percent off. You can’t say she didn’t earn it,” Jones noted. “We got another customer review that told us ‘this is super-addictive.’ She was talking to her husband and he told her that she could buy the shoes so long as she could get them for a 41 percent discount. So, for her, the game was on and this customer, in her words, was ‘committed to sitting up all night.’ I think she eventually got the shoes for a 44 percent discount.”

And yet the retailer isn’t losing on these discounts, as the customers watching the ads are themselves producing a new revenue stream for them.

“We’re getting revenue per ad impression, and we split that with the retailer. So actually the retailer gets a price advantage on the competition because they have extra revenue coming in on each transaction,” Jones told PYMNTS. “There are users who go through 10-20 commercials, but don’t buy. But retailers have all those people who put money into the system anyway, even if they don’t make a purchase. Plus it gives our retailer even more room as they consider discounts on products, because they can offer the discount, without upsetting their margins.”

Plus, Jones noted, it allows smaller retailers to offer big discounts, but not in a way that is transparent to their bigger competitors or likely to set off a price war.

“A lot of companies will crawl a competitor’s website and grab their prices. They [Heel.com] were telling us that Zappos crawls their website, so if they lower the price on a pair of heels, then they will too. They can’t compete against Amazon [who owns Zappos] in a price war, but with this technology they can leave the list price alone and then whatever the customer wants for a discount is self-determined – and it is impossible for a competitor to know what price is being shown to the customer or what price they are buying at.”

And that, says Jones, really gives Skinnyprice merchants an edge – they can customize their discount, instead of using it as a big, undifferentiated and totally transparent clue to the competition. He further noted that ultimately the goal of the gamified shopping experience is to help merchants build the biggest, most inclusive tent for consumers – while still building out an experience that works for different profiles.

“You can either be Walmart and sell low-priced products at a high volume; or you can be Nordstroms and sell higher priced items, but not do as much volume,” Jones explained. “We are trying to help retailers hit that sweet spot right in the middle where they are selling at full price to the people who are willing to pay it but also getting all the way down the demand curve to the poor college student that can’t afford to buy it unless it is 40-50 percent off- and has the time to watch 50 commercials to snag that deal.”

And so far the users who have tried Skinnyprice like it. According to the company’s internal figures, 97 percent who bought using their service said they would use the product again, 81 percent of those who bought said they would recomend the service to a friend and 59 percent of those who used but didn’t buy said they would refer the service to others.

“When people get a bargain, they love to talk about it,” Jones noted.

And Skinnyprice hopes that it will get more people talking – and soon.

The service is new – it will be officially launching with partners and looking to sign on new ones over the next few months – as well as expand into data services (wherein they can start to show partner merchants patterns in consumers discounting habits). And while the field they enter is crowded – their service is undeniably interesting.

And, just the slightest bit addictive. Don’t believe us – go try out the demo and then tell us what you think.