Pay as you go takes on a new meaning with m-commerce.
If the predictions are true, eventually the wireless Web will be as large as the wired Web of today, and when that happens, online vendors will connect with mobile millions - once they know where they are.
Boston Computing Group (BCG) manager Tom von Oertzen sees two m-commerce business models as currently feasible. The first will seek to offer content that is specific and valuable enough to the consumer that they will be prepared to accept a small charge for the service received, either on a subscription basis or pay-as-you-go basis. The second will be effectively an advertising or promotion-based business model where companies sponsor particular sites and receive advertising dollars.
However, organisations will have to exercise extreme caution in taking up the second model. Yes, advertisers will jump at the opportunity to use the mobile phone as an additional channel to reach consumers, but BCG's recent worldwide survey into m-commerce behaviour makes clear consumers will accept advertising on their mobile phone only if it is targeted to their needs and they can control it. While "click through" rates appear promising, the revenue stream from advertising will only become sustainable if it is based on targeted direct marketing on an opt-in basis.
Recent research from ConStat's Wireless Commerce Monitor confirms some wireless users are ready to treat their phones as advertiser-sponsored sources of frequently needed information, such as traffic reports, news, weather, stocks and e-mail, including promotional messages. The ConStat study found almost half of surveyed wireless users who indicated a payment preference for receiving wireless information would opt for an advertising-supported model over a monthly or per-use, fee-based model.
"Another important finding is that small businesses that advertise are considerably more interested in mobile advertising today than they were 12 months ago," says ConStat's vice president Mike Hesser. "Interest levels nearly tripled since the first wave of research was conducted last year, jumping from eight per cent to almost 30 per cent."
Users of the current wireless Internet are not using it to browse, notes WindWire executive vice president David Wilson. WindWire has the first, pure wireless advertising network and ad serving solution delivering targeted ads, coupons and promotions to all major wireless devices, including phones, PDAs and two-way pagers.
Rather they're using their devices for specific reasons or functions. As a result, organisations looking to offer m-commerce promotions must advertise to promote the products or services they are pushing on the wireless Web, the way Sephora.com did when it ran a last-minute Valentine's Day campaign in the US targeted at the business traveller who might have forgotten their sweetheart. When a user clicked on the mobile ad, they had the option of seeing five gifts for women, five gifts for men or to just purchase an e-gift certificate. Once the user chose the gift, they entered their credit card information and the e-mail address of the recipient of the gift. Sephora then e-mailed the recipient on Valentine's Day indicating their Valentine's gift was recently bought and in the mail.
"The campaign had a click-through rate of over 10 per cent - far higher than any recent wired' campaign," Wilson says. "We do not feel Sephora.com would have had nearly the success without using advertising to promote their wireless m-commerce site."
Wilson says wireless ads are proving 10 times more successful than wired banner ads, partly because organisations are free to deliver ads specific to the content a wireless user is viewing, and also because they make it possible to target by location. "One of our advertisers is the National Hockey League's Carolina Hurricanes," Wilson says. "The Hurricanes only wanted to advertise in North Carolina, South Carolina and Virginia. We were able to provide this service and they saw a click-through'/call-through' rate of over 15 per cent."
WindWire is also attributing the success of its wireless ads to its "call-through" feature. Prospects are able to call an information or order centre and discuss the promotion. The average abandonment of a wired shopping cart is more than 65 per cent. WindWire is seeing an average abandonment rate of a wireless advertisement of less than 30 per cent. "We see the market becoming mobile' vs wireless'," Wilson says. "There are many new devices coming out that synchronise with your desktop or laptop every couple of days for updates.
We see this as an important market. For example, handheld game manufacturers could increase revenue through advertisements built into these games. These advertisements could be updated every time the user syncs with his or her computer. So when Bobby is playing his favourite handheld soccer game, in between quarters he could see the latest Nike advertisement and a month later he may see an advertisement for Adidas." As parents we may all wince. As businessmen, many may salivate at the prospect.
Not Without Permission.
However, permission-based marketing will be the key. According to forecasts by APT Strategies, by 2005 permission-based marketing organisations will have developed proper customer relationship management (CRM) systems that will allow companies to establish one-to-one messaging services with their customers.
The research company predicts customers will reject the current broad SMS and WAP-based advertising services. Spam, already rejected by Internet users, will be equally unacceptable to mobile users. With Australian government regulations due to be introduced during 2001 to limit if not totally disallow such practices, only permission-based marketing services will have a long-term commercial viability, the company says.
Permission-based marketers rather than mobile operators or handset manufacturers will develop m-commerce. "We forecast that in exchange for personal data on which these marketers can establish, their customers will be provided with free mobile phones and free services," APT says in its report Profitable Wireless Strategies: Critical Factors for Successful Wireless Development and Marketing.
"These permission-based marketers need open networks: they want to establish their own virtual network operations model," says independent telecommunications analyst Paul Budde. Furthermore, he says, sophisticated CRM systems will have to be developed that are connected to gigantic data centres which track customers. "Companies will have to establish a relationship of trust with their customers so that they feel comfortable disclosing their personal details. This has more to do with human behaviour than with technology. Both the companies involved and their customers will have to go through a steep learning curve, and we all know from past experience that this takes time - certainly more than two years," Budde says.
To make their offerings appealing enough that people will be prepared to disclose personal details, organisations will need to find ways to develop "sticky applications" - ones that draw users back to the same portal again and again. Developing a good mobile portal and having applications that make people continually return to your portal is seen as key to being successful in the mobile industry, says Schema Associates consultant Andrew Bolton.
An example would be that many portals offer a free e-mail service so that they will get "eyeballs" that will come back to their portals every time they check their e-mail. "Think of Yahoo, for example. Because they are such a successful portal means that they can then onsell all sorts of e-commerce transaction-based things via their Web site, even though they started as just a search engine. There are a lot of other benefits that occur if you are able to establish yourself as a primary portal," Bolton says.
Keep It in Context.
Some analysts say contextual commerce, an emerging personalisation technique involving the strategic placing of products for sale near related content, is the definitive next step in effective commerce.
Contextual commerce is a way to associate products with online content. As a user reads a story about cricket, for example, he or she may be offered deals to buy a cricket bat or tickets to an upcoming match. A food retailer that wants to sell goods online or a ticketing brand that wants to sell tickets online doesn't need to have their own URL for the mobile device where consumers must go to buy food or book tickets. Instead, they make their products available on every other portal that they can think of (including the operator's), aiming to capture as much as 90 per cent of the mind share for mobile users. Such affiliate product branding reduces the number of keystrokes required for customers to get to a product while giving the user access to a lot more content.
EdgeMatrix director Dinesh Bhatia says every transaction cycle should be considered in the light of the concept of contextual commerce. He says Web ads on content sites could offer a transaction opportunity from that site rather than linking to the retailer's site. The idea would theoretically see marketers acquire new customers instantly and keep them at their portals longer rather than having them fall prey to the commercial temptations they might be exposed to when clicking banner ads appearing on their pages.
For now, many analysts say contextual commerce falls far short of the goal of one-on-one marketing that is defined as personalisation. But it does have at least one advantage: besides being a simpler way to deliver personalisation, the theory goes that contextual commerce can alleviate some of the privacy concerns raised when sites try to be personal by tracking users' behaviour through cookies, clickstreams and profiling.
Bhatia points out that for contextual commerce to work, organisations will have to build more and more relationships.
"Everyone is looking out there to build their own brand and a lot of bricks-and-mortar companies probably have the money to invest in building their own brands," he says. "But contextual commerce involves you getting your product to as many related sites as your market segment would probably allow, without you offering them yet another site to go to."
In fact, context concerns both "place" and personalisation. Place revolves around location-based technology and search engines, both of which will prove essential to adding value to wireless portal applications. Personalisation is the customisation of applications and services to suit the particular needs of an end user. Personalisation gives users greater "ownership" of the service and makes it more compelling while increasing customer loyalty and lock-in.
One Size Doesn't Fit All.
Andrew McLorinan, Ericsson Australia marketing manager, mobile internet applications, says most applications developed for the wired world assume a certain context: that users are sitting at a desk in front of a big screen, that they're static and that they're in one place. As a result, we have a one-size fits all approach to information delivery. But applications developed for the mobile Internet might involve delivering information to someone when they're on a train going to work or while they're sitting in a café.
"Location-based services are more and more important," McLorinan says. "We're starting to see that a marketing object in the public domain such as a billboard may be able to interface or interact with people as they walk past. That means more and more that we have to bear in mind the context in which we are going to communicate information to people."
Developers will need to start by considering the physical location of the person using the application. For instance, the physical location of someone within an organisation could be important in putting the right customer with the right service technician, or with optimising limited numbers of personnel so that their location allows them to better serve a customer base more efficiently. It could also optimise highly expensive capital items by being able to get them to where they have to go just in time.
Externally, considerations of context might involve how best to match an end customer's needs with their physical location.
"If you are offering a banking service, where is the bank that is nearest to the consumer? If you're providing information, then what is the information relevant to that consumer's location? So if I'm looking to find a hotel room for the night, I need two bits of information: where is the hotel that fits my budget and is closest to me?" McLorinan says.
This work is currently being hampered by the lack of maturity in location-based services, says Ericsson general manager mobile e-commerce Kate Bennett.
"There aren't a great deal of location-based services relating to mobile commerce now because operators are just putting in mobile positioning equipment. Right now they can tell where you are, which suburb or region, but they can't tell, for instance, which street corner you're on."
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