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The perils of deep discounts delivered via mobile advertising

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April 8, 2013

Mobile advertising has become a no-brainer for some brands to drive in-store traffic and online revenue. However, it seems that some marketers are relying on calls-to-action that promise heavy price markdowns to drive click-throughs, which puts the value of the brand at risk.

By focusing solely on price, retailers are putting themselves in situations that thrive on one-time sales. Instead, marketers need to add value to their mobile advertising campaigns to keep consumers coming back in the future.

“If retailers become too deeply associated with endless discounts and incentives then they risk damaging their brand and ultimately devaluing their offering,” said Eric Mugnier, U.S. senior vice president at M&C Saatchi Mobile, New York.

“Once this happens then it is very hard to regain consumer confidence in paying full price for a premium product,” he said.

“Driving sales spikes through relentless discounting can often be a short-termist view for many retailers. It also potentially ends up causing an association in the consumer’s mind between mobile and discounts rather than establishing mobile as an entirely legitimate means to reach consumers like any other medium.”

Cheap deals
According to Mr. Mugnier, there are a few reasons why retailers might be pushing out deeply-discounted products in mobile advertising campaigns.

The growth of smartphones and tablets has led consumers to be dependent on using their devices to find nearby deals, for one.

Consumers are also increasingly becoming more comfortable using their devices for everything from boarding passes to loyalty cards.

Additionally, the wave of daily deals and fear of showrooming in the past few years might be forcing retailers to push out deeply-discounted advertising campaigns.

“It’s entirely fair to say that in the current economic climate people are especially price-sensitive,” Mr. Mugnier said.

“The abundance of daily deal services on Web and mobile plus apps that use location to tell people about discounts and then offer on-the-spot vouchers are obviously popular on mobile,” he said.

“You then look at the turmoil that retail finds itself in versus fierce online competition and this all lends itself to a climate where mobile works well for deal-seekers when they are out and about.”

Long-term view
Companies such as LivingSocial and Groupon changed the way that consumers viewed deals. However, one of the major reasons why these companies are now failing is because they used deep discounts to drive quick sales without a long-term business plan.

Retailers therefore have a chance to learn from the mistakes of daily deal sites by focusing their mobile advertising initiatives more on value than price.

By leveraging mobile advertising, retailers can boost their loyalty programs by downloading an app and signing up for a loyalty program.

“Mobile retailers are resorting to this tactic because they don’t know what else to do,” said Michael Burke, co-founder and president of appssavvy, New York.

“Deal sites have lead people to assume discounts drive sales, but deal sites have different models than retailer direct,” he said.

“If retailers were more informed into what truly drives purchase and loyalty, they may learn that the straight discounting isn’t their best option.”

Price is not necessarily the end goal for mobile consumers nowadays. As mobile sites and apps continue to get better, convenience and access are increasingly playing a stronger role in why consumers shop through their handsets.

“I think mobile consumers are there for the experience of purchasing direct from their smart phone – in their mind that trumps price,” Mr. Burke said.

Consistent message
Marketers also need to be careful about how calls-to-action in advertising campaigns line up with the messaging on their mobile sites and applications, according to Tim Villanueva, account director at Fetch, San Francisco.

Nowadays, marketers expect for advertising to be consistent across screens.

When it comes to mobile advertising though, not many marketers are getting this right.

If a mobile advertising campaign includes a call-to-action for a discount off of a particular item, the click-through needs to lead consumers to an experience that has been tailored to reflect the promotion.

Take a mobile advertising campaign that Whole Foods ran in January to promote sales at local grocery stores, for example

Whole Foods ran an ad campaign inside the Pandora iPhone app with creative that read, “Click for Our Madness Sales.”

When users tapped on the ad, they were directed to a landing page that featured the specific deals and was tailored to a user’s location. The call-to-action was simple but straight-forward for consumers who were looking for deals (see story).

On the other hand, a campaign from The North Face earlier this year missed the mark on syncing up a banner ad and click-through.

Creative in the banner encouraged consumers to watch a professional skier. However, when users clicked through, they were directed to the homepage of the North Face’s mobile site (see story).

One way that retailers can deal with this is to roll out the same coupon codes across the media and App Store descriptions, per the Fetch executive.

“Retailers can risk confusing the customer, or worse coming off as misleading if the user is not able to easily find how to take advantage of it,” Mr. Villanueva said.

“I can understand retailers’ motivation to grab the limited attention span of on-the-go mobile users, but fighting in the pricing war is not always the best option,” he said.

“Marketers should take advantage of the unique targeting opportunities in mobile to really hone in on users with the highest propensity to drive ROI based on data points such as location, context, time and device.”

Final Take
Lauren Johnson is associate reporter on Mobile Commerce Daily, New York

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