article

Hope and Hype

Posted: 07/2001

Hope and Hype
The Brave New World of Wireless Marketing
By Tara Seals

A recent cross-channel marketing initiative drove up TV viewing, increased web and wireless short message service (SMS) usage, encouraged customer participation and loyalty, provided a bump in brand awareness for Ericsson Corp. (www.ericsson.com), gathered user information for future marketing campaigns and delivered sponsorship money to a wireless service provider.

Clearly, the brave new world of wireless marketing has arrived. The idea of marketing goods and services, driving loyalty and building user databases via wireless devices is in the beginning stages in Asia and Europe, and is being explored throughout the United States. Key benefits and significant pitfalls, along with U.S. market obstacles, surround this emerging alternate channel for marketing.

Ovum Ltd.’s (www.ovum.com) recent report, “Wireless Marketing: Rhetoric, Reality & Revenues,” examines the hype, the reality and the obstacles.

Building a Database and Cashing In

The main benefit of delving into wireless marketing is the creation of an alternate revenue stream. Third-party marketers and retailers that want brand awareness can contract with a service provider to reach their customer bases. The campaigns include large cross-platform interactive programs, targeted vouchers, discount offers for stores and outlets and sponsored wireless portals.

For example, in the initiative cited above, a viewer watching the recent MTV music awards in Sweden would have noticed a television ad campaign that encouraged viewers to visit a website where they could sign up to hear Ericsson-sponsored MP3s from unsigned artists. Afterwards, participants could vote for their favorite song using SMS via a wireless handset. The votes were tallied and the winner announced during the broadcast.

The prospects may be exciting, but making money from wireless marketing boils down to the number of connected eyeballs a provider can deliver.

This creates a value for which a third party would be willing to pay. Demonstrating that value relies upon the construction of a customer database.

“You can take away the focus of trying to generate the income from end users,” says Rosalie Nelson, topic director and lead author of the Ovum report. “You’re actually getting marketing companies and advertisers who are paying to reach your specific audience.”

This is an important issue in the face of a customer base unwilling to pay a premium for generic content and Internet services on a mobile platform, Nelson explains. The service provider must find a way to subsidize its offerings.

“The key thing about wireless marketing is that it provides a broader base of paying parties,” Nelson explains. “You have users who are accustomed to getting their content and services over the Internet, and they aren’t really going to be willing to pay on top of airtime to receive them via phone. So the issue becomes: How do you, as a service provider, generate revenue?”

Most service providers that are looking to capitalize on the idea would rather build a permissive database where subscribers opt in, than to create a telemarketing-like vehicle for unsolicited push marketing, which many consumers resent.

Opt-in participants generally sign up to receive content and services of interest to them, which may be managed, branded or sponsored by a marketer.

“Having gotten that user database of people who have registered, they’re not actually opting in to receive ads per se,” Nelson explains. “They’re opting in to get news and info and have messaging services, of which marketing can be an implicit component.”

In Europe, companies are getting creative in the process, generally by leveraging multiple points of contact with the user. In the case of a biweekly teen magazine in England called Smash Hits, readers are asked to send in an SMS message to the publication to register for gossip and music updates via handset. The reader gets something of value, and Smash Hits creates an opportunity to add to its database.

Money-generating derivatives also arise from database construction. An inevitable evolution of the process is the ability to sell or rent the database to outside interests. Also, m-commerce can raise revenue from the mobile Internet, but it also arises from wireless marketing. Promotions become the front end of commerce, alerting the user to special incentives.

Wireless marketing can be a customer-retention tool. An additional benefit of the Smash Hits strategy is that it allows the magazine to maintain communication with its readers in between the fortnightly publication. In turn, the readers, guided by a sense of loyalty, may be more likely to choose Smash Hits in the print version rather than a competitor.

“This works when you have perishable content,” Nelson says. “This isn’t a strategy for Levis, because you’re not buying jeans on a weekly basis. But for events, travel, publications, then you can keep the users coming back to you.”

Similarly, competitions, sweepstakes and interactive gaming, all of which encourage wireless users to register in order to win something, require continuing contact.

“You can up-sell from that point,” Nelson says. “These have been very successful, especially in the youth markets.”

NTT DoCoMo Inc.’s (www.nttdocomo.co.jp) iMode service features an abundance of mobile advertising, divided among wireless Internet content providers, traditional consumer-goods groups and retailers making offers over wireless to drive traffic.

For example, video rental chain Tsutaya provides members with a discount via handset that subscribers can redeem at the store.

For the company doing the marketing, the investment could pay off. In a Japanese trial, a beauty products manufacturer sent a wireless message offering to mail a product sample. According to Nelson, 30 per-

cent responded within an hour, 70 percent responded within four hours and 90 per-

cent responded within three days, an unparalleled response rate.

“Wireless is such a personal accessory that it offers the one-to-few direct marketing that for many is a Holy Grail,” Nelson says. “It also has a strong call to action. You can interact with it and do something with it.”

The U.S. Market

The Ovum forecast has Europe and Asia-Pacific leading in wireless marketing. The United States’ comparatively slow uptake is primarily a product of sociological issues, Nelson says, and requires a shift in service providers’ thinking.

“The real risk in the U.S. is people seeing wireless as just one more online channel and not understanding what the real benefits of mobility are,” Nelson says. “The wireless campaigns have to be aware that being mobile adds a lot of value, such as user convenience and better time management.”

End-user demand is also different from elsewhere in the world. A high rate of fixed Internet access in the United States means wireless is not a substitute, rather an additional, online play. Subscribers also expect wireless Internet options to feature all the attributes of rich media or banner ads they’re used to in fixed access.

“In countries like Japan, people’s first access to data is over mobile phone,” Nelson notes. “In the U.S., the expectation is that whatever you get on your phone simply complements whatever you’re getting online, rather than replaces it. What’s happening online very much dictates the approach to wireless.”

The U.S. market also differs because many campaigns take place via personal digital assistants (PDAs). Vindigo Inc. (www.vindigo.com), for example, has tested wireless marketing stateside. Its personal navigation tool can be downloaded from the web to a PDA. The free software lets mobile users enter a location in order to find places to eat, shop, see a movie or find other entertainment. Vindigo has content agreements with services such as TimeOut New York (www.timeoutny.com), New York Today (www.newyorktoday.com), washingtonpost.com (www.washingtonpost.com) and Tribune Interactive (www.tribuneinter

active.com).

Founded in 1999, the company has 450,000 users and operates in 20 U.S. cities.

“It means the audience will be very different, because those that have PDAs are a certain type of demographic group, whereas, in Europe, SMS is being used effortlessly by 14- and 15-year-olds,” Nelson says.

Across the Atlantic, people sign up to receive information on what radio personalities were playing on what nights, tied into guest passes.

In another example, in a dating game, men would text-message their best pick-up lines, and the girls voted on their favorites.

Pitfalls

Despite the opportunities, service providers can run into trouble if they lose control of the content or types of marketing executed through their portals and devices.

“If you get incidences of spam, unsolicited calls, any violation of privacy, even if it’s of some relevancy, at the end of the day that will taint the whole industry,” Nelson says. “The service provider risks churn, not the content provider.”

SPs may regret banking on location-based services.

“The concept that you’ll be walking up the road and your phone will ring and you’ll get a $50 voucher for going into Starbucks, I don’t believe that that’s how the model will work, because I believe unsolicited push marketing is putting you in risky territory,” Nelson says. “More than likely you’re just going to be hacked off.”

It also is costly. A provider needs to track where users are at any time within a small radius and track accurately what the marketers are in that area.

“Even if they do come in and get their free cup of coffee, this has really big issues with network management,” Nelson says.

Ovum predicts that by 2005, half of wireless campaigns will have location or geographic elements, but in the form of user-driven services, such as finding the nearest taxi company on demand.

There also are technological issues. Delivering campaigns to several different devices that are using different platforms such as PDA, wireless application protocol (WAP) and SMS proves challenging and expensive.

Also, tracking usage is difficult. On the Internet, marketers can follow clickthroughs; but in a wireless environment, a user can call up a website or contact a call center for more information or even redeem a voucher in person.

“You need to rely on people reporting correctly and noting the reference number, and this creates issues of accountability for the marketers who want to know what their return on investment is,” Nelson notes.

“This is at a really basic level at this point, and it’s going to become a lot more sophisticated,” she adds. “It is fledgling, and you’ve got tests and trials and the results look good.”

“But I’ve got to say at this stage, there are a number of issues that need to be sorted out, such as established formats, the technology, the devices, the management of those campaigns and also getting people to use it,” she warns.


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