“The practice of taking a coupon or banner ad and shoving it on smaller screen of a device where it doesn’t belong is missing the point of new possibilities of interaction that is a one-to-one conversation on a mobile device,” he said. “We view the ‘interruption paradigm’ as fundamentally annoying and incompatible with a fun experience. We wanted to create native mobile environments that respect the consumer’s time and say I will give you something of value if you voluntarily learn about these products.”
“Learning” constitutes 20 different interactions, such as reading a recipe, unlocking a game, reading a fact posting on Twitter, or answering short poll questions. The more interactions, the more cash they get, though they can’t earn money without buying a product. On average, consumers earn $5 every time they use Ibotta. In the year and a half since the app launched, users have been paid nearly $8 million.
“In effect, you’re telling story of your brand through these interactions to build equity, which results in follow-on purchases and true loyalty,” he said.
The app works with 500 to 600 brands at any given time. Early adopters were mostly large brands including Kraft, Coca-Cola and Whitewave, “because we knew that’s what it would take for consumers to use it,” Leach said. But the app has since become increasingly popular among emerging brands and those with lower budgets.
“The purpose of the app is to educate,” Leach said. “You don’t want to just incentivize trial; you want feedback on how the product is performing and you want people posting on social media, so a conversation with the consumer about your brand is highly appealing.”
Which marketing tactics convert to SKU-level purchases?
Also appealing? The data. Historically, brands have lacked the ability to connect online marketing to the offline world of stores and malls and truly see whether they’re getting a return on their investment.
Traditional methods like consumer panels and focus groups are limited in the data they can get on consumers’ shopping habits, largely because of the number of participants, types of questions, and the time lag for accessing the data, Leach said. Ibotta enables brands and retailers access to purchase list correlations to help them understand which media tactics convert to SKU-level purchases.
“The world never had a way of tracking down to the SKU level what people are buying and why,” Leach said. “We’re offering a way to understand who is buying products and why—segmented by age, gender, zip code and retailer—without convening a focus group. It’s enabled retailers and brands to understand why salads are selling well at Burger King or what causes the highest basket size at Walmart among a Coke shopper. It’s not just about understanding the click-through rate, but what [consumer data collection firm] DataLogix calls the ‘buy-through rate’, or the actual purchase list that correlates with this click.”
Young people don’t clip coupons; they don’t even read newspapers
This becomes increasingly relevant for younger generations who scarcely pick up a newspaper or magazine, and rely on their phones early and often throughout the process of making a purchase. (Indeed, 90% of Ibotta users are between 15 and 45 years old.)
“The path to purchase has changed,” Leach said, adding that the notion of the Zero Moment of Truth—in which consumers use their smartphones and tablets to seek and share information about products as they move down the path to purchase—has become increasingly important in the digital age.
“Younger people don’t clip coupons from the newspaper—they don’t even read newspapers. You have to hit them much earlier in the path to purchase and influence them well before they walk in the store.”
Then once they’re in store, they can open a list of active rebates or see how much savings they’ve unlocked on the app.
The power of social relationships to incentivize buying
Ibotta recently added a social networking feature, which enables users to invite their social media friends to join the app. The friends who join are automatically added to that user’s “team”, which is connected to joint earning goals (e.g., if your team collectively spends $1,000 at Whole Foods next month, you each get $5). Users can also like and recommend favorite products to one another within the app.
But what’s most exciting to Leach is the potential to leverage the power of social relationships and groupthink.
“Consumers are looking for a clear social signal of regard that is untainted and unincentivized,” he said. “So someone posts endorsements on your wall. What’s that worth? We’re talking about using the principles of games and reciprocity to incentive group buying behavior. If you see that team member got your team 35% toward a bonus, you feel indebtedness to make sure the team gets above that goal. It’s an experiment with human behavioral psychology that’s tied to purchase behavior.”