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360i Report: Mobile Shopping, Coupons and Barcodes

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360i Point of View on
Mobile Shopping, Coupons and Barcodes

Overview
Mobile commerce is in its infancy, with relatively few consumers making purchases directly from their mobile devices, and relatively few retailers and marketers offering an easy way for consumers to do so. Yet consumers are increasingly shopping via mobile handsets, as they research products and services before completing transactions in stores or online. Coupons delivered via mobile media are sending more consumers to stores, and several competing formats of mobile barcodes are delivering product information largely to smartphone users. The accelerated intersection of mobile, local, social and commerce is erasing the distinction between online and offline environments.

This is the sixth and penultimate POV in a series on mobile marketing. Read the previous editions on 360i’s Digital Connections blog, where you can also subscribe to receive subsequent updates.
How consumers shop via mobile devices

There are three primary ways consumers use their mobile devices to shop:
As part of the research process before they are ready to make a purchase

In-store when ready to make a purchase decision

Completing transactions directly from the handset

Compete illustrated mobile’s role in research in a study of the travel industry. It reported that less than 1% of consumers use mobile exclusively for travel research and booking, but 30% of consumers use mobile in conjunction with online research, and 22% use mobile in conjunction with online booking. Even if it will take some time for consumers to be comfortable planning and booking trips using mobile devices, it’s already playing a role in the process, a role that will only grow as marketers develop and enhance their mobile offerings.

Compete further broke down all the ways smartphone users shop. The greatest numbers use their phones to get second opinions while they shop (62%) and look up store locations or hours (53%). Another 44% have downloaded a shopping application to their phone, and 39% seek retailer or product coupons.

One of the biggest changes in mobile user behavior is also apparent above. Compete noted 44% of consumers with smartphones use their devices to check prices of items while shopping in stores. eMarketer Senior Analyst Jeffrey Grau recently cited this trend as well, noting, “Until now, researching online and buying in a store have been sequential activities that take place hours, days or even weeks apart. But customers who bring their web-enabled mobile phones with them into a store can do online research at the point of a purchase decision.”

Scott Dunlap, CEO of mobile shopping service NearbyNow, recommended to eMarketer what retailers should do. He said, “Mobile shoppers are simultaneously in the physical world and in the online world at all times… They just don’t want to feel stupid by finding out later that [a product is] 30% off on an online shopping site. I think it’s very smart for a retailer to put a mobile shopping app in front of consumers because if they end up going to Amazon.com, that retailer is going to get underbid–guaranteed. Retailers need to reward people for showing up in their stores.”

Mobile commerce is starting to become more commonplace as well. A Mobile Marketing Association Survey from May conducted with Luth Research noted that 17% of U.S. adult mobile phone owners used their phone to purchase apps, ringtones and other content. Another 6% received coupons or discounts from their phone, and 6% purchased physical goods or non-mobile content from their handsets. Not surprisingly, responses varied based on the type of mobile device respondents used, with more than half of iPhone owners and 34% of BlackBerry owners having purchased content for their phones.

A Forrester Research study in conjunction with Shop.org released in June indicates the progress being made, noting 74% of U.S. online retailers have a mobile strategy or are developing one. Yet retailers say consumers using mobile web browsers account for less than 3% of total site traffic and 2% of revenue.

M-commerce revenue can add up. Amazon reported in July 2010 that in the previous 12 months, it earned over $1 billion from selling products through mobile devices, including its Kindles.
Mobile couponing usage

Couponing is already a booming industry in a global economy bouncing back from a recession. The New York Times cited retail technology firm Inmar’s figures showing 50 million coupons were redeemed in 2009, up 263% over the previous year. Coupons are attracting even more interest now thanks to advents in mobile marketing. ClickZ cited Borrell Associates’ forecast that US mobile coupon spending will climb from $90 million in 2009 to $6.53 billion in 2014, though it’s still well below internet coupon spending, which will grow from $4.2 billion to $22.6 billion over that span.
Mobile couponing is promising in that it rewards consumers for trekking to retail stores. Like the age-old store-distributed paper coupon, mobile coupons incentivize purchases, but go one step further to capture handset data for future marketing efforts. Creating a mobile-friendly environment is crucial for local store managers, who should ensure that signal levels on all major carriers are strong within their floorspace. Otherwise, prospects may leave to find a signal.

There are several indicators that consumers are warming up to mobile coupons. A July 2010 Harris Interactive survey commissioned by location-based mobile marketing firm Placecast showed that among consumers interested in receiving opt-in promotional text message alerts, grocery coupons and promotions beat out all other categories, drawing interest from more than two-thirds of respondents.
360i Vice President of Retail & ECommerce David Randolph wrote about coupons on 360i’s blog in April 2010, saying, “This is the time for retailers to be in full testing mode. Mobile is a long way from mass penetration, but growing in its importance as a staple of marketers’ plans.”

How mobile coupons work

“A new breed of coupon, printed from the Internet or sent to mobile phones, is packed with information about the customer who uses it. While the coupons look standard, their barcodes can be loaded with a startling amount of data, including identification about the customer, Internet address, Facebook page information and even the search terms the customer used to find the coupon in the first place.”

— The New York Times, “Web Coupons Know Lots about You, and They Tell,” April 2010

Mobile couponing can be effective for customer retention, driving consumers to the store, or reaching consumers when they’re in the store. A benefit of mobile coupons compared to their print counterparts is that consumers always have their mobile devices with them.

There are many ways to allow consumers to sign up for coupons:
Set up an SMS program for consumers to retrieve coupons through their mobile devices; IHOP offered consumers a free short stack of pancakes to anyone who texted “IHOPFREE” to a certain shortcode.
Allow consumers to sign up online — through a website, a deal or coupon site, or a branded presence elsewhere such as through a social network — to receive offers to the phone.
Partner with location-based ad networks and technologies such as Placecast, iLoop Mobile and NearbyNow to target consumers with offers in specific locations.
Consumers can receive offers directly from the mobile ads.
Offer coupons through out of home technologies such as Blue Bite that deliver coupons in select stores or outdoor environments via Bluetooth or Wi-Fi networks.
Coupons can generally be redeemed in-stores at a register by having the consumer show the cashier the coupon, and the cashier can enter the code. It’s also possible to scan the phone directly. A pioneer in the space is Target (see image at right), which in March 2010 claimed to be the first national retailer offering scannable mobile coupons. Consumers can sign up online, at Target’s mobile site, or by texting “coupons” to 827438 (TARGET). Consumers are then directed to a landing page with multiple offers available at the nearest Target, all of which can be redeemed by scanning a single barcode at checkout.

Other forms of coupons are evolving through social media. Foursquare reported that when Starbucks offered $1 off any size Frappuccino for its mayors, there were 50% more check-ins at its locations. Milwaukee hamburger restaurant AJ Bombers offered a free cookie to any Foursquare user that added a tip and a free burger for mayors, and it netted a 30% increase in menu item purchases. During the summer of 2010, Twitter is launching its @earlybird account to deliver exclusive offers from marketers, and marketers should expect the program to expand to local and mobile versions if it’s successful.

Mobile applications can also connect with marketers’ loyalty programs. For instance, dessert chain Tasti D-Lite allows consumers to earn points (and ultimately free product) by broadcasting their check-ins and orders across Foursquare, Twitter and Facebook. The CardStar mobile app for smartphones provides a way for consumers to manage their reward cards for a range of marketers while also offering coupons and deals.

The technology behind mobile couponing is still in its early stages but is progressing rapidly. The New York Times covered an IBM product called Presence, reporting, “Shoppers who sign up can be detected as soon as they set foot in a store. That enables Presence to offer real-time mobile coupons. And tracking shoppers’ spending habits and browsing time in various departments can help the system figure out who might be moved to suddenly buy a discounted item.” IBM further noted it is employing “predictive analytics,” a field that has developed rapidly online. Through mobile media, analytics can connect online and offline behavior.
Mobile payment options

As consumers increasingly complete transactions directly from their mobile devices, there are many overlapping and competing ways to pay for purchases:
Credit cards: While credit cards are ubiquitous for most mobile phone owners, entering a 16-digit credit card number can try consumers’ patience, especially when consumers must also enter billing and shipping information.
Stored registration by site or application: Sites like Amazon have many users’ registration data on file, and billing and shipping preferences carry over to their mobile sites and applications. It’s a major time saver for users, but only for loyal customers who already made a purchase through that site.
Stored registration by handset: The defaults for making purchases for applications via the iPhone and Android respectively are through iTunes and Google Checkout payment services. These make it easy to buy mobile content, but also consumer products, as Apple demonstrated with its Apple Store app that accepts payment via iTunes logins.
Credit card applications: Visa developed its In2Pay application that works with a custom iPhone case that can be scanned at retailers’ contact-free terminals to instantly process the transaction. Rival MasterCard is letting developers use its payment technology in their mobile and web apps and launched its MoneySend app as a PayPal rival.
Pay via phone bill: Services like Boku allow charges to appear on a consumer’s mobile phone bill after opting in via SMS.
Peer to peer payments: Paypal created an app incorporating Bump Technologies that allows users to pay one another by tapping their iPhones together; payments can also be sent from the app via email. Startups like Venmo also allow mobile money transfers.
Scan credit cards with mobile devices: Square, launched by Twitter co-founder Jack Dorsey, allows any merchant or user to accept credit card payments directly from the mobile device. Retailers could provide these devices to their sales associates or collect payments at events.

Square turns any smartphone into a credit card terminal.

Mobile barcodes

Another quickly developing technology within mobile marketing is the use of mobile barcodes, and there are many competing formats. While most barcodes require applications to read them and are much more accessible via smartphones, they’re often an efficient vehicle for linking the physical world with mobile media.

Some barcode scanning applications like ShopSavvy and RedLaser center around standard UPC (1D) barcodes that are commonly printed on product packages. 1D barcodes have the advantage of already existing on countless consumer products, but they’re more difficult to create and customize.

There has also been traction with 2D barcodes, often thought of as QR codes (beyond QR, there are other similar formats such as data matrix). Additionally, there are many propriety barcode formats built on 2D technologies, several of which are discussed below. 2D barcodes tend to be easy to create, and they can bring up a range of content such as links to mobile websites, text messages, click-to-call phone numbers and multimedia.

Google in particular is especially bullish about QR codes, incorporating them into Google Places. Local businesses can download QR codes that link to a mobile edition of their Google Place listing, or a mobile coupon. The business can then use these codes in stores, in print ads or on other promotional materials.

Additionally, Google has emphasized QR codes to promote apps for its Android devices. Since Google currently has no app store online, app developers use QR codes to link to their mobile applications, as Yahoo did to promote its suite of apps.
Square turns any smartphone into a credit card terminal.

Barcode case studies

Universal Pictures and RedLaser
To promote the release of the Jude Law film “Repo Men” that included barcode scanning as an integral (and gruesome) part of its plot, Universal Pictures incorporated barcodes into its print movie posters in a program developed in conjunction with 360i. When accessed with the popular barcode scanner RedLaser, a landing page appeared with exclusive content related to the film. This was a rare example of 1D barcodes leading to entertainment content instead of product information.

Square turns any smartphone into a credit card terminal.
Bosch and QR codes
To promote its VitaFresh refrigerators in Germany, Bosch placed oversized, wrapped packages of meat purportedly coming from dinosaurs, mammoths and saber-toothed tigers in supermarket freezers. The packages included QR codes that linked to product information for its appliances, garnering 75,000 views from customers in the stores.

Unilever and Jagtag

When Unilever launched its new men’s grooming product Axe Twist, it created custom branded barcodes with Jagtag. The codes could be photographed and sent via MMS (multimedia messaging service) to 524824. Consumers in return received exclusive video clips that Axe produced with comedy site Funny Or Die.
Select barcode scanners

There’s more than one way to scan a barcode. Here are some of the more interesting scanners to consider for marketing programs, included because of their consumer popularity, marketing applications, technical capabilities or all of the above.

JagTag
Supports: Proprietary format, which can be branded

Features: Consumers take a picture of the JagTag barcode and send it via MMS to receive special links, content, deals or other information. See the Unilever case study above for more information.

Microsoft Tag
Supports: Proprietary format, which can be branded

Features: Microsoft emphasizes the control marketers have over creating and tracking barcodes through this format that must be scanned with a proprietary reader. Microsoft reported that more than 1 billion tags have already been printed. A range of marketers and publications are using tags, from the Mall of America to Get Married magazine. Scan the code at right to access a must-read blog.

RedLaser (acquired by eBay in June 2010)
Supports: 1D

Features: Scan product barcodes to look for local and online retailers, food allergens, nearby libraries for books, and other information. See the Universal Pictures case study above for more information.

ScanLife
Supports: 1D, 2D and proprietary EZcode

Features: The reader scans a range of barcodes, including its own EZcode (pictured at right). Anyone can create EZcodes for free, but for a fee, business accounts have more options for what actions can be taken with the code. Premium accounts also include analytics for the number of scans, unique users, time of scan, handset, carrier and demographics (where available). Designer Norma Kamali, who uses the codes in her boutique window, told The New York Times in February, “I’ve been in this business since the ’60s and I have to just tell you, nothing – nothing at all – has been as powerful a change in the psyche of the way we do everything as this technology.”

ShopSavvy by Big in Japan
Supports: Primarily used for 1D, but also works with 2D

Features: With a user base of over 5.5 million, the app includes inventory and pricing information from over 20,000 retailers. Big in Japan also offers AdOns — ads targeted based on the product scanned and its location. Ads can include content such as product information and video, and its offerings in the works include food and allergy information, comic book previews, event tickets, coupons, trailers and product reviews. Ads are sold on an auction basis for popular barcodes or locations.

Stickybits
Supports: 1D and proprietary barcodes

Features: The Stickybits scanner, powered by RedLaser, allows anyone scanning a product’s barcode to leave comments with text or multimedia and view every “bit” others have recorded. The scanner also works with Stickybits codes available for free on the site or as stickers that can be ordered for a fee. Brands can work with Stickybits to have their own content listed first when their products are scanned.
360i’s concluding thoughts

The good news for retailers, packaged goods brands, travel marketers and others is that there are no longer technological hurdles to deliver product information, offer coupons and complete transactions through mobile devices. All of this is especially easy to accomplish with smartphones, and in 2011, smartphone penetration should handily surpass the more limited feature phones in the U.S.

Other hurdles are numerous. Coupon scanners can be difficult to implement at the point of sale. Staff in stores must be trained how to accept mobile barcodes or SMS-based coupon codes. The wide variety of barcodes — including the names (1D, 2D, UPC, QR, etc) — create confusion among marketers and consumers alike, and both seek a more consistently reliable experience. With completing transactions, the challenges trigger flashbacks to online retailing in the 1990s; security concerns, on-site usability issues and widely varying capabilities by merchants create a chicken and egg dilemma.

Mobile shopping in many ways will be easier for marketers and retailers than the 1990s migration to the web. First, consumers and marketers alike have become far more technologically savvy. Mobile devices are also much more convenient for some aspects of shopping. Coupons can be delivered directly to devices rather than requiring the intermediary step of printing when offering them online. It’s also much easier to create a seamless experience for consumers with mobile media to fulfill immediate needs based on exactly where they are; consumers take the mobile web with them wherever they go. Barcodes themselves are evolving from a novelty to a necessity, delivering detailed product information, discounts and relevant content, and the value proposition is starting to catch on with consumers.

Mobile shopping by many measures has arrived, and it is well on its way to becoming ubiquitous. For the vast majority of marketers working with major brands, the question is not whether consumers are engaging in mobile shopping. Marketers instead need to ask how their consumers are shopping with their mobile devices and how they can reach these audiences as behavior and technologies rapidly evolve.
Next Steps
Contact your strategic advisor at 360i to figure out how to further your goals through mobile marketing.