The Evolution of Mobile Based Loyalty Marketing

(Originally Posted on the Capillary ShopTalk June 2011 newsletter. To see entire contents click here)

Customer Engagement: a 21^st Century Concept?

Customer Engagement is the lifeline of retail and it has long been established that loyal customers form the bedrock of aprofitable retail business. One of the first known instances of customer loyalty marketing dates back as far as 1793, when a US merchant started giving out copper tokens which could be exchanged for free items in the store.

Gradually, the customer engagement efforts moved through time and space to create newer media to reach out to customer s, including Product Catalogues and Direct Mails and to the most modern ones – plastic cards, electronic mail an d paper vouchers and are very successfully being used by retailers.

Loyalty Programs have become an important part of revenues for many retailers. For instance, in India, according to the Indian financial daily, Economic Times, the loyalty program members in India in 2010 is estimated to be 20 million. Lifestyle, for example, draws 50% of its annual revenue from about 2 mill ion members of its ‘The Inner Circle’ programme, while Shoppers Stop derives 73% of its business from its more than 1.9-million ‘First Citizen’ members(Source: Economic Times).

 

 

The Evolved Customer and Mobile Phones

The arrival of the mobile phone, one of the most disruptive pieces of technology ever developed, has changed the human civilization radically over last decade. With almost 4.9 billion subscribers (77% of the world population) today, the mobile as a device is at once personal; its always on, always present, and always connected, and has changed some of our most deeply set habits.

In the same time, the customer herself has changed; she doesn’t carry loyalty cards all the time or remembers the long membership numbers. The mobile phone as a device plugs in beautifully to the changing shopper behavior and rapid proliferation of plastic cards: simplifying the consumer interface and making the loyalty programs easy to participate and maintain.

 

 

 

Mobile Based Customer Engagement Programs

In principle, Mobile Customer Engagement Programs are very simple – the mobile number of the customer is used as the main customer key, leading to simplicity of customer engagement. It enables uniquely identifying a customer, communicate with her easily and cost-effectively, and authenticate her while rewarding – the three most critical aspects of the customer interface for any loyalty programs. Along with this, by combining this with real time communication, m-vouchers, point of purchase analytics, the simple concept of mobile engagement can become a very potent weapon in the retailer’s arsenal.

Simple, Low-Cost and Effective

The most important aspect of using Mobile CRM is to vastly increase the customer base. Our research indicates that most mobile based CRM programs are able to sign up as high as 80-90%, against 10-15% in card based programs. Operating cost of a cardless program is close to zero, cutting out the cost of cards, the effort in logistics and management, paper based forms and data entry, relying on m-vouchers for gratification and  SMS/Email for communication thereby generating massive ROI on investments. The fact that its environment friendly also helps in reducing the perceived cost.

One of the key benefits of mobile CRM is that a retailer can launch a simple engagement scheme with data capture without a formal points based loyalty program. For instance, a simple seasonal milestone program (Buy worth USD 200, and get a USD 25 m-Voucher) program can be used to build customer understanding. After studying the program for a few months, a well modeled points based loyalty initiative can be launched with a far better understanding of the consumer buying patterns.

A few Caveats

Easy as it may sound, its also easy to get the initiative wrong. The systems have to be very robust and simple to use so that data is captured in clean and validated formats otherwise the retailer ends up realizing after months of effort that the data is unusable. Quick search tools across the customer base are an absolute must and the customer database from all the stores must be available at real time at the store level.

 

It’s also very important to instantly communicate with the customer to give her the reassurance that the data has been captured in the system and cannot be put to misuse by the store staff. Additional features can be developed to ensure store staff doesn’t get access to contact numbers to ensure customer satisfaction. There are additional expectations of personalization of communication which have to be met.

In a form free environment, the customer understanding has to be built using past purchases, including the SKUs she buys. Customer Understanding and Analytics become a necessity to ensure meaningful engagement. The ubiquity of mobile numbers also means that fraud detection and mitigation systems need to be very robust and based on analytical techniques to ensure invalid entries are quickly flagged and investigated.

 

Rapid Adoption

Apparel major Indus League was one of the first retailers to adopt mobile based loyalty programs. Within months, the loyalty conversion for One League increased by almost 75% compared to its predecessors. Rachna Aggarwal, CEO, Indus Leagu Clothing Ltd. Said, “The biggest benefit members enjoy is that ONE League is now Instant! Earlier, it took upto 15 days to credit points to a loyalty account, now it is done the moment the purchase is made. . Capillary’s !nTouch allows us to gratify our customer instantly through SMS updates, m-vouchers etc. the moment a transaction is done.” Similarly, marquee Indian brands like Peter England, Dabur’s newU, Odyssey Bookstores and Puma India have also successfully launched mobile loyalty programs.

The simplicity of Mobile Based Customer Engagement means that retailers of all sizes can now use powerful data capture tools to build a large customer data base, learning about them and effectively analyzing their behavior and using insights to drive repeat visits and higher transaction values – all that at a low cost.

 

Ideas for new mobile operators

I was going through Rajesh Jain’s blog post where he has penned downs some ideas that the new crop of mobile operators could use, both to differentiate themselves at launch, as well as establish themselves, and get a large number of subscribers. Rajesh has himself given some excellent suggestions like:

1. Focus on Data-hungry customers with a flat Rs. 99 per month plan
2. Use a more open and participative VAS platform to entice users
3. Open the User Profile to Third-party services

I’ve been thinking myself on how the new crop of operators (the Swan Telecom, Unitech-Telenor, Shyam Systema etc.) would market themselves, and would they take a niche or undercut prices and go for the masses. Well, Shyam has already launched as MTS (Shyam has chosen to use its JV partner’s branding straight away, so as to clear the way for a possible sale in the future I believe), and chosen to go after the masses, giving out a truckload of minutes free for lifetime prepaid. Too see a list of telecom companies in India, refer to Wikipedia.

The way I would like to approach this is to see what the shortcomings of the market currently are, and how they can be fixed, and I would probably enumerate them as these:

1. Undercut prices further for the bottom of the pyramid – I think the prices at the lower end of the spectrum can go down further, and that’s because even though we are lowest cost mobile services country in the world, the distribution infrastructure has been commoditized (buying and selling prepaid credits, separate tower companies, billing systems etc.), and the lowest rung of customers that are added today, would not be as heavy users and will not occupy as much spectrum per capita. Since, currently mobile companies are more or less valued based on the number of subscribers, there will be a mad rush to acquire customers, and undercutting is the simplest way to do it. [This is already the strategy that MTS is using]
2. More value for the middle tier – I think some of the mobile operators are going to figure out “one size fits all” is not possible, and there are lots of opportunities in segmenting and targeting. I personally see very unique plans applicable for companies giving out phones to their sales people, incoming plans for companies, family plans, lover plans (which already exist), college plans, children’s plans, election plans (?) etc. with a good number of VAS services that are bundled in for that target segment. Of course, this would require better content and VAS services, and hence more rev share for VAS players.
3. Fanatical Support for the top tier – I think one place where the current operators are lacking is servicing the top tier really well. These are the high value consumers that perhaps constitute well over 40% of the market. In some cases like Corporate Connections, they do get enhanced support, but the large swathe of India still has many high intensity users, from SMEs, businessmen, lawyers, dealmakers etc. and some of the new operators could target these and probably charge them an extra Rs. 200 per month for extensive support and personalized services. For instance, I have an Airtel connection and my GPRS just refuses to work when I am on roaming, and I have probably spent more than 40 hours trying to find a resolution but in vain. I wouldn’t mind paying some money to get this issue resolved.
4. Better Roaming (Domestic & International) – One place where most operators are lacking is good support and costs for roaming, both National and International. They cost a lot, they are painful because you can’t figure out how much you are going to be charged, and if it stops working when on roaming, you are dead in the middle of the desert. I would foresee prices in this area going down quickly, because customers of point (3) are typically also heavy users of point (4). However, this would require an India wide network, and a long distance backbone before this can be attemped, and I think Tata Docomo is very well suited for this.
5. 3G and all the frills – This will be another turf fight, but I think its extremely raw now, and difficult to figure out how its going to pan out.

With all the new entrants, the media will be big winners, since they are going to advertise like mad – good news for newspapers, outdoor companies, and TV channels.

What do you think? How is the entry of the new players going to play out and what would you like them to do?

Bangalore Bloggers’ Meet and BarCamp Bangalore 4 and Yahoo Big Thinkers Talk

A Bangalore (or Bengaluru by then?) Bloggers’ Meet is scheduled for July 21 at BreHaHa. I don’t know who else’s going though. If anybody else who reads this blog (~ zero) is going please let me know as well (leave a comment or mail me)… I might decide to go as well in that case.

More details about the Bloggers’ meet

BarcampBangalore4 (BarcampBengaluru4?) is also scheduled later this month (28 and 29 July) at IIM Bangalore. I went the last time to BCB3 and sat through the mobile sessions most of the time. This time, there is some noise around Collectives. Essentially, they are asking people interested in some area to register a collective so that some dialog can start before the event and have more focused discussion on the day.

More details about BCB4

Besides, there is a talk by R. Preston McAfee on Pricing. This talk is a part of the Yahoo! India Big Thinkers Talk series. I happen to have gone for the first two (by Raghu Ramakrishnan and Andrew Tomkins) and the talks are rather interesting. This one promises to be not so technical and more business oriented, and I am looking forward to it. You should register for it since the seats are limited.

More details about McAfee’s talk

Tags: bcb4 barcampbangalore4

WiTricity, anybody?

[Crossposted on Desicritics]

[Link – Goodbye wires…]

One of the most painful things is charging cables and batteries (since I forever seem to forget them), and that is what a team from MIT is trying to address. They have come up with a concept called WiTricity, or Wireless Electricity. The technology relies on magnetic resonance to enable efficient power transfer between coupled devices at reasonable distances. The project is lead by Marin Soljacic, and his students from MIT.

It is interesting to note that such a thing is even possible, and it will probably lead to a complete shift in paradigms if it can be made commercially viable. It is probably as disruptive a technology as wireless-radio which has transformed communications.

However, it seems that there is still a lot to do before WiTricity will be out of gestation. It might take a few years to a decade. First of all, the technology has to be made viable, and demonstrated to be cheap and easy to use. Secondly, the effect of magnetic resonance radiations to human beings has to be studied and certified to be healthy.

More coverage on this: here, here and here.

Barcamp Bangalore 3

I attended Barcamp Bangalore 3 today, held at IIM Bangalore. I reached early and saw the place getting organized in a ad-hoc manner. Initially there was chaos, and gradually order emerged. It was very interesting to see how the whole thing got organized with just a handful of volunteers. The event was well attended, with I think an attendance of well over 300 people. Kudos to the organizers!

There were a number of interesting sessions arranged around the broad themes of Mobiles, Society, Internet and Demo/Training. I felt that the mobile room by far attracted the largest crowds. Randy Wang kicked off the society room with a talk about Digital Study Hall. Thereafter, I spent most of my time in the mobile room. some of those that I attended and liked:

• Impact of Camera phones by Wwigo people — The key takeaway was that mobiles with cameras are becoming ubiquitous and there are interesting applications going to become prevalent. Some pointers are in the area of (1) scanning barcodes and finding more information about products, (2) Citizenship Journalism and many others. The form factor of the UI is a severe limitation. Privacy concerns abound and also to whom does the rights of a picture belong (subject or shooter). They showed a demo of their product Wwigo which lets you use your camera phone as a web cam with your PC.
• Activ Mobs — This was by far the most exciting demo I attended. The idea is Yahoo! groups ported to mobiles. They let users create small groups (which they call mobs) using mobile phones and let people message all their friends at once with a single SMS. The utility is obvious and the product is already a hit with the target crowd (18-25) with more than 10k users and 25k SMSs sent every day. They are still trying to figure out their revenue story and find investors, but the concept is cool, and can spread like a virus. I tried it out and they have some kinks due to overloading, but hopefully the service will only get better with time.

They talked about their learning in the last 4 months that the service is up. For one, they add Activ-Tip when the message is less than 100 chars, and have found that people actually read them. That could help them monetize it by replacing the Activ Tip by an (context-sensitive) advertisement. Secondly, it is difficult to enforce a format/grammar on the users since it is difficult to remember commands and syntax. Thirdly, which is a really interesting concept — instead of providing a web-interface which is completely different from their mobile interface, they are building a command-builder UI which lets the users easy build commands on the screen and submit online (with suitalbe help/directions). This will not only help in usability, but also help the users to remember the commands.

They also described their stack – Linux, Kennel, MySQL, Ruby, and a web server.

Good luck to these guys (Akshat, Sidu and Vidit)!

• mChek – mChek is a mobile payment solution which is currently live in Delhi. Airtel customers can pay their bills through their credit card using mChek as a gateway. It is good to see such gateways being set up since that is going to spur mobile commerce and more services being sold through mobiles. They use SMS + USSD (Unstructured Supplementary Data) to register and make payments. They claim that the USSD provides them an advantage over the other players such as Pay Mate and is also more secure (since USSD is not saved in sent items). They are certified by VISA. However, there were some issues raised about security in the light of the PIN and credit card number being sent in clear text.
• Zook – This is a mobile search solution on both SMS and GPRS. They have tried to keep extremely structured data in their databases which the query against the users question and display results, unlike Google/Yahoo!/MSN mobile search which essentiallly try to mimic their usage of unstructured data as on the web. They currently only focus on a few categories (ringtones/wallpapers/flights/restaurants/events etc.) due to the restriction of having structured data. Another choice they have made is to prompt the user with more users in case they can not find exact solution. For instance, if you such for Pizza, they might come back to ask you if you are looking for Pizza in Bangalore? and even names of localities such as Koramangla. They feel that this interaction differentiates them from other providers. They also have the option of the users contributing to their knowledge base, but I would not buy this poing until they can demonstrate its efficacy with large number of users.
• Socio-Net – This was about Social Networks becoming pervasive in future. Social Networks will evolve to become intelligent with personalization, intelligent minig of information, and closer integration with other applications, unlock collaboration and become drivers of many of our current applications. I feel that social networks have been in existence long before (LDAP, IM, Amazon, mailing lists) they became branded so, and what we are going to see is the defintion of Social-Networking applied to it. The reason I call Amazon a social network is because they are implicitly adding ‘friend‘-edges between people who bought the same book and doing collaborative filtering on it. There is need for more research in the area with many interesting applications possible (Mechanical Turk, Community Customer Support). There was a (rather) long discussion about entreprises having social networks so that employees spend time on their own social networks rather than external sites like Orkut. While I am all for leveraging social networks in an enterprise setting, I would not subscribe to providing a company social network like infosys.orkut.com on which employees can spend time. That is legalizing time pass :-) There can be better models.

Overall, some great ideas and it was great fun!

[barcampbangalore3]