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Are customers from different mobile channels worth the same?

By
November 2, 2009

That question should be legitimate to ask as more retailers such as fast food giants Pizza Hut and Papa John’s generate record sales from mobile customers.

Among the key mobile channels to consider are Web site, SMS, application, display ads, search, email, carrier portal and brand-specific mobile devices such as Amazon’s Kindle and Barnes & Noble’s Nook.

As reported last week in this publication by staff reporter Dan Butcher, Pizza Hut claimed $1 million in incremental sales from its three-month-old iPhone application (see story). Papa John’s, too, had already set an earlier milestone from mobile ordering, reported here earlier in the year.

What is this telling the market? That consumers are becoming increasingly comfortable with shopping and buying through their mobile device.

“From an income standpoint, iPhone customers tend to be more affluent, and they’re in the tech-savvy 18-34-year-old demographic skewing slightly male that we tend to go after online,” said Bernard Acoca, senior director of digital marketing at Pizza Hut, to this publication.

“We always saw a steady level of growth with our mobile business via our WAP site, but to be candid it wasn’t the explosive level of growth we’ve seen with the iPhone app,” he said.

“IPhone applications capture consumers’ imagination in a way that WAP sites simply can’t do, so the decision to expand to the iPhone was as good one for us.”

That insight gives some idea that Pizza Hut found that the iPhone application attracted more customers – especially those in a desired demographic – than its mobile site.

Indeed, not only were the target consumers more enthusiastic, but they also showed their approval by downloading the application to the iPhone – surrendering valuable real estate on the device.

Now that’s loyalty – and it needs to be qualified and quantified. It’s up to the retailer or marketer to set the parameters and benchmarks for cost of customer acquisition and retention.

Slice of pie
There seems to be a hierarchy even among mobile applications.

Given the user-friendliness of the iPhone and the number of applications in the iPhone App Store and the volume of downloads, it is only fair to assume that the iPhone application is top of the heap.

Disregard people who say the iPhone accounts for only 8 percent to 10 percent of the audience. So what? That’s what targeted marketing is all about. Mobile shouldn’t be about spray and pray.

Let it be said once and for all that the iPhone matters – at least to those marketers who seek under-34, tech-savvy, big-spending early adopters. And that slice of the market is growing, if iPhone sales are any indication.

Moreover, if properly measured, the iPhone would turn out to be among the top mobile phone models in use nationwide, and it is definitely the leading smartphone model. The BlackBerry doesn’t count, because it has several models with distinct features, while the iPhone has only two models, one with 8GB memory and the other with 16GB, colors aside.

Back to the different mobile channels.

So it would seem that consumers who have downloaded a mobile application to their phone – be it from the iPhone App Store, BlackBerry App World, Palm Catalog or Nokia Ovi Store – have actively raised their hands and reached out to demonstrate their passion for the brand. It’s the equivalent of the Harley tattoos on bikers’ biceps.

Of course, it becomes harder to measure the value of customers shopping and buying through a mobile-friendly site, unless they have acknowledged their presence by typing in an email address for the retailer to recognize the shopper.

To wit: Amazon’s 1-click technology is perfect for such mobile shopping, and that is one reason to bet that Amazon will very quickly capture a leading share of the mobile commerce market.

In Amazon’s case, the mobile customer has already proved a prior relationship with the retailer and simply shopped through another channel. The difficulty here, as it is with more channels mobile or otherwise, is to accurately quantify if the mobile purchase is incremental or simply a channel-shift. Only the retailer can be the judge of that, based on past shopper behavior and activity.

Among the other channels, consumers opting in for an SMS relationship hold almost the same value as the application-downloaders. Texting in to a short code and opting in to receive regular alerts, news and discounts to drive traffic to a mobile site or retail store is more proof of the consumer’s willingness to engage with the brand on a long-term basis.

The SMS customer occupies the same role in a mobile database that mail and email names do in their respective databases – they want to stand up and be counted. They want in the club.

At some point most marketers and retailers will realize they will need to quickly build a database of mobile customers as more shopping migrates to mobile devices. A short code is the best complement to a toll-free number and wired and mobile Web site.

The SMS customer has signed up for push marketing. In other words, she wants the retailer to talk to her at set intervals with offers and at price points that make sense.

Indeed, the lifetime value of the SMS customer is beyond value, simply because this question should be asked: How often do consumers switch their mobile phone number? And compare that loyalty to a mobile number with the 33 percent churn in email addresses and the twice-decade changes in mailing addresses for some demographics?

While the jury is still out on how search will evolve on mobile, it isn’t wise to bet against Google. Combine location awareness with search behavior and there’s a potent reason for mobile search to play the same role in customer acquisition that online search does.

Google, Yahoo and Microsoft’s challenge, however, is the mobile screen. Google cannot serve up the AdWords ads to the right of the screen, as it does on the wired Internet. So how does it monetize search?

And the very idea of mixing organic search with paid search is repugnant – and may face consumer backlash. While there is no doubt that organic search is also rigged through search optimization and by following the search engine’s rules, consumers have come to expect a clear line between advertising and editorial in search.

Location awareness also has its problems. Privacy fears continue to dog the active use of location-based advertising. Privacy groups worry about intrusion and Big Brother tracking – a line of thinking that may find favor with this federal government.

So, the optimal use of location-based advertising and search will be determined by how smartly Google, Yahoo, location-based services and the carriers navigate search. But make no bones about this: location-based awareness for marketing, commerce or communication is the original promise of mobile.

What about email? As more consumers migrate to smartphones – market trends indicate that smartphone sales will overtake feature phones’ in 2013 – email will get another lease of life.

Yes, email isn’t going anywhere. Maybe it will continue to have rendering issues and marketers and retailers may have to tailor their email designs to make them reader-friendly on mobile devices.

That said, opening an email on an iPhone is almost similar to opening an email on a computer. All it takes is some pinch-pull-and-press and the email works as designed.

So, email on mobile will, and should, hold the same customer value for retailers as it does on computers. Most smartphones have email functionality and there is no doubt that customers will migrate to actively reading their work and personal emails on mobile the way they do on computers. It is never wise to bet against convenience.

As for customers clicking on display ads, there is no doubt that brand awareness will have to be constant on mobile as it is online. Banner ads, even in their 4×1 and 6×1 versions, will need to be part of every marketer and retailers’ plan as consumers increasingly restrict their media interactions to online, television and mobile.

Obviously, the consumer clicking through a mobile banner ad is sufficiently intrigued by an offer to click-through to a landing page. The same rules of online marketing apply: don’t waste the visitor’s time. Get straight to the point and offer enough incentive for the consumer to take the next step.

Finally, there is the question of the customer walking in through the carrier portal. It’s no secret that wireless carriers have floundered in their attempt to shepherd customers through their portals for shopping and buying. Ringtones don’t count.

But where the carrier will play a key role is in authenticating a customer or a retailer or even serving as a billing conduit.

Now it is understandable that carriers aren’t in the credit-card business or in banking. But they can definitely process payments working with a payment process or credit card company.

Carriers currently process micropayments for the American Red Cross and certain charities. The amounts are small – increments of $5 – but the system is already in place. And consumers will find it more convenient to see charges appear on a single mobile bill than myriad invoices sent via email or mail.

Carrier billing for products bought through mobile stores is accepted practice in certain countries. Perhaps that might happen here. But it’s wait-and-see.

All said and done, the carrier has the primary relationship with the mobile customer and the most data too. It cannot, and should not, be discounted from the process.

After all, should something go wrong with a transaction, the carrier doesn’t want to be left holding the bag and fielding expensive, $3-per-subscriber customer service calls.

Think lifetime value
At some point, retailers and marketers will have to produce metrics that demonstrate the value of customers acquired and retained through each mobile channel. It is already accepted practice to measure the worth and lifetime value of customers who come into the store or shop online or via the catalog or television.

Quantifying the worth of customers acquired through distinct mobile channels will allow marketers and retailers to more accurately allocate budgets for customer acquisition and retention. It will also give more credibility to the overall mobile commerce sector.

For those who say that it doesn’t matter which channels bring what business in as long as business is in, that argument doesn’t hold with a new medium such as mobile commerce.

Being channel agnostic when several new channels are taking shape is not smart. A count has to be kept, if only to recognize the importance of mobile in the multichannel retail experience and acknowledge that shopping and buying behavior is evolving.

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Mickey Alam Khan is editor in chief of Mobile Commerce Daily, Mobile Marketer and Luxury Daily. Reach him at mickey@napean.com.

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