Mobile Vouchers – The Next Billion Dollar Market?

by Russell Buckley on 11. May, 2011 in Mobile coupons, Mobile Phone Evolution, Personal

You may have read in the news over last few weeks that I’ve taken the decision to return to a full time role in the mobile marketing scene, as Chief Marketing Officer of Eagle Eye Solutions in the UK. I thought I’d take the opportunity here to explain my thinking a little and why I believe this is where the action is going to be in the next few years.

Firstly, let me clarify one brief point. When I wrote about my plans a month ago I suggested that I would be looking at some advisory work, investing and mentoring. This is something I’m still doing and plan to continue, so taking a full time gig is not a u-turn in any way, but very much complementary to the work I’ll be doing at Eagle Eye. You’ll still hopefully see me on the speaking circuit and I’m especially looking forward to the MLOVE Confestival taking place in a castle near Berlin at the end of June. I’ll be expanding on some of my recent talks about the exponential growth of mobile technology, The Singularity and the short and long term implications for businesses. And there’s a bunch of great speakers and plenty of partying to look forward to – check it out and book your place.

Anyway, back to mobile vouchers.

When I were a lad starting out in marketing, we used to bandy around the phrase “Advertising loads the gun and Sales Promotion pulls the trigger”. Like many truisms, it contained a healthy dollop of fact and wisdom, even if it was simplistically expressed. Basically, it suggested that Advertising’s job was to build a brand and create consumer demand for the product. And Sales Promotion created the sale by, for example, driving store traffic, promoting the product in-store or running loyalty programmes.

Today, Sales Promotion has been officially abolished in favour of “Promotional Marketing”, but broadly speaking, the principles are the same.

However, the hybrid “performance marketing” has also grown disproportionately important, where the ad also stimulates a purchase – largely driven by PC-based display and search marketing. This is a very effective technique for advertisers and can often be purchased on a payment-by-results basis – you only pay when the consumer engages with the brand by clicking on the ad (Pay Per Click), or in some cases, actually making a purchase of the product (known as CPA or Cost Per Action).

Digital Direct Response Advertising or Performance Advertising has proved truly revolutionary, but really only for companies who can complete an action or make a sale online. So if you’re say, Amazon, eBay or LastMinute.com, Performance Advertising is marketing nirvana. But if you still rely on a purchase of a physical product in a real-world store, the case is less clear. If online activity simply drives consumers to your website which doesn’t actually stimulate a transaction, does this have real value?

Rather than getting into a debate about the merits of this argument, let’s just look at the facts.

According to eMarketer, online ad spend now accounts for 15.4% of the total. There’s an argument to suggest that this is low anyway in comparison to how much time the average person spends online, as opposed to engaged with other media. Despite this, Nielsen states that

Big FMCG brands in particular might appear to have been rather shy of the online space, with Procter & Gamble investing just 1.3% of its overall media spend in paid-for internet ads, Nestle 2.7%, Unilever 1.9% and Tesco 1.4%.

Now, let’s just remind ourselves, these are 4 of the most sophisticated and innovative marketing brands globally and they’re consistently underspending in digital. And the main rationale for this is lack of measurable of results in terms of sales created. Or as Jerry Lloyd-Williams, head of content at MediaCom Beyond Advertising suggests:

For a lot of FMCG [CPG in the US] brands, one question still prevails, which is: do the dollars and pounds they spend on digital equate to sales? There’s still a lot of research that needs to be done, but the caution with which they are spending online is built on a reasonable research question.’

But let’s look at mobile, as opposed to PC-based advertising. Mobile can actually link advertising to a physical sale in a store. A brand can issue a mobile coupon and provided that the coupon can be digitally redeemed (as opposed to a sight-check by store staff), we can suddenly measure sales precisely and develop appropriate ROI formulations.

This isn’t a new concept, by any means. As an industry, we’ve been talking about “closing the loop” for the 11 years I’ve been in the industry and it’s remained the big promise of mobile marketing – but a promise that hasn’t yet been delivered. Most launches into this area rarely get beyond a trial as every method tried to date – from barcodes to NFC – require a significant upgrade in either the retailer’s EPoS or mobile handsets, or both. Such upgrades are expensive and take time to deploy.

When I was looking for my next role, I was looking for a market that had the ability to become a billion dollar business within 5 years. So it’s perhaps not surprising that mobile coupons would make my list. It’s potentially huge, with over 300 Billion paper coupons issued every year in the US alone. In addition, I know that mobile coupons will be embraced by retailers and FMCG/CPG verticals when a secure abd foolproof redemption methodology is in place.

However, in the last 11 years, I hadn’t seen a technology that would actually deliver the promise today in a scalable way. Until I came across Eagle Eye Solutions, which owns a great piece of patented technology that has the potential to disrupt several industries all at once – retailer marketing, mobile marketing and couponing.

While most players in this market have focused on scanning technology of some form, Eagle Eye have very cleverly thought out-of-the-box. Their idea has been to partner with the companies who supply retailers with their Credit Card Terminals in-store, or what we call in the UK, Chip and PIN Terminals. By integrating with these companies, which are already linked to the retail EPoS, something very neat indeed can be achieved. This is how it works.

1. Consumer Requests a Coupon

The ways in which a consumer might learn about the availability of a coupon are many and varied. But essentially, they’ll be responding to an ad – whether via traditional media, such a radio or press, or perhaps more likely, via mobile advertising itself. If by mobile, they can click on an ad or link and get a coupon sent to their phone, usually via ubiquitous sms.

2. The Coupon

The coupon is actually a simple unique PIN programmed for one-off usage.

3. The Retail Experience

They visit the store, make their purchase and use the Chip and PIN machine to enter the PIN as part or full payment. All the evidence so far points to very positive consumer acceptance of this mechanic, as they’re used to entering numbers in this way.

4. The Marketing

If the promotion is being run by the retailer, they get real-time reporting and analysis on their campaign. Ditto, if it’s a brand running the campaign via the retailer.

5. The Security

One of the dirty little secrets of the coupon industry is fraud.

There are two types of coupon misuse in operation. Malredemption is trade fraud – for example, where a retailer cuts out and collects coupons and claims back the face value and trade handling allowance, without ever involving a consumer. Clearly, this is a problem mainly involved with independent shops, but it is and always will be an issue using paper-based systems and manual fulfilment and reconciliation.

Misredemption is a far wider problem and involves the consumer claiming the value of the coupon without having ever purchased the product. It’s pretty hard to quantify the size of this wasted marketing budgets. Occasionally, a company with a vested interest in minimising the problem commissions a survey which finds that most people claim not to do it. But as you’re asking them to ‘fess up to cheating, maybe that’s not a big surpise.

Anyway, digital redemption is secure as the discount isn’t given by the retail EPoS unless the product is purchased. Brand budget holders can wave goodbye to this perennial headache for good.

6. The Fulfilment

No waiting for fulfilment houses to count coupons and send cheques (checks) around the country. So, the Green implications are pretty impressive too – especially avoiding the printing and distribution of the vouchers themselves.

Of course, the really huge opportunity here is using all the data to the best effect, but I think that’s a post for another day.

The mobile coupon/voucher space is already a crowded one. But that’s great for Eagle Eye as there are loads of companies who need the technology that we can deliver. The Facebooks, Groupons, LivingSocials and any company involved in running mobile advertising campaigns will all benefit from partnering with us to deliver mobile couponing today. So, I hope others will quickly see what the opportunity is here.

When I joined AdMob 5 years ago, many people questioned just what the hell I was doing getting involved in a company that ran banner campaigns on mobile websites. Clearly, I don’t need to explain that any more. In the same way, many people have asked the same thing about mobile couponing – or at least been very underwhelmed at the news.

Believe me, this sector is going to be massive and is worth getting very excited about indeed as the mobile revolution continues. Whether or not Eagle Eye turns out to be a big winner is yet to be seen. But I’ve researched this market very carefully and really believe that it’s got a good shot at winning big.

So, will mobile couponing be a billion dollar business in 5 years? We’ll see. But it’s going to be fun finding out.

—–>Follow us on Twitter too: @russellbuckley and @caaarlo

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Tags: eagle eye solutions, mobile coupons, mobile marketing, retail marketing

« 5 Reasons Why You Shouldn’t Pay People to View Advertising

Carnival of the Mobilists #249 »

Great article about the power of mobile coupons. Albeit written by someone who head up a company that does them!

In fact, I’ve seen mobile coupons in use here in NZ for a while now, and well executed at that. Todd Wackrow of PocketVouchers (http://www.pocketvouchers.com) is the man to speak to about this.

You don’t need to look at how overseas companies are being successful with mobile vouchers, when local brands like Rebel Sports, Sanitarium and Liquorland to name a few are having successes in your back yard.

Not overly expensive to execute either, and integrates right with your existing POS terminal. Easy.

The following is the weekly guest series by Derek Johnson, Founder & CEO of SMS marketing software Tatango.

After Groupon announced their plans to go public earlier this month at a $30 billion valuation, they’ve been taking punches left and right in the media. Even TechCrunch, which has always had a soft-spot in their heart for Groupon, let guest Rocky Agrawal spend an entire week ripping the daily deals giant a new one with posts such as the following:

Why Daily Deals Are Becoming A Raw Deal

Why I Want Google Offers And The Daily Deals Business To Die

Why Groupon Is Poised For Collapse

I’m guessing this wasn’t the type of coverage Groupon had in mind after their big announcement.

The majority of the criticism being hurled at the daily deals giant isn’t that the consumer is getting a bad deal (I don’t know anyone that doesn’t love getting 50% off), it’s that businesses offering the Groupon deal are the ones still in search of positive results. If you’re not familiar with the ideology behind why a businesses is sold on using Groupon, it’s very simple. A business will offer a steep discount through Groupon, usually 50% off, exposing that business to thousands of new customers, who in a perfect world become repeat customers of that business.

After pouring over all of the criticism over the last month, a quote in the Wall Street Journal from business owner Jennifer London, sums up why businesses feel they are getting the shaft when using Groupon.

“Most of the people who came are not from this neighborhood – I most likely won’t see them again.” - Jennifer London (Xoom Smoothie Shop)

Ms. London is right in her assumptions, Groupon says its research shows 78% of its customers never come back to a business after redeeming a Groupon. To verify the accuracy of this statement, Utpal Dholakia, professor of management at Rice University did his own research by surveying 324 businesses that offered deals from August 2009 to March 2011 from five daily deals services including Groupon, LivingSocial, OpenTable, BuyWithMe and TravelZoo. His results were similar to Groupon’s own results, but he also found that nearly 80% of daily deals users were first time customers. If we do some back of the napkin math with the survey results, and take a business that redeems a whopping 1,000 coupons — that business is only generating 160 new repeat customers (1,000 Groupons x 80% new customers  x 20% repeat customers).

Groupon’s tagline on their website is the following:

“Learn how a one-day feature on Groupon can bring your business thousands of new customers.”

Business owners and the news media are starting to wise up  though and they want to see this instead:

“Learn how a one-day feature on Groupon can bring your business thousands of new [ repeat ] customers.”

With nearly 80% of all daily deal users being first time customers, the only solution I see besides drastically changing Groupon’s business model is to increase the amount of repeat customers for businesses using the service. Why is the number for repeat customers so low? Groupon doesn’t share information like email addresses or phone numbers of the customers coming into a store to redeem a deal. Groupon also doesn’t provide businesses with the tools to capture customer information on their own, which would allow the businesses the ability to create loyalty programs and advertise to those customers in the future to encourage repeat business.

A recent HipCricket survey found that 57% of people would be interested in opting in to a brand’s SMS loyalty program. Again, a little back of the napkin math and that comes out to just over 450 customers (with the same example above) willing to join that business’s SMS loyalty program. Compare that to the mere 160 new repeat customers currently generated from a Groupon campaign, and it seems like a no-brainer why Groupon’s next acquisition will be an SMS loyalty program provider.

The best part, adding an SMS loyalty program is a win-win for everyone! The consumer now gets deals straight to their mobile phone from businesses they enjoy, the businesses using Groupon get more repeat customers, and Groupon is able to increase the amount of businesses interested in running a second Groupon, which currently sits at just 50%.

Some interesting ideas in here.

The thing that’s most interesting is the idea of setting up in house txt loyalty programmes. This is very simple to do.

** WARNING – Shameless plug ***

With the COMTXT messaging platform, it’s quit easy to set this up too. Build your list of loyal customers, and txt them a great deal every now and again. From only 9c a message, you know that’s got to be a cost effective way of getting existing customers back through the door.

Try yourself for FREE at: http://my.comtxt.co.nz

The biggest defeat on WWE Monday Night Raw this past week didn’t take place among combatants inside the squared circle. Instead, the big loser of the night was WWE’s plan to engage fans and viewers via the “power to the people” text voting campaign.

On Monday, fans were given the opportunity to serve as the WWE Raw General Manager. By texting their match preferences for the evening, WWE was hoping to give fans a democratic majority-rule opportunity to determine which superstars would wrestle one another. Fans were also provided the opportunity to determine match stipulations and rules.

As it turned out, however, technical glitches caused the voting results to be every bit as genuine as the sport of professional wrestling itself.

The WWE now admits that three match choices were affected by “faulty text voting tabulation.”

Per the established rules on Monday, WWE fans could select match stipulations and opponents by texting A, B or C to 46993 (GOWWE). But when the system overloaded (that can happen when you’re fielding 600,000 texts), all hopes for making the live three-hour program “interactive,” were dashed via incorrect voting results – results that actually made viewers and fans alike scratch their heads during the program before anyone knew of the errors.

Simply put, something seemed a bit off when matches were being made that very few fans seemed to have any interest in watching. And the ratings from Raw this past week reflect that reality.

Still, WWE is being lauded for acknowledging the error and promising to give WWE fans the matches they really wanted to see (as determined by a subsequent correct tabulation of votes) next week on WWE Monday Night Raw.

So this is both good and bad. It’s bad because, well they had a glitch, but hey, it’s proven that people are willing to engage using mobile.

Nothing like a flood of txts to get people believing!