The Case for 'Smart Incentives'

Bobby Tinsley knows a thing or two about how the digital revolution can disrupt an industry. He is a former recording artist, after all.

The one-time R&B singer moves to a different beat today. He’s a co-founder and executive VP of SKUxchange, a startup fintech company that he said could be something of an iTunes for retail incentives. Founded in 2018 in St. Petersburg, Fla., “SKUx” brings a new architecture to the origination, distribution, redemption and settlement of digital promotions by utilizing blockchain—or a digital warehouse that serializes each offer and transforms them into a secure, one-time form of payment. As Tinsley explains in an interview, excerpted below, couponing is an area of the retail trade long overdue for a new approach to security and speed that can benefit brands, retailers and shoppers.

Jon Springer: Can you give a quick overview of your background, and the big idea behind SKUx?

Bobby Tinsley: I’m a serial entrepreneur, but believe it or not, I started my career in entertainment. So I've had an interesting journey into this tech world. I had a record deal out of high school, and was very blessed to do that for many years and build a great career, but long story short, as things started to transition toward streaming and moved from physical products to online, I made a pivot and started really getting involved in tech companies and investing.

That’s what introduced me to my other partners. My partner Jim Sampey was a president of Valpak, so he comes from the traditional couponing/CPG world. Another partner, Kenny [Douglas] comes from a payments background. Our Chief Technology Officer [Moshe Joshua] has built some of the world’s leading tech platforms, and has a big background in blockchain and payment systems and comes from Wall Street.

And so when we originally started this whole concept of SKUx, it was really looking at the retail world from a different lens. You understand the traditional couponing problems—the fraud, the lack of transparency and visibility, shipping offers to Mexico for them to be hand-counted, and all of that. And we said “OK, if we were going to redo this, throw away the existing model and start over, how would we do this?”

We looked at it from a fintech, new-technology perspective, and that’s really where this whole idea started from. I think there’s an opportunity to do it differently, eliminate the fraud, and make it seamless for the consumer and ultimately for the retailer.

We are an end-to-end platform, and we’re redefining everything from the offer’s creation, to redemption, to payment, to settlement, all the way to satisfaction. From a simple standpoint, it’s the whole supply chain of an offer—everything that happens from when you create it through when everybody gets paid. We have a platform that monitors and drives that whole entire experience and gives us data from every single element of that.

What makes blockchain the right approach?

When we talk about blockchain, we’re really talking about serialization. Currency is serialized because it’s trackable, it’s a one-to-one type of relationship. That really doesn’t exist in traditional coupons and offers because you can’t track them. You don’t know where they are in the ecosystem. From a CFO’s perspective, it can be like a black box that leaves you wondering, where is my liability outstanding? Where are the offers? And there’s tons of fraud. Every week, you hear about something going on with a major brand, and over-redemption happening at a certain retailer.

And when you switch your lens and look at it from a payments perspective, they’re used to by-the-penny, end-of-day settlement. And so blockchain in our world is really about putting serialization on every single offer and then being able to actually track that and trace it, so that you actually know, one-to-one, what’s happening with your promotional budget.

Where is SKUx now in terms of a rollout?

We’ve been in stealth mode, working with some major retailers, and scaling the solution right now. We’ll be making some announcements of some major, tier-one retailers that will be going live, but for now we’ve been running programs in the background with major brands [the meat snack company Jack Links is one] and major retailers. I think the industry has kind of figured out there’s a better way.

From a fintech perspective, our plan the rest of this year and going into next year is just starting to rinse and repeat, and kind of spreading this out across the ecosystem. We’ve got some great partners that we’re doing that with, Blackhawk Network is one of them. We’re working with them and their merchants on the incentive side of the business. So there’s lots going on.

What is the experience like for shoppers?

We’re purely focused on digital, and we’re not a coupon—that’s a very important part of this. We call it a product-based payment, but this truly is a payment. And so when you think about what we’re doing, it’s really a new category that really doesn’t exist today.

Product-based payment is actually driving a one-to-one, one-time-use payment for a specific product. A consumer gets an offer on their phone that can be delivered in any fashion. It’s an omnichannel delivery: We don’t have an app, so there’s no SKUx in the front, we just work with marketers and we work with brands.

A brand may decide it wants to do a QR code scan off of a shelf tag in a store, for example. The consumer scans that, and they get an incentive on their phone that may offer $2 toward a certain product. And they’re simply taking that offer up to the register and tapping or scanning their phone and walking out. It’s really seamless. But in the background, there’s a lot happening under the hood to make that happen.

And would retailers essentially absorb this like any other digital coupon?

They get all of their money at the time of the transaction. So if you think about it, there’s no discount from the perspective of the retailer, because this is not a coupon, this is a payment. So it’s different. And I’ll say this kind of generically, but it’s no different than you pulling out the Mastercard in your wallet and making the payment at that retailer. That’s what’s very exciting about this. When we talk to retail partners, a lot of times they’re waiting 45, 60 or 90 days to even get paid off the offers, never mind the fraud. So we’re moving all of that forward directly to their top-line revenue, which is pretty powerful.

Another benefit is the cashier not having to play banker, which is happening a lot right now: Cashiers are making decisions. Do I take this offer? Do I not take this offer? The example that I always give is, if I walked into a grocery store today and bought a $100 worth of groceries, and my payment card was declined, they’re not going to give me my groceries and say, “That’s OK, sir. We'll just honor that.” They’re going to say, ‘Sorry, sir, your payment was declined. Do you have another form of payment?”

Think about that from an offer perspective, that’s what we’re doing. We’re standardizing that process and taking the burden off of the cashier to play banker.

And brands I assume get a little bit better visibility into who gets their offer, and where it goes.

It’s full transparency from the brand’s perspective, to be able to actually see from the issuance of the offer all the way through redemption and settlement, and being able to actually manage their funds.

I think the pace of digital has changed things. The world has changed. Post-transaction doesn’t work anymore. You have to be able to make real-time decisions. And that’s something that our brand partners just love about our platform.

This would also give you a little bit more precision with offers that could go specifically to a person and available at a specific retailer?

Yes. All the retailers that we talk to are all trying to figure out new ways to engage shoppers—off platform, omnichannel—and just not advertise or market to them, but create a meaningful relationship with the customer. Does that start on a TV commercial? Or could it start with an ad on the side of a bus? I think the world is truly being digitized. And if you can start that experience at somewhere nontraditional, and then actually be able to track that all the way through your store’s redemption, that’s that’s what we’re enabling.

Can you give me any examples of things that you’ve tried, or that you’re capable of enabling that might not have been a possibility before?

One example is the resurgence of the QR code. We can use that to do digital product sampling in-store. We’ve done some campaigns off of actually scanning a QR code right in front of that product. And then just being able to take that through redemption right there. We’ve seen some strong numbers on that.

We increased one of the brands we’re working by 12x from what they were doing on their website, by plugging in our product-based payments without doing anything different other than plugging in our technology. So I think there’s something to be said around that seamless experience, not having to print things, not having to go through all of those traditional hoops and just do one-to-one right off the phone.

How does SKUx make money?

We’ve got multiple revenue sources. The main driver is that we get paid on redemption. So we have a cost-per-unit-redeemed model. There’s other fees like, depending on when we’re working with an agency partner, where we have a pass along a monthly fee and those types of things, but really it’s about being aligned on a per-redemption pricing. So as we drive offers, we’re aligned with them on results. Our technology is powerful, but the business model is too.

When you look at the traditional offer model, a lot of times it just does not work for all the stakeholders in the ecosystem. And we’re really trying to come with a holistic approach that works great for the retailer, works great for the brand, and can drive new revenue and opportunities to engage new audiences.

There’s a lot of talk in the industry today about how promotional things might get as we come out the pandemic. If it turns out to be more promotional, and you say you’ve got a better mousetrap, this could be a big moment for you guys, right?

From your lips to God’s ears! Honestly, that is our perspective. No one likes to discount their product. And there’s a lot being said about discounting and prices, but at the end of the day, brands want to build relationships with consumers. And so do retailers, that’s why every loyalty platform and app is out there trying to get you to sign up. They’re trying to build that meaningful relationship.

And I think personalization is the element that the industry really missed. It’s been spray and pray, put out offers generically, and hope that people get them. And what we’re building is an engine that allows you to get a different offer than me. And I think when you create that personal touch and you combine that with digital payment technology, that can actually track it, move the money and settle it in the same click of a button, I think that’s very powerful and it opens up a completely new way to really run our businesses. That’s what we’re excited about. I don’t think we have all the answers—no one does. But I think it’s kind of a new chapter for retail, and we’ve got a great opportunity.

Is the fintech couponing space like the music industry in any way?

I see so many parallels! Going back, I was one of the last pioneers of selling physical records, I was really focused on the CD sales side. And then you had the Napsters of the world come in, and it was all about digital distribution, not having to go through the traditional formats, like the record companies, to get access to music. And today, that’s all been standardized to your phone. When iTunes came out, that’s what’s happening in offers right now. All of a sudden there’s this whole new way to play, but no one’s really come in and been that Apple of that space. I think that’s the opportunity for us.

What’s great about that is, it was good for the creators and for music. It really helped new artists not have to go through all that rigmarole to put their stuff out, but really be able to produce great music at home, put it out and get it in front of an audience.