Over the past year, mobile coupons have created a stir – in a good way. Companies are incorporating mobile coupons into Apple’s Passbook, through a variety of mobile applications and even SMS-based programs to incentivize consumers.

“Consumers are searching for coupon content not just when shopping online on their desktops at home, but also while they are visiting bricks and mortar stores,” said John Faith, senior vice president of external affairs at RetailMeNot Inc., Austin, TX.

“Retailers have an opportunity to combat showrooming by reaching those consumers when they are engaged and ready to make a purchase,” he said.

“In addition, retailers are starting to shift their coupon strategy from a CPM model to a pay-for-performance model.”

Mobile coupons
According to comScore, retail is the second fastest-growing content category, up 60 percent year-over-year from October 2011 through October 2012.

Furthermore, comScore found that 24 percent of smartphone owners have used their device to find a coupon or deal.

So what is the allure of mobile coupons?

Mr. Faith believes it is all about ease and availability.

“The mobile device has become the consumer’s personal organizer that’s always around,” Mr. Faith said.

“The future of mobile couponing lies in ease of use for consumers and new controls and performance insight for merchants,” he said. “Merchants and coupon distributors are increasingly using multiple points of data from a mobile device to serve contextual coupon content to their audience.

Including geo-fencing, intent-based algorithms, Wi-Fi detection, user transaction history and secure profiling is important.

“New technology allows the experience to be optimized across desktops, tablets and smartphone devices,” Mr. Faith said.

“Consumers have a choice on how they wish to redeem. In-store redemption is a smooth process with digital technology that works with a retailer’s existing point-of-sale systems,” he said.

Consumer incentive
Mobile is fast-becoming a distinct channel and, as such, brands and retailers are coming up with new ways to attract consumers to this channel.

“While coupons might or might not be the right term, we are seeing is mobile-specific offers and incentives designed to engage consumers and drive them to a mobile commerce experience,” said Wilson Kerr, vice president of business development and sales at Unbound Commerce, Boston.

“Coupons are an age-old tactic to attract new customers and keep current ones,” he said. “Loyalty programs and the discounts brands deliver to maintain this loyalty are tailor-made for mobile, since no one likes to carry around scraps of paper cut out of newspapers or little plastic loyalty cards.

“Additionally, there is lower administrative overhead for the brand, since these discounts can be attached to loyalty programs already in-place. The Starbucks offer that Groupon recently ran is a great example, since the eGift credit could be applied to a mobile account. For consumers without such an account, the discount coupon likely drove them to create one, to redeem the offer.”

Mobile coupons are everywhere nowadays.

Take Passbook, for example. More marketers are rolling out mobile coupons that consumers can save to their smartphones and redeem at the point-of-sale.

Then there is Target.

The company is continually building up its SMS mobile coupon database and offering consumers incentivizes to drive in-store foot traffic.

“Smart retailers will start catering offers to their mobile audience as a way to promote discovery of their mobile commerce sites,” Mr. Kerr said. “By linking these offers to store visits and actual purchases, they can roll in the loyalty component and reward the right customers for the right reasons.

“Customers who make real, tracked purchases via mobile or check in while at a retail location by scanning a QR code or tapping an NFC tag while in the store are more valuable and deserving, versus the anonymous consumers who take the time to clip coupons out of a newspaper, for a one-time savings,” he said.

According to Cezary Pietrzak, director of marketing at Appboy, New York, mobile coupons have really been taking off in the last few months.

Initially, the market was driven by daily deals sites that offered discounts to local merchants, and then mobile apps such as foursquare and Level-Up integrated the coupon experience with their location services.

“We’re now seeing various retailers like Sephora, Target and Starbucks offer strong mobile coupon programs to their customers, and coupon platforms like SnipSnap are growing exponentially to aggregate various offers,” Mr. Pietrzak said.

“Passbook has fueled much of the excitement about the category by making the experience very contextual and dynamic,” he said.

According to the executive, mobile coupons have several advantages over their physical and even Web counterparts.

The first is convenience. It is much easier to show a mobile bar code than carry around a piece of paper.

Then there is offline integration. Mobile coupons create a bridge between digital behaviors and offline purchases, which informs direct marketing efforts and provides data around ROI.

Additionally, mobile coupons are extremely contextual because they take advantage of mobile-only features such as proximity to end user and location.

Reminders to use them can also be triggered through push notifications and platforms such as Passbook, which eliminates the friction from redemption.

Mobile coupons can also be tracked in real-time and often connected to individual user profile, which enhances marketers’ understanding of both the effectiveness of their campaigns as well as the breakdown of their audience.

“Mobile coupons will continue to explode in popularity this year alongside mobile payment and wallet solutions like Square and Google Wallet,” Mr. Pietrzak said. “Retailers will get better at serving mobile coupons that are relevant to location, time and customer segment.

“Retailers will also provide coupons that change in real-time depending on market feedback,” he said. “They’ll also be able to do A/B testing on different offers and customer segments to see what works best and optimize accordingly.

“I also believe purchase behaviors related to mobile coupon use will be more closely integrated into CRM systems to enhance marketers’ overall understanding of their customers.” 

On the rise
Advantages such as instant redeem ability and the convenience of mobile are definitely driving the growth of mobile couponing – so much so that spending through mobile coupons is projected to grow from $5.4 billion in 2012 to $43 billion by the end of this year, per Alex Romanov, founder/CEO of iSign Media.

“Mobile couponing is definitely on the rise and moving fast,” Mr. Romanov said. “It may soon merit being rightfully called a true phenomenon, particularly as the slow economic recovery continues driving frugal consumer behavior.”

When done right, mobile couponing can be a great tool in driving ROI.

For example, when it comes to proximity marketing – distribution of marketing messages to devices within a certain range of a retail location or business – it is all about relevance.

Relevancy is possibly the most important redemption driver on mobile because consumers are far less tolerant of irrelevant offers on their personal devices than on desktop, where they are much easier to overlook.

“Let’s say a particular pizza parlor is engaging in proximity marketing,” Mr. Romanov said. “The restaurant would use a vendor’s software to send opt-in coupons for a discount on a medium sized pizza, or perhaps offering a free dessert item when the consumer buys a large pizza.

“The coupons hit consumers’ devices when they are within close range of the restaurant, walking by or inside the premises, hopefully close enough even to smell the baking dough and cheese,” he said. “That’s what I like to call a ‘moment of maximum influence,’ an opportunity for capturing consumers when they are nearby, primed and ready to purchase.”

According to the executive, mobile coupons are going to keep growing in popularity as more brands start adopting proximity marketing solutions that enable them to deploy consistently relevant and instantly redeemable offers.

“Companies are also increasingly looking to solutions for indoor mapping, which can help them track shoppers throughout places such as retail locations, shopping mall food courts and even sports venues, and target them with offers that are relevant to the time and location,” Mr. Romanov said.

“This is evident from Apple’s recent purchase of indoor mapping startup WiFiSLAM, which builds mobile solutions that can track a smartphone’s location in real time,” he said. “Because proximity marketing solutions and mobile couponing complement each other so well, as one booms, so will the other.

“We’re definitely going to see considerable growth in this space.”

Consumers are rarely separated from their always-connected devices so it makes sense to target them with mobile coupons.

As evidenced, brands are increasingly designing their loyalty programs to be accessible through mobile as well as through physical cards.

“So, mobile coupons, when they are relevant to the individual loyalty member, are a great way to reward your loyal customers for their repeat business, which in itself drives even further loyalty,” said Michael Hemsey, president of Kobie Marketing. “Brands can track and analyze all customer mobile interaction with the program, with the collected data painting an ever-more-detailed picture of each customer’s preferences, so that the next coupon is even more relevant than the last, increasing the likelihood of a redemption.

“Clearly, there is plenty of room for growth in mobile couponing,” he said. “According to a recent report on mobile couponing from the Mobile Marketing Association, the biggest check on mobile couponing’s growth right now is technical: there’s a very wide range of point-of-sale systems out there that may work with some devices but not with others.

“Red laser scanners can’t scan bar codes off a mobile screen. There isn’t a set standard for redeeming mobile coupons at the POS. I think this year we will see plenty of growth in mobile couponing and progress toward more standardized procedures as more companies publish mobile coupon apps. Certainly as more brands enable access to their loyalty programs through mobile, we’ll continue to see mobile coupons boom. They’ve got a great future, because marketers have to reach consumers where they are, and that’s on mobile.” 

Final Take
Rimma Kats is associate editor on Mobile Commerce Daily, New York