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Feature: Loyalty and Motivation - Mobile Payments

Source: www.brandrepublic.com (09 April 2008)
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Eco-friendly, targeted, secure - mobile promotions should be everywhere. The problem is that retailers and consumers are still wary of them. David Murphy asks why they haven't caught on, with comment from Robert Thurner.

On the face of it, mobile coupons seem to be the answer to every retailer's and brand's prayers. They're eco-friendly (no paper), and they offer a neat way to avoid some of the mis-redemption issues that blight paper coupon campaigns. Yet the retail trade's response to mobile coupons has been lukewarm, to say the least.

When Sainsbury's took over the northern convenience chain, Jacksons, two years ago, the chain was in the middle of trialling a mobile coupon system developed by mobile specialist The Light Agency. Sainsbury's allowed the trial to continue in the renamed Jacksons@Sainsbury's stores, but eventually The Light Agency failed in its efforts to convince the grocery retailer to roll out the scheme nationally. Instead, the scheme is now running in more than 30,000 convenience stores up and down the country.

But mobile coupons still have an advantage over the paper alternative, according to Robert Thurner, commercial director at mobile agency Incentivated.

"The value of paper coupons redeemed over the course of a year is tiny compared to the number distributed," he says. "The majority are not redeemed because it's easy to forget to take a paper coupon to the shop. It's much easier to take a phone, which we always have with us, and present that."

Thurner adds that, because the coupon is in digital form, brands and retailers can see which offers a consumer was most interested in, and feed the result back into the company's CRM strategy and planning.

The problem of course - and no one denies its scale - is that most retailers' EPOS infrastructure cannot cope with the brave new world of mobile barcodes. So while there may well be benefits in terms of reduced fraud and mis-redemption, these are not perceived by retailers to outweigh the cost of ripping out their legacy systems and starting again.

Things are bound to change in time. The next time a multiple retailer refits its stores with new EPOS hardware and software, mobile barcode scanning will no doubt form a part of the installed solution. But with such refits typically occurring on a ten- to 15-year cycle, it could be some time before this happens.

In the meantime, mobile coupon supporters are looking at other ways to promote acceptance. The Light Agency's M BAR GO technology platform, for example, integrates with the PayPoint terminals that are used to top up utilties and mobile phone credit, enabling smaller retailers to participate in the scheme without any additional investment.

"The scheme has achieved more than 30,000 members with a low-level marketing spend to date," says Light Agency client services director Lynette Cowen. "We think it is important to educate retailers to ensure best customer experience, so the launch focus has been to grow the membership base along with the retailer programme. But the membership growth and response to TV advertising shows a keen interest."

Another company in the mobile space, Magnet Harlequin, has successfully introduced a mobile couponing scheme for book chain Borders. According to Magnet Harlequin head of technology Scott Seaborn, the key to success is to keep things simple. "(WPP Group CEO) Martin Sorrell said that mobile is the most over-hyped medium in the short term and the under-hyped in the medium term that he has ever come across and this is the problem," says Seaborn. "The people pushing mobile coupons and barcodes get so excited about it that they over-complicate things and then the brand or the retailer gets confused."

In line with this thinking, the Borders scheme simply invites customers on the company's email database to receive discounts off books via text if they prefer. The offer appears on their phone in the form of a text message they display in store. To redeem the offer, checkout staff use a traditional printed barcode that the till is already equipped to cope with.

By keeping things simple, says Seaborn, the campaign has been a great success, with redemption rates as high as 23 per cent for some offers. "This tells me that mobile coupons are valid and that they work, but you have to keep them simple, and too few companies are doing that," he says. "Borders should take a lot of credit for having the vision to do this, without trying to over-complicate it."

Borders commercial director David Kohn agrees that keeping it simple works. He says: "This is in no way the centrepiece of our marketing strategy, but it appeals to a section of our customer base and, for that reason, we continue to do it."

Another company trying to promote mobile couponing is Eagle Eye technologies. It is working with broadcaster ITV on a scheme that enables advertisers to offer mobile coupons to viewers who see their TV ads. Viewers can text in to receive an eight-digit code on their phone, which can then be redeemed against the appropriate offer in-store.

The first advertiser to use the scheme is furniture retailer Harveys. The company's head of marketing, Helen Vinken, says: "We are delighted to be the first to develop a fully integrated marketing campaign across all digital platforms, driving tangible results to our stores via digital and a mobile messaging mechanic. It is important to Harveys to communicate with our customers in a way that is convenient to them and we are constantly trialing new initiatives to meet their changing needs."

Eagle Eye has applied for a patent for a solution that would enable retailers to redeem mobile coupons using their existing Chip and PIN terminal infrastructure. Eagle Eye director Steve Rothwell says he expects the patent to be granted within the next month, and he disagrees that retailers are not keen on mobile coupons. "Retailers are not reluctant, they just need a technical solution that takes away the integration pain and that's what we are delivering," he says.

Nigel Dean, head of interactive at mobile network O2, is another who believes that retailers do want to adopt mobile coupon campaigns. "We've seen a huge upsurge of interest from retailers over the past six months," he says. "They are interested in all aspects of mobile, including, but not restricted to, coupons."

While the retailers work out how and if they are going to gear up for mobile couponing, there is another issue that has to be overcome if mobile coupons are to achieve their potential - consumer apathy. "Redeeming mobile coupons requires a big change in consumer behaviour," says Chris Bourke, managing director of mobile agency Aerodeon. "Busy mums in supermarkets still need time to become familiar with, and adept at, using their increasingly feature-rich mobile handsets."

Bourke believes that change will happen, but that it will be a slow process, taking another three to five years before mobile coupons begin to establish themselves as a part of everyday life.

"Retailers will need to justify investment and carry out lengthy cost/benefit analysis and technical trials before they install mobile coupon redemption technology nationwide," he says.

"But one of the big multiples (retail chains) may just surprise us and drive this development through the market to deliver that elusive competitive edge."

Until that happens, the going looks to remain slow but steady for mobile coupon promotions.

Mobile winning in other promotional arenas

While mobile coupons may be finding it hard to make much of an impact, other forms of mobile promotion are proving popular. A number of venues are trying mobile ticketing schemes, where a ticket is sent to the consumer's phone in the form of a barcode that can be scanned by hand-held readers at the venue.

Statistics from Juniper Research suggest that more than 2.6 billion mobile tickets will be delivered by 2011, as ticket issuers seek to benefit from reduced costs, better security and an improved environmental footprint. The research estimates that the airline industry could save £250 million a year by migrating to mobile boarding passes.

Several companies are using mobile as a CRM tool. Incentivated runs a scheme for British Airways that alerts customers via a text message if their flight is delayed or cancelled.

And text and win competitions continue to be popular with brands, providing an easy way for consumers to enter competitions without having to fill in a form and send it in the post.

One of the most successful staged in the UK was created by mobile agency Sponge for Walkers Crisps in 2005. It offered consumers the chance to win an iPod mini every five minutes for a month, and then one a day for a further two months. The campaign attracted 17 million entries from seven per cent of the UK population.