Businesses use gaming principles in marketing

 

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Small businesses are using technology to help them operate more efficiently and cost-effectively in an increasingly competitive environment. Each Monday, USA TODAY looks at new ways companies are gaining an innovative edge in a tough economy.

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.

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