This interview was written and first published by Roger Ström, Visiting Lecturer, Marketing Halmstad University, Sweden.
With a thoughtful approach and consistent implementation, mobile marketing holds a huge potential for retailers. The pitfalls are many, however.
The mobile phone has still not made a substantial impact as a new marketing channel. There are many examples of more or less successful attempts, but these have largely been individual campaigns, not as a permanent channel of communication. “Technology providers and mobile operators have long been pointing to the area’s potential for marketing, but still the majority do not use the phone for other things than normal phone calls and text messages, “says Martin Vendel, independent consultant and former Head of Product Management of mobile services at the largest Nordic and Baltic operator TeliaSonera. However, the market is gradually maturing constantly giving more favourable conditions. The vast majority of phones are now able to connect to the Internet and data transfer is not a problem anymore, thanks to 3G. Operators plan to or are implementing the next generation of mobile networks, “4G”, with the potential of reaching download speeds of 100 megabits per second. All phones sold today have a good high resolution colour screen. Pricing for data traffic is reasonable and close to understandable for customers. “Since the launch of iPhone, we see an increased focus on usability by all stakeholders. All these positive trends make mobile marketing even more interesting as a new channel of communication for both customers and retailers. Now the time is right to evaluate what mobile marketing can do for each player in the retail sector, “continues Martin Vendel.
Retail mobile campaigns have historically been primarily SMS-based. Retail clothing chains, such as H&M, have achieved good response on campaigns designed to drive traffic into their stores. According to the U.S. research firm Forrester more and more companies are still planning new marketing campaigns based on SMS, e.g. large one-off promotions or special offers. But is this trend sustainable? “The situation can be compared to the development of e-mail marketing in the middle of the last decade. Tolerance to increasing amounts of unwanted messages in your inbox is not likely to be greater today than fifteen years ago, “says Martin Vendel. The problem with spam to mobile phones was early identified and resolved in markets such as Japan. There are few examples where legal fines are imposed to companies spamming users with sms. The problem may be considered to be limited but with the expected increase of campaigns, the issue may arise again.
Mobile marketing can be seen as an extension of the web. Anything that can be done online can also be done using a mobile phone connected to the Internet. “Modern mobile phones are becoming more and more like small computers. But do not make the mistake to regard the mobile as a normal computer. The services must be adapted to the mobile’s tiny window and the phone usually lacks a proper keyboard,” says Martin Vendel. Furthermore, data capacity is still significantly lower compared to fixed broadband. This leads to further constraints on capacity-demanding services such as moving images.
The computer screen size, image and sound quality is well suited for large, multi-sensory, brand communications, while keyboard and mouse facilitate more extensive search, comparison and evaluation of information for purchasing decisions. The limitations of the mobile phone make it more suitable for simple messages in a simpler format, with less extensive search patterns.
The mobile phone is personal and almost always directly available to the user. It holds the potential to become the perfect media for communication close to and at the time of the purchasing decision, as a tool to support customers in their purchases in store. “I think customers shortly expect all retail chains to have a mobile service where the most basic functionality is available,” says Martin Vendel.
Features such as find the nearest store, goods in stores, expanded information about goods, other customers and “expert’s” opinions on products, other channels of supply and prices simplifies customers’ search process and decision. Shop capacity and sales can be increased by an increased degree of customers self service and by an increased conversion rate of buying customers not leaving the store because of lack of information, suggestions or not finding the right goods.
Loyalty programs may increase their value to customers through increased accessibility utilising the mobile phone. Enabling access through the mobile phone of features such as shopping lists, personalized tips and advice, bonus balance, account balance, discount and bonus offers and coupons, and club cards, will increase their relevance and value as being used in store and during a purchase. Coupons and club cards are for instamce often forgotten at home, especially within the consumer discretionary sectors.
You should have a realistic expectation on the mobile channel and it´s contributions. It is not realistic to expect that it will solve all the challenges and replace existing channels immediately. “It is more realistic to expect that only a few percent of the customer base migrate over to the mobile channel initially. Then it is up to the company to train and reward their customers so that they migrate to the channel most valuable to both parties, “according to Martin Vendel.
In the choice of technical infrastructure, it is important to select solutions that can be used by as large fractions of the customer base as possible. In this perspective, SMS has up until now been superior to more advanced services. There have been numbers of barriers for an easy access to Internet based mobile services such as incompatible mobile operating systems and operator phone settings. More advanced applications giving a superior user experience are available for smartphones such as the iPhone or phones built on the Android operating system. These applications do, on the other hand, only work and may be accessed through specific phone models, and cannot yet be seen as general solutions. Today there are good alternatives, such as the service Squace, which can reach the majority of customers independently of operating system and with all the functionality needed.
Companies that are evaluating and planning implementation of mobile marketing should according to Martin Vendel, consider the following:
- Revise and clarify your online strategy carefully. Build mobile extensions to existing web functionality, where it makes sense and brings value.
- Mobile marketing will not replace existing channels, but should initially be seen as complementary. Attention must also given to clarifying the benefits and role of mobile marketing compared to other channels. Mobile marketing has to be an integrated part of the overall marketing, including other channels, to maximize synergies.
- Start with features that have high value for the customer and which are relatively simple and inexpensive to implement.
- Each company’s needs are unique. The solution should be based on existing systems and aspirations of digital marketing as a whole.
- The mobile channel will initially attract only a small but growing share of the customer base.
- The content of a mobile site must be constantly renewed so that it is not perceived as dead, this is even more important on a mobile site compared with online services.
- Encourage and educate the customer base to gradually incentivise them to move to more efficient and profitable channels.
- Mobile and the existing online services should interact and be based on the same technical infrastructure to achieve efficiency.
- Choose a rather simple and straightforward system that will not be expensive nor inflexible.
- The mobile service should be possible to be directly managed by the marketing department, so that marketers do not become dependent on suppliers or internal IT bottlenecks.
When done right, companies will find solutions that meet their unique needs while maintaining a good flexibility. Furthermore, these investments will create substantial value within a short time period.
In summary, the time is right to learn more about mobile marketing and what it may bring to each individual business. The potential is huge. Unfortunately, it is very easy to make mistakes in this area, which can be costly and could harm customers’ trust in the specific brand.
The roles and perspectives of five kinds of stakeholders are discussed and debated: the end user; the device and hardware manufacturers; the traditional media houses; the Internet giants and the telecom operators. All are very important and play essential parts in the mobile/Internet eco-system. The balance between them has shifted over time and will continue to do so. The telecom operators seem to be the most criticised and questioned. Is this unfair or have they earned it?
Historically the telecom operators have been enormously successful offering high quality global fixed line telecom services. Next in line was mobile telephony developed in cooperation between Nordic operators, such as Telia and Sonera, today merged into TeliaSonera, and hardware suppliers such as Ericsson and Nokia. The success of the operators has been based on a network centric business model. Even with many attempts to expand into new adjacent areas almost all of the profits still come from the original core of the business. Moving into new areas has shown to be difficult. This is probably due to limited knowledge and experience, cultural differences and conflicting business strategies. Focus has been on increasing traffic and not end user value, a strategy which now even may show quite dangerous risking ending up in a network apocalypse scenario. Should then the operators avoid new tempting areas and just stick to what they clearly understand, running networks and offer access?
The operators struggle with the dilemma of finding new revenue sources at the same time as they desperately defend the existing cash cows. The main difficulty lies within that the old network business is local/national and telecom centric and most new business is global and based on IP/Internet logic. You can’t move into the new business without starting competing with the old thinking. Moving from a fully controlled stove pipe environment to a horizontally layered business structure with fierce competition on each layer may be an almost impossible equation.
What we see over and over again are attempts to move into new value added services without understanding what it takes to become successful. The new services most often need to be competitive by their own on a regional or global scale utilising significant scale advantages. Instead the new business is subsidised by the old until some brave young business controller analyse the case, showing that the new business is not competitive, have a far too high cost level and do more harm than good.
We have entered into a situation of access independent services also for the mobile. As outlined in a recent report by Gartner the mobile will already in 3 years be set to overtake the PC as the most common web browsing device. Internet will finally be available for all of humanity through Internet enabled mobiles, especially important to developing countries. The operators are of course instrumental to make this happen. We need well run high quality and efficient networks. There is also a number of enabling functionalities, such as efficient payment solutions, location data, device management etc. that the operators may offer partners. However, there are still some very basic elements related to cost control that urgently need to be in place, the two most important being: affordable flat rates and reasonable and transparent data roaming charges.
There is also a lot of talk about utilising all the data the operators have about usage and the end user. However, this data is hard to get out of the systems and is rather technical in nature and not originally defined for marketing purposes. It’s time to realise that the huge amounts of detailed data hidden in the operator’s systems is rather useless. We need specific data depending on business logic, that can be used for marketing purposes, and that is automatically generated and monitored without first involving the technical staff for weeks.
The operators need to shift focus from traffic maximisation to end user and partner value creation. They also need to support device and operator independent initiatives, such as UMIs, as all will be winners when penetration of Internet access through the mobile increases. Differentiation of the access offering through exclusive value added services and content is a very costly and is not sustainable. Stop doing costly experiments in attempts to find new revenues sources in business areas you don’t understand. There’s no reason why being a bit pipe provider should not be a profitable business even in the future, except for if the regulator mess things up completely. Please realise that moving into an IP environment gives access independent services, focus on making data charges understandable and affordable and incentivise all to maximise the value to traffic ratio.
I was asked at the Mobile Monday event at the Squace office in Stockholm yesterday what people read on this blog. Going through the statistics over the last year some conclusion may be drawn. If this says anything at all regarding general mobile trends could be debated. The top three posts discuss the importance of the mobile to developing countries, as a new marketing channel and as a way to distribute long-tail content. Reflecting key industry trends? Yes, I think they do.
Below the top 10 blog posts are ranked based on popularity:
The development of app stores has been beyond anyone’s expectation. The key driver for the development the last 18 months has been the iPhone app store but similar concepts have been around for many years with services, such as Handango and GetJar, as well as many operator portals. The overall numbers are really impressive. There is today about 115,000 iPhone apps and more than 100 million downloads a month (incl. iPod Touch), while the second largest app store Get Jar, serving all types of mobile phones, has about 60,000 apps and 50 million downloads a month.
With close to 40 million iPhones sold the number of apps downloaded per user is on average quite high. Some claim that the number is as high as 11 apps per month and user, but I’m not really sure they got the math right. Anyhow, is this a gold mine for the developing community? We do have success stories but the app stores are now quite crowded. On average each app is downloaded about 1000 times a month. But looking at the usage patterns for free apps presented by Pinch Media only about 20 % return to the app a second time, only 5% return to the app after 25 days and after 90 days only 1% still use the app. Keep in mind that these numbers are all averages. Also taking into account that the top 1% of the apps in the larger app stores probably account for 90% of all downloads, then the numbers become quite disappointing for the majority of the apps not making it to the top. Most apps do probably not have more regular users than, well, those involved in developing them. Sad but probably true. The numerous launches of app stores by device manufacturers and mobile operators do expand the market but it also becomes quite fragmented. All different operating systems and specific demands result in that each app have to be made in many different versions, driving cost even further.
The likelihood that a new app after some initial attraction ends up in a close to zero down load frequency and that those initially downloading it stop using is, despite the over all success of the app stores, quite high. The app stores are turning into app graveyards for most new apps, buried under piles of more attractive apps and with very little possibility to gain visibility. Gaining visibility is a marketing issue but the limited stickiness of the services may indicate that most of the apps should never have been made as they do not meet a specific customer demand. Services with a limited but loyal segment are fine but with false expectations on future take up and revenues the cost levels are usually far too high for the development.
The term app graveyard has been used for clusters of apps that were not approved and never made it into the so attractive looking gated communities of the app stores. The question is if they actually have a better chance of succeeding outside the fence. The app stores may be fantastic and one of the most disruptive elements seen for quite a while within the mobile sphere, but please remember that they still can’t sell services that are not really marketed, nor sell services that actually do not meet a customer need.