Saturday 5 March 2011

Facebook credits - a lesson for retail

FacebookcreditsFacebook credits are starting to gather pace, with the deadline set for July 1st for Facebook games to use them exclusively. To support these a number of features have been created to allow developers to integrate this new currency into their games.

What's interesting is how Facebook and the gaming community are designing and using these features and what lessons real-world retailers (and payment providers) can learn.

Buy with friends

This is a really simple idea which essentially allows the customer to promote their purchase to friends and in the process, giving their friends an opportunity to make the same purchase at a discounted rate.

On paper this wouldn't seem particularly compelling for real world purchases. Imagine an offer from a retailer saying "Purchase x and receive a 20% discount coupon for your friends" - the typical response would be whats in it for me.

However social media changes this concept completely. Firstly, people are more likely to want to promote their purchase (or anything else for that matter) as it provides "social currency" that they can share. Secondly, the immediacy of the offer which is linked directly to the purchase in real time and the ease in which it can be carried out (just clicking "Share") makes it less of a decision and more of a reaction.


The removal of barriers to making decisions is critical to get opt-in and this is what "Buy with friends" is doing. Facebook says:-

"more than half of people who were offered a deal in-game decided to share it with their friends, and the engagement and conversion rates on the resulting posts were also strong.”

For a retailer, linking their customer loyalty programme (which provides the identity) with a social network like Facebook makes this type of offer a real possibility - and the promise of over 50% of purchases being promoted to friends is very compelling.


Common knowledge (and common sense) says that it costs more to acquire than retain a customer, however that doesn't stop acquisition being really important; its just also really expensive. Providing an offer such as 50% off for friends in order to acquire them makes this both targetted and cost effective - something which services like Groupon have been exploiting.

I suspect it won't be long before real-world retailers have a "Share" purchase option at the end of their e-commerce process with a discount offer attached to it for friends. For offline retailers, technology services such as SNAP combined with a retail loyalty programme are beginning to make this a reality.

Frictionless Payments

The implementation of frictionless payments allows customers to spend up to 30 credits without interrupting game play with confirmation messages such as "Are you sure?". Again, the idea here is that the less decisions a customer has to make the more likely they are to make the decision.

Amazon see this all the time with their "one click" feature. As a customer I've hovered over the one-click button hesitating to make a decision and then just clicked it - one decision. Done. Instead, had I added it to my basket, then confirmed my basket, confirmed my payment settings and confirmed my overall order i'd have had plenty of chances to say no - and many customers do just that.

Contactless payments are looking to achieve the same thing within offline retail, however this will be a little harder. They will certainly help with impulse purchases when a customer doesn't have cash to hand, but I don't think they make the process frictionless. You still need to queue, deal with a cashier and hand over payment cards - it's just a little quicker.

Imagine instead if you could walk around a store and simply decide then and there to purchase the item. Picking it up, tapping your card/phone and walking out. That would be truly frictionless and is something we are starting to see through self-checkout.

Get Balance API

For loyalty programmes, a feature that lets partners retrieve a customer balance via a real-time API is pretty standard. Loyalty programmes keep a balance of points and partners can interrogate this balance to see if a member has enough points to redeem for an item.

What's interesting though is that while this is how the feature is normally used - to just power redemption - developers using Facebook Credits see a totally different opportunity here.

Inside Facebook had a blog recently discussing this feature which said:-

Determin[ing[ the Credits balance [...] allows them to identify high rollers with a large balance of Credits and dynamically price virtual goods to increase purchase probability or profit margin, improving monetization. Rarely in the physical world do retailers get the chance to look inside a potential customer’s wallet and price their wares accordingly.

That's a very different way of looking at things and something that equally applies to real-world cash as to virtual currencies like loyalty points or Facebook credits.

Loyalty programmes do this to some degree today, using customised offers, targetted points promotions and tiering to recognise different types of customer and their ability to change behaviour. However, the ability to dynamically price goods and services (whether directly or using offers/points promotions) in real-time is something few, if any are doing today.

Open this wider across coalition loyalty or payment services and you have the ability for a retailer to make real-time decisions on pricing or cross-sell offers based on customer headroom, value or purchase categories.

As Facebook Credits become the defacto in-game currency, expect game designers to continue innovating in ways that make their products stickier and setting the agenda for how payments and retail will be evolving moving forward.

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