Mobile coupons coming of age

Joe Barber

Joe Barber
Joe Barber is a 25 year veteran of technology companies with the last five years focussed on mobile and retail. He is currently CEO and founder of Edge80.com with other notable start-ups under his belt being Third Screen Media, Sniip and Planet Internet. Joe has lived and worked in the US, Malaysia and parts of Europe and talks at numerous trade events worldwide.

This article first appeared in the May 2011 issue of Marketing magazine.

 

It seems mobile coupons are finally coming of age. While there have been many early adaptors and technology solutions waiting for a market for quite some time, the last six months have seen an incredible increase in brands embracing the full mobile voucher (coupon) opportunity. As early as 2005, I saw the first very crude attempts to use SMS coupons: redeemed via a cash register and point of sale (POS) terminal using a series of jerry rigged register keys counting coupons presented and POS terminals fashioned to fit coupons into a gift card type model. Irrespective of the success, mobile coupons have struggled to gain traction because the redemption tracking was challenging and disruptive to the checkout process.

Coupons with notional value where viral distribution is part of the campaign mechanic required little or no closed loop processing. But vouchers with cash values and those used to represent significant value goods presented challenges if systems weren’t integrated to prevent multiple use. Not only were the processes and use of electronic devices at the checkout a challenge, but the scanning of coupons on mobiles was not the most reliable process!

As early as 2004, Mobilize Systems in the UK launched its ‘Shop, Scan, Save’ program, which was one of the first closed loop mobile coupon redemption systems utilising hardware at POS to scan or enter the barcode and validate the coupon.

Today, there are a number of organisations building very sophisticated systems to provide a comprehensive closed loop mobile coupon ecosystem. It’s logical that the POS terminal be the key to the redemption that has been the endeavour of many SMS-based systems since 2004/5. But, in reality, it’s been the last 12 months where consumer acceptance, retailers’ systems and agency understanding have all aligned to see new and exciting programs coming into the market.

The Starbucks mobile payment initiative and the Target text alert mobile coupon platform come from two very high profile retailers that have taken the time to understand the medium and created programs that win the hearts and minds of consumers. Interestingly, two years ago these kinds of initiatives in Australia saw average results and were met with roadblocks and disappointing adoption rates. Most of the performance disappointments were due to poor planning, poor execution and the disconnected worlds of IT techos and agency creative people simply not meeting anywhere close to the middle.

If you’ve ever tried, considered, dabbled, explored or even dismissed mobile coupons in the past, then think again; the time has arrived and the early adoption teething problems have been solved. From the scanning through to redemption tracking, mobile coupon platforms are sophisticated and emerging from all kinds of organisations. Some of the more interesting ones are now even integrating high-end CRM (customer relationship management) systems and applying behavioural monitoring and pre-emptive shopping tools. Even more interesting, is that this new breed of retail coupon champions is not from the geek/tech world, and is not from highly creative and abstract agency land, but fits somewhere in the middle with strong retail forensic skills and systems that support their strategy.

To help get back on focus with mobile coupons, here is a collection of facts and figures, along with a discussion and relevancy for our market. Remember always with mobile stats, it’s important to appreciate their context in terms of geography, as markets like the UK and the US have very different influences and usage patterns:

  • According to the Annual Topline US ‘CPG Coupon Facts Report’ for 2010, released by NCH Marketing Services, shoppers saved US $3.7 billion with coupons in 2010, representing a 5.7 percent increase from 2009 (US). Interestingly, it was generally regarded in 2008/9 that Australia was a leader in the trial and exploration of mobile coupons, just behind the UK and far ahead of the US, but, based on this, the US has now embraced and accelerated past Australia. Bigger risk takers or better marketers?
  • In 2010, an average of $1.46 of coupon face value was distributed, representing a 6.6 percent increase from 2009. Sites like Myzerr and Cellfire have helped raise the bar on coupon value from soft offers of a free coffee to vouchers with hard tangible cash value. I believe that, within the next six months as redemption abuse is able to be managed and controlled through complete closed loop systems, we will see far higher value being used in vouchers to the point of them almost being able to be used as ‘stored value coupons’ in the same manner as gift cards (such as the Starbuck payment system). Imagine being able to MMS a friend a $100 mobile gift card voucher for a retail outlet and all parties knowing its secure, reliable, traceable and, most importantly, fraud resilient.
  • Redemption volume in the US grew 3.1 percent to 3.3 billion CPG coupons in 2010. The increasing trend in consumer use of coupons was further supported by NCH’s Consumer Survey and tends to be a self-fulfilling growth accelerator; as consumers begin to understand and use mobile coupons, the number of retailers adopting the approach rallies exponentially. It didn’t take long after the technology was able to support the strategy that frugal consumers saw the huge savings achievable through mobile coupons. And, best of all, there’s no metre-high pile of newspapers and catalogues and hours of cutting and collating to collect the coupons. Text and join, click to buy and a range of other online methods make the receipt of cash saving coupons fast and efficient.
  • More than 300 million consumers around the world will have used mobile coupons by 2014 and this usage will generate a redemption value close to US $6 billion globally, according to a forecast and report by Juniper Research. This is a statistic I’ve now seen in a few places. I am not sure how it was attained, but what it does now demonstrate is that mobile coupons and vouchers are a strong growing digital channel that simply has to form part of a unified cross-media strategy.

This raises such an important point and one where I am constantly frustrated when I go and talk to many agencies and promotional firms. ‘Mobile’ is not the channel. Talking ‘mobile’ is like referring to computers or PCs as the online channel. PCs are not the channel, they are simply the conduit or the carrier for channels such as email and web. Similarly, you must not refer to ‘mobile’ as a channel; it is simply the end point for messaging, coupons, mobile web, web apps, push messaging, apps and social media applications etc. Messaging and mobile web alone are two very distinct channels that require different strategies, have different drivers and sensitivities and, above all, deliver very different results.

I usually talk about the eight or so distinct digital channels that organisations need to deal with – all of which have their own idiosyncrasies and nuances to get working effectively. These include web, email, mobile web, messaging, coupons, mobile applications, Twitter, Facebook and Four Square.

  • Mobile coupon redemption rate averages are 10 times higher than traditional paper-based ones; it is the single most direct marketing channel there is. In fact, some research even shows:
    • average redemption rate for paper coupons: one percent, and
    • average redemption rate for mobile coupons: 15 to 25 percent.

I have seen some Australian campaigns that have had well over 50 percent redemption rates and, with well-planned campaigns that continue the mobile engagement, it can drive upwards of 70 percent redemption on secondary offers. This kind of re-engagement relies heavily on integrated redemptions systems; being able to send a follow-up SMS thanking the consumer for their redemption and inviting them to a follow-up action to gain further benefit. And why wouldn’t you try and re-engage with a willing consumer? It seems obvious, but fewer than 10 percent of most coupon or messaging campaigns have ever considered the post-redemption strategy. Ridiculous, isn’t it? There you have at the counter an engaged consumer using their mobile and you fail to send the next call to action masked as a ‘thank you’.

  • According to PayPal, online retail sales in 2009 accounted for $24 billion in Australia and Forrester’s figures put the US number at $156 billion. Overall, Australian online retail will reach $36.8 billion by 2013, with the US expected to exceed US $247 billion. To make this clear, this is online, which includes traditional desktops and mobile. The top 10 major online retailers all now have mobilised versions that cater for the device specific challenges. For a well-structured mobile payment process, the conversion rate from that moment in time where the final ‘buy decision’ is to be made through to actual commitment is far higher on mobile than desktop transactions. I’ve seen a range of conflicting numbers, but, if I average them out, the conclusion is the same: 90 percent or more of mobile buyers at the final buy page complete their transaction as opposed to fewer than 30 percent on traditional desktop web.
  • There is little explanation offered for this fact with some analysts (and me) speculating that the mobile is a far greater impulse buy mechanism and combined with a higher level of attention means that if a consumer reaches the ‘buy’ button, they are more likely to be in a conscious buying mood and less likely to just be browsing. So while in reality consumers don’t buy more often via mobile, the conversion rates show how important the online mobile website structure and design is in respect of being able to take a consumer down a structured journey to purchase.
  • Based on research done in the UK, the consumer uptake on things like mCommerce, mobile geolocator apps, mobile loyalty cards, mobile gift cards and mobile coupons will see online sales via mobile more than double by 2013. Some analysts are even predicting the decline of paper-based systems to a level where more mobile coupons are sent, then printed! With redemption rates at least 10 times higher, that’s all good news for the retailer.

As a consumer, get ready to start moving the plastic from the wallet to a mobile website or application. There are now three airlines that issue their frequent traveller cards as images to the mobile. There are many supermarkets driving their loyal customers back with very aggressive specials delivered regularly via mobile messaging. And, almost as crazy as the group buying sites and services, the number of third party mobile coupon aggregators and operators is set to grow, but a new breed that understands processes, POS and gateways will create a unified offering.

 

Homepage image courtesy of Felix O, via Flickr