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Eight Mobile Commerce Pitfalls Retailers Must Avoid

A mobile payment system that Starbucks had been testing in beta around Seattle, Silicon Valley and New York is now rolling out nationally. The program, called "pay by phone" will debut in 6,800 stores and 1,000 outlets in Target stores. Starbucks cardholders load an application onto their smartphones - there is a version for both the iPhone and BlackBerry with Android coming soon - which then displays a barcode that is scanned to pay for the drinks. The roll out, at the beginning of 2011, is a timely one: m-commerce is just gearing up with many analysts expecting it to make a splash comparable to that of social media.

In general, consumers are using mobile phones for retail-related activities at an increasing level, according to a study from ForeSee Results, which found that 33% of all survey respondents had accessed a retailer’s website using a mobile phone, compared to 24% in 2009, and an additional 26% said that they plan to use their mobile phone to visit a company’s website, mobile website, or mobile application in the future. (via MarketingCharts).

In other words, more than half of all online shoppers are either already using or plan to use their phones for retail purposes.

"Mobile has the potential to he the device that breaks down the barriers for all our channels,” according to Larry Joseloff, vice president of content at Shop.org, the digital division of the National Retail Federation. (via Response Magazine). That said, the potential for mistakes can be huge, especially for retailers without the resources or customer base of a Starbucks.

Again, comparisons to social media are apt.

"Retailers should learn from past marketing mistakes made in social networking," Joseloff warns. "For about three years in social media, you had people who were just blinded by the power of this new tool. You had VPs running around saying, 'We have to get on Facebook,' and they didn't stop to ask whyor what they hoped to accomplish with it," he says. "Retailers and marketers need to take the time to really think about what their role is in mobile, not just believing they have to get on there by any means necessary because that's what others are doing."

With that advice in mind, MarketingVOX has compiled a list of pitfalls retailers should avoid as they move down the m-commerce path.

Pitfall #1: Not taking into account potential new users.

Gift retailer 1800Flowers.com push into m-commerce was at times a rocky one, Kevin Ranford, vice president of online marketing, mobile and social media, told Response Magazine, especially in the past before iPhones became big and Android was still picking up steam. Still, the company‘s risks have paid off, allowing it to target a new constituency - the on-the-go gifter. "We're very focused on SMS right now and on growing our subscriber base. We can send reminders to consumers for major holidays, for example, and we like to promote our mobile Web offerings via other Web channels, as well," he says.

Pitfall #2: Conversely, not going after the low-hanging fruit.

M-commerce is still novel enough that there is plenty of money to be made on the obvious. Text coupons lead both in terms of current engagement (25%) and planned engagement in the next 12 months (47%), according to a study from IHL Group. (via Marketing Charts). The other two retail-related consumer mobile activities currently used by more than 20% of mobile phone subscribers are regular barcode (22%) and 2D barcode (21%). Coupons on mobile screen only have 16% current engagement, but 38% planned engagement within the next 12 months, second only to text coupons in this category.

Also, mobile ticketing transaction value is expected to be a key driver of overall m-commerce growth until at least 2012, according to Juniper Research. Mobile ticketing transactions are forecast to exceed $100 billion (based on gross transaction value) as soon as 2012. This is more than double the market in 2010.

Pitfall #3: Assuming your customer base is completely tech savvy.

To be sure, much of the smartphone user base is incredibly tech savvy. Also, app developers and smartphone manufacturers have a vested interest in making sure their products are intuitive and easy to use - and in most cases admirably succeed. Every now and then, though, a study or new statistic pops up that suggests not all smartphone users are with the program - or that vendors and manufacturers are educating their customers well enough. The latest comes from the 2010 Digital Influence Index, released by Fleishman-Hillard International Communications and Harris Interactive. It found that as apps multiply and speeds increase, mobile users are snapping up smartphones - but realizing only a fraction of their potential.

Although mobile Internet use is growing, a significant gap exists between the capabilities available to mobile phone users and the number of individuals who actually take advantage of them, the report said.

A separate report by Compete released in 2010 found that most US smartphone owners do not understand the current state of 4G (fourth generation) mobile phone technology. Interestingly, 69% of US smartphone owners know that 4G allows for faster data downloads than 3G. Since a majority of US smartphone owners know this fact and also believe 4G smartphones are available, Compete analysts suggest it could indicate that people are not basing Smartphone purchase decisions on data service speeds.

Pitfall #4: And speaking of technology … not keeping up with it yourself.

The iPhone 4 - currently Apple's latest and greater iteration of this device - comes equipped with features - longer battery life, the new screen, and the ability to multitask - that could propel mobile commerce into the mainstream. "Extended battery life will help m-commerce for the simple reason that if consumers know the phone can last all day, they are more likely to use it more heavily, which means more web browsing," says Avi Greengart, research director, consumer devices, at Current Analysis. (via Internet Retailer). "And the astonishing screen resolution makes any text look like it’s printed on the screen. But more important, retailers need to better optimize their images for the new device, because the better something looks, the more likely consumers are to buy."

Pitfall #5 : Not providing enough data for consumers - or putting out a simple glitzy marketing app that doesn’t take into account the competitive shopping most consumers do.

Compared to last year, about three times as many people are using their phones for product research purposes (30% in 2010, 11% in 2009), according to the ForeSee Results report. Among the group that exhibited mobile shopping behavior for the specific Top 40 retailer they rated, most looked up price information (56%), compared different products (46%), looked up product specifications (35%), or viewed product reviews (27%).

At the same time the proportion of mobile shoppers who look at a competitor’s site while in a retailer’s brick-and-mortar store has nearly doubled compared to last year (46% compared to 25%). The leading reason shoppers visit a mobile site while in a brick-and-mortar store is accessing that store’s website (69% compared to 52%).

Pitfall #6: Not taking advantage of the branding you already have established, either online or in your bricks-and-mortar store.

At the beginning of 2011, Amazon finally took its iconic Amazon Gold Box offerings - which arguably were a precursor to the current craze of daily discounts - and mobilized them. Called Amazon Deals, the free iPhone app lets customers act on limited-availability discounts, be notified about deals, access customer reviews and product information, share the deals’ information via e-mail, Twitter and Facebook and purchase them via Amazon Prime.

Pitfall #7: Not making it fun and informative.

Most apps are fun and sexy and glitzy. Some are informative and actually useful to consumers. Guess which ones are the winning apps? Those that combine both characteristics. eBay added augmented reality to its mobile app at the beginning of 2011, which it launched five months ago for the iPhone 4. A first for eBay, the new AR functionality gives users the choice to "See It On" as well as to build an outfit with "Outfit Builder."

Pitfall #8:  Not closing the deal, that is giving the consumer a way to pay.

Starbucks recognized that need with its app, and for that reason its relatively simple app is bound to be a success. Remote mobile payment for both physical and digital goods is expected to substantially grow in popularity during the next several years, according to a new whitepaper from Juniper Research. (via MarketingCharts). Among the areas Juniper finds good opportunity for remote mobile payment:

  • Direct-to-bill (D2B): Generally offered by mobile phone providers, D2B essentially lets mobile phone users debit mobile purchases to their phone bill, using it as a credit card.
  • Premium Rate SMS (PRSMS): Retailers and content providers offer digital products and services via an SMS text message which the customer pays to receive. PRSMS is commonly used to charge consumers for downloading digital products such as ringtones and wallpaper.
  • Mobile Web/WAP Billing: Online payment for the mobile web is a payment method that enables retailers to bill goods or services from a mobile web or a web site. This is very similar to payment on standard e-commerce sites and usually allows consumers to pay via a variety of payment mechanisms that may not be unique to m-commerce, usually credit or debit card. Richer content such as gaming, music, and video is better paid for via the mobile web simply because of the ability to have previews before purchase, and because of the assurance of delivery.
  • SMS/Java/SIM Toolkit: SMS payments, excluding those under the banner of PRSMS, are when the mobile payment is initiated using SMS and the funds are transferred from a registered account or a mobile wallet. The registered account could be debit or credit based or be based on a SVA (Stored Value Account). Scheme operators include PayPal Mobile (owned by eBay), and SmartPay in China. Java applications and SIM toolkits can also deliver this functionality.
  • Person-to-person (P2P) Payment: P2P payments are when funds are transferred between mobile phone users and then the funds are redeemed for airtime, goods or cash at selected merchants. P2P is seen as a social money payment mechanism in the developed world - for instance, to allow a group of friends to share payment for dinner at a restaurant or for parents to send funds to a child at college to pay for school books etc. In the developing world P2P has considerable potential to act as a major payment method as often there is a lack of traditional payment and banking infrastructure in these economies.
  • Smartphone Apps: Mostly paid for by credit card, applications that perform a wide variety of functions are being offered by an increasing variety of companies on smartphone platforms including Android, Blackberry, iPhone and Windows.

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