How art gets generated.
A long, long time ago (by today’s technology standards, anyway) in 2001, a revolutionary new product was introduced with great fanfare on the ABC news morning show, Good Morning America. The Segway Human Transporter, a self-balancing, electric-powered human transportation machine, was hailed as something that was going to dramatically change the way we got from point A to point B. Since its launch over a decade ago it’s been estimated that there have been about 50,000 Segways sold, which isn’t bad, but not nearly as good as the product’s hype led its investors to expect. In fact, investors expected hundreds of thousands of these two-wheeled power scooters for adults to be sold, generating billions of dollars in the first year. High price, not enough power, bans in urban centers, and problems with being able to balance the vehicle properly made it the revolution that wasn’t.
I bring up this small bit of tech history to make a point about one of the most important factors in building a successful brand from scratch: It has to be relevant to more than just the inventor and the investors. As the pace of technology increases, and as new ideas for gadgets and apps hit the desks of venture capitalists at an equally quick pace, it is essential that all involved remember that difference for the sake of being different won’t get you anyplace but in a financial bind.
It was about this topic that I called Cyriac Roeding, the co-founder and CEO of mobile-shopping app Shopkick and an angel investor in Silicon Valley. I had heard him speak at a conference a few weeks earlier and was immediately taken by his view of success in a market in which the next best tech ideas are hatched by the nano-second. Cyriac founded Shopkick in 2009 while an entrepreneur-in-residence at venture-capital firm Kleiner Perkins Caufield and Byers. Shopkick reached its first million users within six months after its August 2010 launch and produced $110 million revenue for its partners in its first full year of operation. Why? It made something people already do— simply walking into a store—more rewarding for both the shopper and the retailer. As Cyriac and I discussed, find a relevantly different way to make life better for people and they’ll seek you out. Here is part of our conversation:
Allen Adamson: You started Shopkick with the understanding that both retailers and consumers could benefit from a specific initiative and then you created the technology to make it happen. What spurred your thinking?
Cyriac Roeding: It was basically the understanding gained through a lot of personal research that the number one challenge for retailers is getting people through the door, or foot traffic. The conversion rate of getting people to buy once they were in the store is actually very good, but getting them into the store in the first place is the big issue.Then I thought, the cell phone is unique in the sense that it’s the only interactive medium that people carry with them into a physical environment. Thinking about it more, I realized that it could be particularly valuable in a shopping environment where you make a lot of decisions, but there is little opportunity for interactivity. It’s an offline environment with no online functionality. What if we could inject the digital intelligence and capability into the physical world experience?
AA: It was the “aha” moment, so to speak. What if you could find a way to use cell phones, something people carry with them all the time, to make shopping, something people already do every day, a better experience?
CR: Exactly. And the insight was this: If foot traffic is so important, then why doesn’t anyone reward people for simply coming into the store? Why not reward people for visits? The conversion rates, as I said, are not the number one issue. Once you get someone through the door conversion in the fashion category is close to 20%, in electronics it’s 50%, and in the grocery category it’s 95%.
AA: So with Shopkick you’ve got two problems solved. You reward, or acknowledge, people for walking in and you increase conversion rates. It’s like “back to the future.”
CR: It is like back to the future. But instead of going back one hundred years, we’re jumping forward and using technology to create a personal relationship. It’s what we set out to do. We asked ourselves how we could start a dialog right when you walk into the store—get to the Holy Grail moment. You’re about to make purchases. What if we could communicate with you the moment you walked through the door? Allen just walked in, for example. He loves a certain type of music, or a particular brand of clothing. Let’s use his phone to direct him to what he’s interested in and make it worth his while by offering him the products he is really interested in.
AA: What was the process by which you got this technology to work?
CR: Well, the objective was to identify the technology that would let us know if a customer was physically in the store while also protecting her privacy. First we looked at a GPS option, but it wasn’t accurate enough. In fact, it is so inaccurate that you could “check in” to a Starbucksstore two blocks away. So then we went through every sensor on the phone—accelerometer, compass, you name it—and none of them helped. We were finally left only with one—the microphone. We thought, what can we do with this microphone? What if we played a sound no one could actually hear, like a dog whistle? This worked well, but then we realized we had to have a unique audio code for each store. That was very challenging. Every store is different, sound waves reflect and overlap on every obstacle, from shelves to walking people, and Doppler effects kick in when users walk with their phones. A hard problem. We put our best engineers on the problem and were fortunate that they solved it. We immediately filed patents for the technology, worldwide. Once you’ve got the Shopkick app, your phone registers you as you walk into any registered retailer location. And the store doesn’t know you are there, only the user’s phone. That protects the privacy of the user.
By Allen Adamson, Managing Director, http://www.landor.com. August 17, 2012. For the full article, please visit: http://landor.com/#!/talk/blog/how-shopkick-built-its-brand-by-making-something-we-already-do-more-rewarding/