The Age of Sell Phones

Opinion: Most consumers are already carrying phones that can be made to ring with coupons, beam payments and deliver true multimedia interactive experiences. How far will-and should-retailers go to exploit the technology?

A free product coupon is a free product coupon, right? If its for the same product at the same merchant and the pricing and timing are roughly the same, it shouldnt matter how that coupon is given to the merchant. Andrew Kamps, the vice president of operations at a New York restaurant chain, recently learned otherwise.

Kamps chain of 12 Subway restaurants in Buffalo and four in Rochester has a long history of using coupons for free food to entice customers to try a specific location or a particular sandwich. When sent by direct mail—"its our primary means of advertising"—hes used to seeing a 2-4 percent when its a discount and a 10-15 percent response rate when the offer is a free sandwich, he said.

When Kamps recently tried having the same coupon (a free 6-inch hoagie) beamed to 3,000 peoples cell phones, he saw a startling 50 percent response rate.

"I was very surprised. Its a great number," Kamps said, adding that hes been using MobileLime, a vendor that offers marketing loyalty and purchasing programs on cell phones, for the experiment.

Although Kamps represents just one franchise, managers at the $9 billion 26,000-store chain are closely watching the trial, according to Kamps as well as Subway corporate officials.

Subway is far from alone. With smart-phone capabilities soaring almost as quickly as the percentage of consumers who will likely have a cell phone on them when shopping, retailers are trying to figure out how best to make use of the technology.

Online couponing is an entry-level step. The phone can be fitted with a contactless card-like device so that it can be used to transmit payment information instead of a credit card. The nature of the phone lends itself to two-way customer communications, either by e-mail or voice.

Kamps said he finds the potential for full customer communication to be the biggest attraction, although its not something he plans on using in the immediate future. "The absolute best part about the program is communicating with our customers so we can really find out what their needs are," he said.

At present, his chain can send timed text messages to customers at whim, but if a customer wanted to reply ("Thanks for the 50 percent off offer on a turkey hoagie, but Im not in a turkey mood. If you turn that into a 40 percent off offer on a tuna hoagie, Ill do it right now. Deal?") the system wont support it.

Another next step would be more sophisticated integration with existing CRM (customer relationship management) and POS systems, to truly allow for one-to-one-marketing. After that comes the Holy Grail of mobile marketing, the one that simultaneously thrills and petrifies marketers: location-awareness messaging.

Although the cell phone carriers dont go out of their way to advertise it, almost all cell phones today can be easily tracked even if the phone is not being used to make phone calls. In most instances, though, the phone does need to be powered up.

There was an incident last year where a couple got lost and stranded in a Washington state mountain range and they were desperately putting out calls for help, but they didnt know exactly where they were. Law enforcement worked with the cell phone carrier on the hope that the stranded hikers would not choose to save their battery power by turning the phone off. It was because they kept the phone turned on that law enforcement was able to find and eventually rescue them.

But the same market forces that made that cellular carrier refrain from boasting about how it saved its customers lives will impact retailers: the fear that consumers will see the technology as intrusive and rebel against it.

Kemps, for example, said he would love to be able to alert his more loyal customers when they are a certain number of blocks away from another one of his chains locations, especially if its an area of town far from that customers home and work. "The opportunities are endless," he said.

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In an attempt to compromise between perceived privacy invasion and the benefits of more intelligent communications, retailers are initially relying heavily on opt-in agreements from consumers. The only problem is whether such opt-in agreements will quickly become another of those privacy agreements that consumers reflexively click on when they are trying to download a new application.

In other words, will consumers be fully cognizant of what they are agreeing to? If not, then those agreements will do little to reduce their rage later on.

Next Page:What happens when smart carts meet smart phones?