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More than half the population of the United States has a smartphone, according to a 2012 Nielsen survey. While retailers are already reaching consumers on their phones through social media and web marketing, they are only scratching the surface of what mobile marketing has to offer.

Detailed shopping and purchasing behavior data, combined with the ability to reach consumers at a particular location — and measure that impact — means retailers can create highly customized marketing plans.

‘The second screen’
With the ongoing anemic economy, consumers are growing increasingly value-conscious and are using their smartphones to find those values, says Cotter Cunningham, CEO and founder of Retailmenot.com, a website that aggregates coupons and offers from more than 60,000 participating merchants. While more than 20 percent of the site’s traffic currently comes from mobile, Cunningham anticipates that mobile will increase to nearly half the traffic within three years.

“Consumers are using their phones for a number of reasons, whether that’s comparison shopping while in the store or looking for a coupon,” he says. “We call it the ‘second screen.’”

Cunningham says there’s an advantage in offering coupons through mobile devices because they’re neither lost nor forgotten when consumers go to a store and their everlasting, continuous presence represents a constant marketing opportunity. That translates into higher engagement and higher conversion rates.

“The coupon is always right there on your phone,” he says. “We went from … paper to printable [coupons] because they were more convenient, to mobile coupons, which are the most convenient.”

Richard Postrel, CEO of Swift Exchange, says mobile is growing to be a “total game changer” for retail because it allows stores and brands to optimize their traffic, engage customers in a more meaningful way and be more effective with customer acquisition.

Swift Exchange assigns a value for consumers’ meaningfulness to a particular merchant, based on product preferences, shopping patterns and average ticket size. The system can evaluate both immediate and long-term value to decide whether or not to offer a reward or discount.

“We can assign a unique, customized value,” Postrel says. “If the shopper has a great value, it might be 50 percent. If not, it might be 20 percent.”

When combined with the program’s geographic capabilities, it can deliver offers for retailers or brands in a consumer’s proximity. Assuming the shopper is opting in and using the app, she can receive or look for offers within the vicinity as she moves about during the day.

Highly targeted campaigns
Cardlytics is a pioneer in the growing field of transaction-driven marketing, partnering with more than 320 financial institutions to offer rewards programs that reach up to 75 million U.S. households. Unlike other programs where consumers have to download a smartphone app, Cardlytics is integrated directly into their partner banks’ website or app. When the user checks his bank account or looks at his statement, he can see retailer offers that are related directly to him, based on shopping habits and patterns.

Mark Ginsberg, Cardlytics executive vice president of merchant services, says that consumers visit their bank’s website three times per day on average to check their balance or access account information. Marketing via mobile device with highly targeted campaigns not only has high engagement, it’s extremely measurable.

“Because we can look at their spend data compared to the control groups, we can tell the retailer exactly what they are getting for their money and if we are truly changing behavior,” says Ginsberg.

Cardlytics senior vice president of marketing and consumer experience Rod Witmond says there’s an advantage with marketing to consumers on their bank’s website because they’re already thinking about money: Looking at their account balance and then seeing an offer for 20 percent off a relevant item may elicit a stronger response than just spotting a coupon on an app.

“They might also look while they’re shopping to see how much money they have,” Witmond says. “And right then and there, they can get an offer to get 20 percent cash back on the deal.”

Ginsberg says such mobile marketing efforts can bypass demographics, web searches or consumers’ thoughts about brands and go directly to the right consumers with the right offer. With such relevance, convenience and ease of use, he says the offers don’t always have to be that rich: A consumer may not clip or print out a coupon and drive five miles to get 30 percent off, but she might go for a 15 percent off deal at a retailer on the next block if she only has to walk in and show her phone or simply pay with her card.

“There’s often a trade-off between convenience, relevance and value,” Ginsberg says. “When you make an offer convenient and simple to use, they’re going to use it.”

Treading carefully
While the prospects and opportunities are limitless, it’s easy to cross a line and become too intrusive with mobile. Overwhelming a consumer with too many text messages or irrelevant offers at the wrong place and wrong time can destroy a retailer’s reputation.

Colin Haig, retail program principal at SAP AG, says retailers have to keep a close eye on the “creepiness factor.” Popping up at just the right time with the right offer can give the appearance that you’re stalking consumers. Some retailer efforts may backfire if the consumer feels the lines of privacy are being crossed, but Haig says consumers will be less likely to view offers in a negative fashion if each engagement is highly targeted and valuable.

“No one wants to appear creepy,” he says. “You want to make sure that everything is permission-based and that you’re always providing value to the customer.”

Ginsberg agrees that it’s critical not to contact consumers with irrelevant offers and says mobile marketing works best for everyday purchases — gas, groceries, food and convenience store items.

“If you’re trying to get them to switch cable providers or buy big [items] like furniture or appliances, it’s not going to have a higher conversion rate with mobile,” he says.

Haig says retailers also need to stay abreast of social media platforms like Facebook and Twitter to see what users are saying about their reward or loyalty programs. A glitch in a promotion or an overzealous campaign can quickly be spread around the web by irritated consumers.

“If you are engaging people on smartphones, you really need to be aware of what they’re saying about you on social media,” he says.

Herve Pluche, vice president of CP/retail consumer mobile initiative at SAP Labs, says competition is stiff for consumer app usage. Pluche says while there are more than 600,000 apps on the market, the average smartphone user typically only uses five apps on a regular basis, so retailers need to offer high value and relevance to end up on that short list.

SAP works with a leading food retailer with more than 12,000 stores in seven countries that has found high engagement by highlighting value and the potential for savings every time a consumer walks into the store. Pluche says the conversion rate can increase by a factor of eight for a successful mobile marketing campaign when compared with e-mail or web marketing.

“If they know they can save money every time they go in there with the app, they’re likely going to use it,” he says. “It’s about turning static advertising into a specialized experience that offers value.”

Haig says SAP pushes out close to 1.8 billion text messages per day and can reach 97 percent of the world’s smartphones with a text message. But in order for a text message to be effective and non-obtrusive, it has to have high relevance and meet a critical need. One example, he says, is drug stores that use text messages to notify customers of an upcoming prescription refill.

“That could be very valuable to most users,” he says. “If they push something else that will generate an extra sale while you are in there, it could be acceptable to the consumer as well.”

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