In the high-stakes, $5 billion-plus potato chip market, up-and-comer Popchips can't begin to compete with a giant such as Frito-Lay when it comes to money for advertising and marketing its "never fried, never baked" potato chips.
So San Francisco-based Popchips hit on a smart way for it to grab a larger helping of the potato chip business: video games.
The fledgling four-year-old snack maker teamed up with another San Francisco-based start-up, smartphone app company Kiip, which inserts real-world prizes — virtual coupons redeemable for free bags of Popchips, in this case — into hundreds of mobile games.
Corporations, small and large, have begun adopting game principles to do business. The theory: Using fun game-like features such as leaderboards and achievements can produce more efficient employees and more satisfied customers.
Business spending on what has become known as "gamification" will increase from an estimated $242 million this year to $2.8 billion in 2016, predicts M2 Research, an Encinitas, Calif.-based technology research firm. And many small businesses, as well as 70% of the top 2,000 global organizations, will use "gamified" applications for marketing, employee performance and training, and health care by 2014, projects technology research firm Gartner.
Kiip's program fit into Popchips' grass-roots underdog marketing approach for its chips, says Brian Pope, Popchips' senior vice president of marketing. "We will get a lot more mileage and impact out of our limited dollars than doing a lot of mass communication," Pope says.
The rewards pop up when a high score is set or a level is beaten. Rewarding a player with a freebie when they're already happy, without interrupting the game, can cement customer loyalty, says Kiip CEO Brian Wong. "That is very powerful."
Privately held Popchips has seen its sales rise 40% this year, according to SymphonyIRI Group, a Chicago-based market research firm, and its 2012 sales could top $100 million.
Kiip and Popchips are using games as a way to personalize mobile advertising and overcome user resistance to ads on their smartphones and tablet computers. The market for mobile ads is expected to explode, soaring from an estimated $2.6 billion this year to $10.8 billion in 2016, according to research firm eMarketer.
Small businesses can exploit the location-based nature of mobile apps to their advantage, says Lars Leckie, a managing director at Hummer Winblad Venture Partners, which invested nearly $4 million in Kiip last year. "Small businesses can actually interact with you in ways that would not have made sense in the desktop world," he says.
Small businesses might have more to gain from gamification than big corporations, because the technology can help small companies stand out, says Doug Palmer of Deloitte Consulting, which lists gamification among its Top 10 Technology Trends for 2012. "A small tech company not using gamification might find themselves in a minority," Palmer says.
Foursquare, on location
Social-media giants Facebook and Twitter have become corporate tools for companies big and small, but reality-based app Foursquare arose as the early "poster child for gamification" at small businesses, linking consumers and companies, says Gartner Research Vice President Brian Burke.
Users "check in" to the Foursquare app on their mobile devices at restaurants, stores and other destinations. They can post their check-ins on Facebook and Twitter, as well as add tips about the place on its Foursquare page.
"I would say with 98 percent certainty it has helped our business, says Christophe Hille, co-owner of Northern Spy Food, a 40-seat neighborhood restaurant in New York's East Village that specializes in seasonal American cuisine made from local ingredients. "But quantifying that is really difficult," he adds.
Since Foursquare's 2009 launch, about 750,000 companies have begun to tap into the app's audience of 20 million global users by curating their virtual venues with special offers to customers and to the person who earns the title of "Mayor" by checking in the most.
"On one level, it's like a digital maitre d'," Hille says. "The person who checks in all the time on Foursquare gets recognized not just by my servers, but by me. I keep an eye out for this guy because I know he checks in like every two weeks, consistently. So we want to take care of him."
Hille has begun adding menu items and photos using new local updates that Foursquare made available to businesses earlier this month. The practice rewards regulars and informs newcomers. "They have hit on something smart with Foursquare," Hille says. "I'm excited to see where it is going to go from here."
Old-school employee incentive programs included sales targets and Employee of the Month awards. But the dawn of the gamification era brought with it a shift by some companies toward newfangled software algorithms to increase productivity.
About two years ago, restaurant group Not Your Average Joe's — with locations in Maryland, Massachusetts and Virginia — began testing new gamified labor operations software from Cambridge, Mass.-based Objective Logistics. Its artificially intelligent Muse system handles everything a restaurant or retailer needs, including employee work schedules and sales.
Employees can earn rewards for performance, including getting to work the best shifts. "Report-card-like interfaces" let the wait staff know how they are doing, shift by shift, compared with co-workers when it comes to selling special dishes and getting tips, says Objective Logistics CEO Philip Beauregard, who co-founded the company in 2009 with Matthew Grace, chief technology officer.
In the past two years, Not Your Average Joe's CEO Steve Silverstein helped Objective Logistics test its software, even letting Grace wait tables at one of the chain's restaurants to learn about the software's strengths and weaknesses. The goal, Beauregard says, is happier employees and "more sales, busier stores due to higher levels of customer satisfaction, and elimination of … inefficiency." Small businesses can't afford waste and can't afford to leave "money on the table," Beauregard says.
Using gamified software, Objective Logistics predicts that companies can see an estimated 2 percent to 4 percent increase in revenue within the first month of deployment.
"Muse has brought intelligence to an area where restaurants have been flying blind," says Silverstein. "Muse takes the data in and, with no human intervention, outputs a schedule that is a win-win — rewarded and motivated servers, and happy guests who are seeing more of the best servers."
As Objective Logistics and larger enterprise software competitors such as SAP offer gamified operations packages that focus on employee performance, small businesses can reap the benefits, says Gartner's Burke. "This is an area that is, frankly, underexploited."
Encouraging employees to participate in healthy practices as part of company medical insurance programs is another popular internal gamification target, Burke says.
Beyond marketing and customer engagement programs, bigger-picture gamification efforts include the Web-based Recyclebank (www.recyclebank.com), which lets you earn points that can be redeemed for discounts on products made by healthy food company Kashi and sold by environmentally conscious online retailer UncommonGoods.
"We are seeing new kinds of applications every day," Burke says. "We are really only scratching the surface now."