By Pal Flagg
Street Savings
Editor's Note: Welcome to The Mobile Buzz, a new section of The Green Sheet that will appear periodically and is devoted to the mobile payments sphere. We're starting off with the first article in a series on mobile marketing written by Pal Flagg of Street Savings. Flagg's subsequent articles in this series will discuss the rules, risks and rewards of mobile marketing, as well as the role the terminal and POS play in redemption. If you're interested in contributing to The Mobile Buzz, we'd like to hear from you. Please send an email to editor@greensheet.com.
With the ever-increasing pressure on margins for ISOs and merchant level salespeople (MLSs), the need for new value-added products and services is obvious. Mobile has surfaced as an important new product category with particular focus on mobile payments and hardware. New payments industry entrants are receiving significant press including the Google Inc.-VeriFone Inc. near field communication initiative and the ISIS partnership with AT&T, Verizon Wireless, T-Mobile USA and Discover Financial Services.
It's easy to explain the reasons for the expanding array of mobile payment products and services. Mobile is pervasive. Consumer devices are inexpensive and powerful. Mobile phones are always on and always with us. They represent access to would-be competitors and a new channel for incumbents.
What is typically misunderstood in the bankcard mobile revolution, however, is the role of mobile marketing - including rewards and loyalty. This article reviews why mobile (text message) marketing is the "other mobile" that will play a significant part in the overall mobile revolution.
The numbers say it all. Mobile is growing exponentially, and it is becoming a powerful marketing tool for driving sales. According to data compiled by CTIA, The Wireless Association (www.ctia.org/media/industry_info/index.cfm/AID/10323), wireless service penetration grew from 69 percent in 2005 to 96 percent in 2010.
The average number of monthly text messages grew from 9.8 billion to 187.7 billion during the same period. Text message open rates are typically around 95 percent versus email open rates that are usually closer to 17 percent. With these statistics, it's not surprising that the average person now initiates more text messages than phone calls. The utility and convenience of texting have made it the clear choice for quick communication in a fast-moving society.
Mobile marketing falls into two broad categories: data-based services and text message services. Data-based services require that a customer have a smart phone and a data plan.
Consumers can download apps, such as Foursquare, from Apple Inc.'s App Store or Google Inc.'s Android Market. Smart phone penetration is growing fast; however, total current smart phone penetration is less than 50 percent.
The second category, text message mobile marketing, can be implemented easily. Virtually all mobile handsets can send and receive text messages without a data plan.
In its simplest form, text message marketing relies on consumers opting in to a service to receive marketing messages. The usual call to action is to text a keyword, such as "join" into a short code, such as "56687."
Other ways to join a service are via the web, social media sites or interactive phone systems, as well as by entering a phone number into a POS system or credit card terminal, or even an ATM.
Any new marketing service needs to have a significant value proposition for merchants. Mobile marketing delivers with multiple meaningful benefits. Text message marketing enables merchants to:
Customers benefit, too, since they no longer have to remember to bring paper coupons. People rarely forget their mobile phones or mobile phone numbers.
Mobile marketing can also revitalize gift programs and energize loyalty programs. Most gift card programs now include email options for recipients. Mobile gifting programs are the next obvious step, with text alerts to recipients. Mobile has also shown its power with loyalty programs. Customers are familiar with providing phone numbers at the major retail chains to record purchases and receive discounts and rewards.
Today, small merchants can offer the same service as major retail chains by using mobile phone numbers and text messaging. This type of service requires a mobile marketing system that is integrated with gift and loyalty programs. An integrated mobile marketing system is also able to track offer effectiveness and the resulting revenue.
Mobile marketing offers two valuable opportunities for MLSs. First, mobile marketing is a value-added product that drives top-line revenue for merchants. It is easy to bundle with processing and other services where margins are being squeezed because of increased competition. Merchants are reeling from a tough economy, and competition is fierce among the survivors.
Traditional advertising is not as effective as it once was. With mobile marketing, agents can offer a solution that cost-effectively reaches merchants' markets and yields excellent redemption rates and return on investment. Second, mobile marketing is an avenue for MLSs to become well-versed in the burgeoning mobile economy.
When integrated with a merchant's existing payment network, mobile marketing offers a foothold for the agent and his or her services in the emerging mobile commerce ecosystem and will pay big dividends.
Pal Flagg is the Chief Operating Officer at Street Savings. He is responsible for daily operations at the company, including sales, marketing and product development. He brings to Street Savings decades of experience in the advertising, media and wireless industries. As Vice President of Client Services at Comcast Spotlight, Pal oversaw the Client Services group, representing all Comcast advertising opportunities to Fortune 100 clients. Prior to this position, Pal led the client services and new business development efforts for Adlink. You can reach him at pal.flagg@streetsavings.com.
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