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Retail TouchPoints: Forrester Research Highlights Impact of Location-Based Marketing

February 7, 2012

Through a special arrangement, presented here for discussion is a summary of a current article from the Retail TouchPoints website.

A recent Forrester Research survey indicated that 114 million U.S. smartphone users employ check-in services. Forrester predicts that number will grow to 159 million by 2015.

Since its inception in 2008, check-in technologies have continued to evolve. Developed to entice users into sharing location information, they have shifted focus to include customized offers based on purchase history and are moving to loyalty rewards, said Forrester's Senior Analyst Peter Sheldon during a recent webinar titled, "Changing the Game in the Retail Store Through Your Own Branded Mobile Experience."

Mr. Sheldon noted the four phases of this evolution:

  • Phase 1 (2008 to 2009): All About Location. Check-in services such as foursquare used games and competition to induce users to login and share location information.
  • Phase 2 (2009 to 2011): Rise of Basic Incentives. Seeking reward for their behavior, consumers accepted basic deals as the price for willingness to take action (e.g., scan a product bar code, make a purchase, etc.).
  • Phase 3 (2011 to 2012): Emergence of "Smart" Deals. Consumers are starting to expect personalized, customized offers based on behavioral preferences and purchase history.
  • Phase 4 (2013 on): Focus on Repeat Business and Customer Loyalty. Check-in services are inherently customer loyalty tools. By definition, they reward shoppers for repeatedly patronizing establishments.

Forrester survey results indicated check-in users are "social" shoppers, open to receiving social influence via Facebook or Twitter and more likely to research and purchase products online. Half (50 percent) of the check-in users surveyed said they only visited a store after receiving offers via their mobile device. Another 47 percent of check-in users purchased a new product or service in-store after reading friends' status updates on social networking web sites such as Facebook and Twitter.

"Based on the demographics of the study, check-in users are an appealing segment to retailers. This group typically uses social networks such as Facebook, foursquare and Shopkick, and has a greater average annual income and higher education degrees," noted Mr. Sheldon.

Discussion Questions:

Discussion Questions: What types of offers, incentives or rewards do you expect will drive mobile check-ins for retailers in the years ahead? Ideally, how should the location-based marketing opportunity evolve for retailers?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

What's the likelihood that mobile check-ins will become a significant traffic driver for retailers over the next three to five years?

Comments:

Help me understand what I just read if...The number of people in the U.S. who own smartphones jumped 10 percent to 82.2 million in the three months through July 2011 [according to ComScore].

Here's what Forrester Research suggested: A recent Forrester Research survey indicated that 114 million U.S. smartphone users employ check-in services. Forrester predicts that number will grow to 159 million by 2015.

Therefore over 100% of smartphone users... Help!

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Joan Treistman, President, The Treistman Group LLC

The Forrester research unveils the fact that 50% of the 'check-in' users surveyed said they only visited a store after they received an offer via their mobile device. These offers are typically a financial incentive in the form of a discount or coupon and rarely the basis for an ongoing relationship. The majority of these offers are seized by opportunistic buyers and rarely develop into long-term brand commitment or valued loyalty. Menard's has developed an interesting and apparently successful model whereby the loyalty reward program is founded upon in-store credits as opposed to product discounts. This may be a better way to maintain the brand value while still rewarding your consistent customers. The goal here is to reward your recurring customers and not your opportunistic shoppers.

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Adrian Weidmann, Principal, StoreStream Metrics, LLC

Mobile check-in suffers from an astronomical BSQ (the quotient of hype over substance).

I have honestly tried, but I cannot discern its value to consumers, and I am frankly creeped out by the idea that I should self-report to a commercial entity about my movements and mood state.

The incentive would have to be huge for me to participate -- I mean make-my-car-payments huge. Even then, I suspect I'd tend to lose interest after a couple of months. I mean, real people have busy lives, right?

Tracking mobile phones across the landscape with passive participation by their owners may have a bit more of a future, since the data might be crossed with frequent shopper data to understand patterns of competitive trips. But here again, watch your BSQ -- Just because a stat is highly measurable, doesn't make it important.

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James Tenser, Principal, VSN Strategies

There is still a ton of exploration to do by retailers to see what "sticks" in the long run. The US culture seems to adopt this technology a bit slower than others, like in Japan, for instance, where various forms started taking hold some ten years ago. I believe consumers will continue to divulge more information as they see tangible rewards for their participation. The challenge is to keep those rewards fresh and compelling.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

Consumers always appreciate a localized shopping experience, simply because it's efficient, personal and customized. With digital media like Foursquare on mobile phones, retailers have the ability to drive people to their store by offering targeted promotions.

So bottom line is, the opportunity is there and ready to be taken. The promotions themselves need to be as personalized as possible, and feature calls-to-action. Moms would check-in at their local Walmart for a discount on diapers they bought in the past, which the app could ideally track.

Foursquare, of course, doesn't do this now. But ideally, this is one example of where the location-based apps with shopping behavior in mind will go.

Ronnie Perchik, Founder/CEO, PromoAid

The December, 2011 BIGinsight "Media Behavior & Influence Study" (MBI) of 24,578 Adults, 18+ points to the fact that nearly half of all Adults have a SmartPhone -- Android (21.6%), Blackberry (9.6%), iPhone (19.3%), Windows (2.6%). Forrester's view that the number of U.S. smartphones exceeds 100 million+ is on target.

Essential issues that retailers should monitor among these owners is how and how often consumers are making use of the device. We may have a television set, but if we are not making use of it frequently or for selected programming purposes, we may not be of interest to marketers, or they might consider shifting their media allocation.

How consumers use the device -- messaging, gaming, e-commerce, search -- is key to understand. The MBI Study reflects that the leading app uses of the devices at this juncture are: Gaming (Angry Birds, Word with Friends) (64.1%), Entertainment (54.4%), Weather (56.6%), Social Networking (53.1%). In addition, the frequency of use for search is a key one to zero in on -- "Regularly, Occasionally, Never" -- is important for those who are seeking to monetize eyeballs. The "Regularly" users is still a modest 3% to 14% depending upon the smartphone provider.

Best to use segmentation plans of consumers to build out traffic driving opportunities. Mobile check-ins will grow over time, but they are not for all smartphone users yet. Look closely at the numbers first -- consumers and your customer base -- before shifting large amounts of media attention. The data is there for forward-thinking retailers.

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Roger Saunders, Managing Director, Prosper Business Development

Joan, you are right, the numbers are crazy. I did a quick survey of the Forrester site and saw statistics more in line with "11% of smart phone users currently use location based apps" so something isn't making sense.

That being said, I agree with the phrasing in the sense that ultimately, if retailers want to do anything other than set up another Pavlovian loyalty program they need to focus on rewarding best customers, not just throwing a bone to everyone who checks in. Retailers shouldn't be bullied into thinking they have to have a special offer for the opportunistic deal hunting consumer: it's not profitable for the retailer and sends the wrong message. I'd love to see offers that trigger after a certain number of check-ins within a given time period. Even better if those check-ins can be cross-channel so that I can 'check in" to the website as well as to the store. It may just generate browsing, but over time should drive purchase and a pattern of visiting the retailer that will build more than one-off engagement.

Lisa Bradner, Chief Strategy Officer, Geomentum/Shopper Sciences

As retailers build their mobile platform they need to stay consistent across all channels, web, in-store, mobile, social and telemedia. I just read a very interesting study done by Deloitte's Retail Group that discusses the importance of keeping the message consistent across the all channels. Harvard Business review in December also wrote an interesting paper on mobile marketing. This paper discusses the evolution of offers and how sophisticated the technology has become, including Next Best Offer (NBO) solutions that serve up the best offer using data collected about that user. They also cover the topic of Social, Mobile and Local (SOMOLO) and the importance of being consistent across all channels. The new buzz word is Omni Channel.

Retailers will benefit from investing in solutions that allow them to target the most relevant NBO using SOMOLO data. If they know where the consumer is, what they are chatting about and how they are using their mobile devise, the retailer can provide the NBO at the best time to meet everyone's needs.

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John Boccuzzi, Jr., Managing Partner, Boccuzzi, LLC

There is something funny in the numbers; perhaps Forrester is counting number of service subscriptions (so more than one per customer), or they are counting smartphone users and tablet users? Otherwise it's hard to get 114M users from only about 96B smartphones.

Regardless, location based marketing is clearly on the rise, and we've only just scratched the surface. I'm particularly interested in enhancements like Google Maps Indoors which allowed users at the Consumer Electronics Tradeshow to navigate their way around inside the Las Vegas Convention Center this year, or the Meijer FindIt app that helps shoppers navigate inside the store. When these type of "micro-geolocation" technologies become ubiquitous, it's going to fundamentally change how we shop in stores and how we market to people that are shopping in stores.

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Jason Goldberg, VP Commerce Strategy, Razorfish

The dynamics here are very similar to the daily deal space. Lots of hype and easy for retailers to fall into the trap of giving away value with no tangible boost in either loyalty or the bottom line. As with daily deals, retailers should approach location-based marketing by first getting clear on the business need or market opportunity that they are solving for, then they should assess if a location-based offer is the right tool to attain the objective, and finally they should have a clear plan for converting any newly acquired customers into repeat visitors.

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Martin Mehalchin, Partner, Lenati, LLC

Like Tom Cruise's character in "Minority Report," I can envision location-based marketing evolving to in-aisle marketing. Technology that understands that the customer is standing in front of the laundry detergent aisle and then serve them up real time offers or product content, will drive purchase and customer satisfaction/loyalty.

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Robert DiPietro, GVP Product Strategy & Business Development, Affinion Group

A unique and new opportunity exists beyond the hype and questionable numbers. There are millions of smartphone users who are already willing to share where they're located. Given an incentive, we can expect the numbers to grow dramatically.

The opportunity for retailers is immense.

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Christopher P. Ramey, President, Affluent Insights

Wow!, "114 million U.S. smartphone users employ check-in services." That's of the 90.1 million total smartphone users in 2011 (source, eMarketer, Aug 2011). Thanks, Forrester Research, for that totally questionable report.

But regardless of the source of information regarding total U.S. smartphones, Roger Saunders, Forrester's assertion (it's definitely not a fact) assumes that EVERY U.S. smartphone owner uses mobile check-in. It is here that we must employ Jamie Tenser's BSQ.

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M. Jericho Banks PhD, President, CEO, Forensic Marketing LLC

I think customized services will continue to expand, with personalization to when, where, why and how a customer shops being better responded to. Prices may change depending on the set of attributes you live too. Sharing what you paid, how you bought it, and some level of friendly competition for the 'smartest shopper' will emerge.

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Jerry Gelsomino, Principal, FutureBest

To me, the big question is whether a coalition style rewards offering such as Shopkick becomes the glue that brings merchants and customers together or whether the LBS app providers (e.g. Foursquare) become more focused and provide a better channel for merchants to deliver their own incentive and rewards offers.

Foursquare has every right to take leadership in this space and should be moving to help merchants launch and manage promotional offers, even loyalty programs with their service. Instead, they are talking about loyalty, but are not acting in a visible manner.

That has left the door open to Shopkick, LevelUP, and others to align with both national and local merchants.

I do think that location based marketing will be a central marketing tool for national and local merchants alike, but who wins the race is yet to be seen.

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Bill Hanifin, Managing Director, Hanifin Loyalty LLC

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