Moblie Coupons go Mainstream

Even as mobile advertising struggles to gain acceptance among carriers, brands and consumers, the mobile phone quickly is becoming a replacement for the 300 billion paper coupons issued every year in the U.S. Industry forces are converging in today's market to create the perfect storm for mobile coupons to take off: Consumers are increasingly price-sensitive, revenue is harder to come by, and mobile phones are nearly ubiquitous.

In the past month, big names such Burger King, Dairy Queen, Victoria's Secret, ShopRite and Unilever have gotten on board with mobile coupons in various forms, and according to Howard Wilcox, analyst with Juniper Research, where the big brands go, the rest of the industry soon will follow. Juniper expects coupons issued via mobile phones to increase by 30% during the next two years alone.

In the U.S., mobile couponing is emerging in three ways, said Jeff Orr, senior analyst with ABI Research. Most common is through short message service (SMS) as an affinity program in which consumers text in a short code and receive a coupon in return — popular with the text-centric younger generation. Second is through multimedia messaging service (MMS). This less widely supported method sends a two-dimensional bar code in an MMS message with an image, logo or brand in a barcode to be redeemed when scanned in-store. The third and least widespread example is Web-based fulfillment, where the coupons appear on mobile Web sites, Orr said. Combined, these forms of mobile couponing are taking off in a way mobile advertising has yet to.

“Generally, the majority of U.S. consumers are opposed to mobile marketing,” Orr said. “They don't think they'd want to participate, but that has been decreasing year over year. The number of consumers who said they would be willing to participate or accept some incentive, which suggests a coupon, goes up when it feels like it's something they'd use every day, like a burger or coffee shop.”

The attractiveness of mobile couponing lies in the ability to make coupons targeted and personal. Coupons on the mobile phone typically offer a much better redemption rate and are more cost-effective, Wilcox said, making them a win-win approach for retailers. For consumers — outside of the environmental benefits of going paperless — it is appealing insomuch as it is explicitly opt-in and targeted to their particular interests. The combination of an existing interest, a convenient delivery mechanism and money savings is making the market desirable for consumers as well, Wilcox said.

Mobile couponing technology is gaining traction in Asia — specifically in Japan and Korea, Wilcox said — but North America is catching up. Examples of services already taking hold in the U.S. come from multiple verticals and vendors, each with a different take on mobile.

Globatel Media enables the delivery of e-coupons, contests and giveaways or location-based advertising from the PC to mobile phone. The service works by advertising a short code and a keyword to send to it. When consumers respond, thus opting in, they receive targeted coupons based on their particular brand preferences.

“Our belief is that text is the only technology besides voice that can reach every one of the 3.6 billion cell phones out there,” said Robert Sanchez, president and CEO of Globatel. “Only 9% of phones have data on them if you are trying to target an audience that requires an Internet connection or [wireless application protocol]. You have to use mobile couponing.”

Sanchez said that on 95% of Globatel's campaigns, there is a return rate of better than 97% for all texts sent out, with only 3% of people opting out of the service. Four-year-old Cellfire is experiencing similar unusually high return rates. Dan Kihanya, vice president of consumer marketing for Cellfire, said the vendor consistently returns redemption rates in the teens compared to paper coupons' return average of less than 1%. Cellfire is available through every mobile carrier and integrated into the decks of 10 top U.S. carriers, and the service works with brands including supermarkets Kroger and Safeway and retailers Best Buy and Sears.

Depending on the needs of the client, Cellfire mobile coupons include barcodes redeemable from the mobile phone or coupons loaded on to a loyalty card that then becomes a consumer's shopping list and savings card. Kihanya said the company was formed with the goal of taking the manufacturing coupons from the Sunday paper and bringing them into the digital realm, but the process has not been without its challenges.

“The bottom line in the U.S. is that most retailers use infrared scanners, which will not read a phone screen,” Kihanya said. “They look for a contrast — a black-and-white barcode — and phones absorb too much light. There are image scanners being deployed around the world where you look at a picture and process it at a pixel level.” These, however, still are not commonplace. Cellfire supports both linear and 2-D codes, but they still are in early stages.

Optimization goes a long way in solving this barcode problem, as does moving away from laser scanners to image scanners and, eventually, near-field communications (NFC), said Ronnie Forbes, chief technology officer for fellow mobile couponing vendor Mobiqa. The company owns a patented process for optimizing barcodes for delivery of coupons and tickets to all cell phones, regardless of form factor. It recently teamed up with Eagle Eye Solutions to create coupons that are redeemable through barcodes, SMS text codes and NFC. Mobiqa currently operates in the retail, airline, cinema, live event and transportation industries — where the volume and the money are, Forbes said.

“The barcode is the perfect device to close the loop on a purchase,” he said. “Some solutions are text-based, sending a message with a unique number. That's redeemed by keying the number in. That's seen some success, but it's much more difficult for consumers and retail operators to work with and understand. It's hard to associate value with a number in a text, whereas psychologically people associate value with a barcode.”