Juniper: Mobile couponing is redeeming the smartphone
I want to talk to you today about Greg Grunberg. Mr. Grunberg is perhaps best known for his role as Matt, the telepathic cop in the sci-fi series Heroes, but outside his thespian activities he has played a small but significant role in the development of the mobile couponing space.
The story runs thus: Mr. Grunberg is shopping at a local store. He has assembled a fine collection of discount coupons for said store, which he wishes to redeem at the till. However, on arriving at said till, he realizes to his chagrin that said collection is back at the Grunberg residence; the cashier, notwithstanding the fact that Mr. Grunberg is both a regular customer and a superhero bent on thwarting the plans of the evil Sylar, declined to proffer discounts despite Mr. Grunberg's assurances that he would bring in the coupons at a later date. Hence, Mr. Grunberg took to Twitter on the matter: "Why isn't there any app that has coupons on a phone?" Which, following some Twitter-based interaction with some app developing followers, led to the birth of Yowza, the couponing app co-owned by Mr. Grunberg.
Couponing is hardly the newest kid on the mobile block--in the U.K. and several other European markets, Orange Wednesdays have been enabling my wife and millions of other moviegoers to receive two tickets for the price of one for around nine years--but it is fair to say that the mobile market has progressed since that time. (Brief recap: consumer smartphones; mobile broadband; app stores; lots of apps; social networking; m-commerce.) Orange Wednesdays is still an excellent means of customer retention for the network operator, while also allowing cinemas to increase customer on a weekday, which is traditionally less busy. However, what with the evolution of mobile technologies and attendant consumer behavior referred to in that recap, the opportunity now presents itself to enhance the breadth and depth of mobile couponing product.
For retailers, the smartphone increasingly offers (and critically, is perceived as offering) a means of interacting with the consumer, not merely at the point of sale but at all touchpoints in the retail lifecycle: product discovery; product comparison; product purchase; post-sale engagement. Mobile couponing is recognized as a key mechanism within the process, both in terms of driving foot traffic and retaining customers. (By the way: you think that retailers are installing Wi-Fi just so that you can keep up to date on the football scores while you're in-store? Think again. Essentially, having cottoned on to the fact that 2G coverage--let alone 3G--is often negligible, a number of retailers have realized that the best way to enable their staff to provide on-device product demonstrations and to push product information and offers to customers is to fire up a hotspot.)
Just as retailers are embracing mobile in its myriad shapes and forms, up pops Apple (NASDAQ:AAPL) with Passbook. Much has been written--not least by me--on the negative impact that Apple's decision not to include an NFC chipset in the iPhone 5 will have on the wider NFC space. Retailers will perceive it as a lack of faith in the technology and thus will be even less willing to install NFC-enabled terminals; brands similarly will be less inclined to run campaigns using the technology. Consequently, there will not only be fewer consumers with NFC-enabled handsets than would otherwise have been the case, but less opportunity for them to see and experience NFC.
Conversely, Passbook is potentially great news for the couponing ecosystem. Replace all the negatives in the above paragraph with positives, and that's your smartphone couponing virtuous cycle, courtesy of Apple. Passbook (essentially a mobile wallet sans payment card) allows retailers and third party couponing aggregators--including Yowza--to reach consumers through a preloaded app; it provides a single, on-device storage location for coupons, vouchers and loyalty cards. According to French smart loyalty solutions provider Adelya, the average French shopper has nine loyalty cards in his/her (physical) wallet; judging by paper coupon usage in the U.S., wallets stateside must be full to bursting with the things: that is, assuming that you remembered to take them with you in the first place. But, of course, many people don't: hence the fact that redemption rates for paper coupons are no more than 1 percent.
Thus, redemption via mobile is an attractive proposition. Assuming, that is, that it is a proposition which the retailer in question is willing to support. There are hurdles to mobile couponing, not least the fact that PoS (Point Of Sale) terminals can have a lifespan of a decade or more. Thus, disrupting the replacement cycle, by upgrading or replacing existing stock with 2D barcode scanners and/or NFC readers just so the customers can get one dollar off a hamburger may not necessarily win approval at the next budget meeting. The retailer, understandably enough, wants ROI, and he or she will take some persuading: every single interviewee I spoke to for our Mobile Coupons report highlighted the PoS logjam as the key constraint upon the couponing market.
But--and this is critical--the consumer increasingly expects his or her mobile device to be able to support all manner of activities: gameplay; browsing; photography; shopping. And, as part of the shopping experience, couponing. It is important for retailers to realize the importance of couponing as part of an over-arching retail strategy: both in terms of the real value from consumer retention, and that--to manage consumer expectations--those who fail to implement it run the risk of being left behind.
Over to you, Mr. Grunberg.
Dr. Windsor Holden is Research Director with Juniper Research. He has authored more than 50 full length reports for Juniper Research, including four editions of its much heralded Mobile Entertainment series: his recent reports include Mobile Coupons: Strategies, Opportunities & Forecasts, Mobile Payment Strategies: NFC, Remote Purchases & Money Transfer, Mobile Payments for Digital & Physical Goods: Opportunity Analysis and NFC Mobile Payments & Retail Marketing: Business Models & Forecasts. Windsor has a PhD from the University of Leeds and is also a former Research Fellow of the Institute of Communications Studies, University of Leeds.