Mobile couponing: a short SWOT

Summary

Mobile couponing is currently being presented by marketers, technologists and social media experts as the new way to attract customers, reward loyalty, increase revenue, move product, detect trends and target market segments. This report presents both strengths and weaknesses, details various core assumptions, and discusses the potential for Mobile Couponing at the POS and at the backend.

At its core, mobile couponing takes advantage of traditional couponing, and couples it with the ability to offer those coupons to users based on various criteria: location, loyalty, permission marketing, word of mouth, profile and frequency. The new technologies available and changing social attitudes towards couponing make MC a powerful tool for companies and consumers.

Challenges are present in the adoption of the technology, current bandwidth costs and needed capital investment and infrastructure. In the back end, the rapid need for accurate information tailored for each customer will demand a sophisticated computing infrastructure.
SWOT analysis for Mobile Couponing

Strengths
As its strengths, Mobile Couponing serves to
• maintain and reward loyalty,
• create word of mouth,
• increase top of mind presence,
• increase inventory turns ,
• track tendencies and identify user clusters ,
• target offers based on costumer and product,
• drive traffic,
• facilitate awareness, and
• promote word of mouth.

Weaknesses
As its weaknesses, Mobile Couponing has
• acceptance curve ,
• limitations in available technology,
• need for capital investment at the POS,
• social acceptance issues ,
• redemption issues at the POS ,
• and costs (SMS or MMS) for marketers and companies.

Opportunities
At the core of the opportunities for Mobile Couponing is technological change and adoption:
• increase in mobile computation capability,
• decrease in prices in broadband mobile services,
• increase in adoption of smart phones,
• social changes and the current economic climate that furthers the adoption of saving habits,
• integration with existing platforms, and
• proliferation of social media portals that act as replicators for MC offers.

Threats
As its threats, Mobile Couponing has
• lack of industry consensus,
• security constraints,
• possibility of fraud and duplication,
• excessive connection charges, and
• marketplace saturation.

Lower barriers to entry indicate an initial market, and future consolidation may place only a few coupon managing companies in control of a higher share of the market, creating de facto standards and raising barriers to latecomers. Privacy legislation might also limit the amount of information and retaining periods, affecting accuracy of offers and user profiling.

Actors
The customer
The current customer is likely within 20-40 years of age, middle income, technological savvy and willing to engage in social media practices. This customer will likely have Twitter and/or Facebook accounts, and is able to use a smart phone. This restricts Mobile Couponing to a niche proposition, while creating an marketing opportunity present MC as a top niche consumer behavior. From higher end companies then MC can be introduced to lower end, more mundane activities such as groceries and medicines.
The consumer is likely to evolve into a much more broad base, due to increased social approval of couponing, electronic management of coupons, improved targeting and tracking of expense habits, and higher adoption of smart phone technology. This means that within the next 2 years Mobile couponing can be expected to be used extensively at mass retailers (case in point: RFID adoption by Walmart), extending use to a wider demographic and increase acceptance of couponing.

The company
Companies that are acting right now on Mobile Couponing range from all aspects, looking to attract and maintain a solid user base, using third party technoogy providers to maintain and access the customers, and testing or conducing pilot programs to verify the benefits of Mobile Couponing.

The technology at POS and customer
Approaches are constrained to the avaiblable technology, but the high penetration of mobile phones and the increasing adoption of new smart phones are changing the scenario for Mobile Couponing: RFID, MMS, MSM, WAP links, GPS and smart phone (iPhone, Android) apps can be used with varying success: RFID is not yet adopted in USA or Canada, yet it is being used in Japan and other Asian countries. GPS offers that depend on location are being tested in Italy, while smart phone applications are already being used in the USA.

The technology at the coupon management provider
The high use of mobile coupons and the technologically sophisticated user points to a high speed application, highly customized offers based on users location, preferences, past purchases, purchasing habits and demographic information. These demands demand extensive and highly sophisticated data mining from the coupon management provider, fast and timely delivery to customers, secure tracking and verification of coupons, and short processing times. Additionally, the Coupon Management Provider will most likely experience a substantial amount in the amount of transactions reported due to a high conversion rate, for the reasons indicated above.

Use and trends
Inmar presented recently a study indicating that use of coupon is skyrocketing, and industry estimates indicate triple the amount of transactions as compared to the previous year; this explosive growth indicates that the early adopter stage is over, possibly pointing to a more mature behavior and a wider acceptance of coupons. Technological obstacles at POS are being addressed by the increase in smart phone apps and different combinations of coupons and offers, while the WAP / SMS combinations are proving to be highly effective in driving traffic and creating brand awareness and word of mouth marketing.

Conclusion
A powerful trend in adoption of more capable mobile devices, coupled with social media acting as multiplier, posit Mobile couponing as a real alternative in the coming years. While factors like social attitudes toward couponing and technical awareness hampered these efforts in the past, the current economic climate and the saturation in mobile devices and their progressive sophistication point to a more widespread use of Mobile Couponing, paired with other marketing channels as ways to increase inventory turns, improve positioning and drive traffic to stores.

Technological problems are likely to diminish, while issues like cost and capital investment necessary are being tested already with very positive results. In a few years is likely that the explosion in Coupon “pushers” will lead to a consolidation stage, and the data mining companies and coupon settlement companies will have to adjust their procedures to respond to an increased number of transactions.
Sources

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Part one: Startup Spotlight: Mobile Spinach, Jonathan Weggener, June 22 2009, http://blog.jwegener.com/2009/06/22/part-one-startup-spotlight-mobile-spinach/

Part two: the business of SMS Couponing, Jonathan Weggener, June 25 2009, http://blog.jwegener.com/2009/06/25/part-two-the-business-of-sms-couponing/

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