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Mobile Magnetism

How smartphones are pulling consumers through the path to purchase
  • June 24 2012

People don’t go shopping alone anymore.

They head out to the store accompanied by a savvy companion who can tell them everything they need to know about products and prices. The companion can outline the differences between seemingly similar products, share whether other people like what they’re shopping for and highlight if the place they’re going to buy it has the best deal. At a moment’s notice, the companion can whip out a coupon, alert you to a deal or even provide a quick product demonstration, and might even help you pay.

The companion is, of course, a smartphone.

With mobile devices nearly ubiquitous, the path to purchase has been altered as retailers and brands are now able to reach and engage with shoppers in a very personal way. Retail marketers have access to a wide range of mobile tools—text messages, apps, the mobile Web, QR codes, mobile coupons, location-based tools and more—to engage with shoppers more deeply. Smartphones have the ability to marry the myriad of options of the digital world with traditional brick-and-mortar shopping.

At the same time, shoppers are more informed than ever and are using smartphones to drive their purchasing decisions. They expect retail apps to offer much more than simple store locators and Web features. Rather, they want to be able to scan in bar codes to get product reviews and recommendations, add products to shopping lists and shift their loyalty cards to their phones. They’re forsaking in-person assistance for virtual information, which they find more accessible and more trustworthy.

This past February, data from Nielsen’s U.S. Digital Consumer Report found that 29 percent of smartphone owners use their phone for shopping-related activities. The most common were using the phone for in-store price comparisons (38 percent of mobile shoppers), browsing products through their mobile Web or apps (38 percent), reading online product reviews (32 percent) and searching for and using coupons (24 percent).

“In one way, the mobile device is becoming the GPS for brands,” says Beth Ann Kaminkow, CEO of TracyLocke “It can become the navigation device for where [something is available], what’s the best price and how’s the quality. Brands can activate at a more engaging level with unique content that inspires the desire to purchase.”

Consider the recent surge in adoption of Shopkick, a mobile application that retailers are employing to reward shoppers for simply walking through their front doors. Already being used by big-name retail brands such as Macy’s, Best Buy, Old Navy, Sports Authority and Crate & Barrel, Shopkick was rolled out at all of Target’s 1,700-plus U.S. stores this past May, making the largest Shopkick retailer. In addition, American Eagle Outfitters said it would go national with Shopkick in its 1,000 stores.

Once downloaded, the Shopkick mobile app records points or “kicks” upon entry to a store that can be redeemed for purchases with any of the participating retail brands. Less than two years in existence, the Palo Alto, Calif.-based company already boasts more than 3 million users and is the fourth most popular mobile shopping application behind eBay, Amazon and Groupon, according to Nielsen Research.

“Our goal is to drive the incremental transaction,” says Cyriac Roeding, co-founder and CEO of Shopkick. “The typical number of transactions at one large retailer is between three and five per year. What if we could drive number four or number six? Think about the percentage increase that represents for the retailer. That’s huge.”

In its first full year, Shopkick generated $110 million in combined incremental sales for its retail partners (which may next include supermarkets, pending talks with major grocery retailers), says Roeding, who further predicts that the company could grow to as many as 20 to 30 million users in the next three to five years.


Engaging Mobile Shoppers

Shopkick is hardly alone. Retail and brand marketers are looking to boost their presence on mobile platforms through a wide array of methods, including such established tools as loyalty cards and coupons, as well as experimenting with more cutting-edge technologies such as augmented reality.

For example, CVS, which has close to 70 million members, recently updated its mobile app so that it can store loyalty account information. Consumers can simply show their phone instead of a card, and also use the app to redeem their rewards.

Macy’s made a smartphone app the centerpiece of its recent “Brasil: A Magical Journey” campaign, which featured apparel from Brazilian designers and in-store experiences celebrating Brazilian culture. An augmented reality app allowed shoppers to interact with in-store markers that triggered a virtual tour of Brazilian culture (such as a trip to the Amazon, Carnival and a soccer game). QR codes throughout the store delivered fashion content from the Brazilian designers to shoppers’ smartphones.

Procter & Gamble, meanwhile, is using mobile to enhance in-store sampling. Saatchi & Saatchi X, its agency, created a vending machine—called Freebie—that has been placed inside select Walmart stores. In order to get a sample of, say, Tide Pods, the shopper must check in on Facebook via her mobile device. “With a lot of CPG buying, mobile is important in the path to purchase,” says Tyler Murray, VP of digital and media at Saatchi & Saatchi X.

P&G is so convinced about the value of mobile that earlier this summer, it and Saatchi & Saatchi X created a pop-up store in Manhattan out of a food truck that let consumers order limited-edition versions of some of its products, including Tide detergent and Pampers Cruisers diapers. Scanning a large QR code on the side of the truck took consumers to Walmart’s e-commerce hub to place orders. A similar program ran in bus shelters in downtown Chicago.


What’s at Stake

There’s a lot at stake for these marketing initiatives, not the least of which is enhancing the in-store shopping experience in light of shifting consumer preferences. One need look no further than the phenomenon of “showrooming”—where shoppers visit a brick-and-mortar store to see a product and then purchase it for less via mobile or a website—to understand how the path to purchase is being affected.
But before they funnel more of their marketing dollars into shopper programs that tout the latest apps and mobile technologies, retailers should consider: Some of these tools are catching on with consumers a lot faster than others.

For example, there remains relatively low interest in the mobile wallet, which allows a consumer to pay by swiping a smartphone. Some observers say this barrier will be overcome in the same way that consumers set aside initial privacy concerns related to online shopping, but that remains to be seen. The Nielsen U.S. Digital Consumer study found that just 9 percent had paid for goods/services at point-of-sale with a smartphone. Still, 34 percent said they would be very or extremely interested in an app that allows them to use their phone as a credit card.

Jason Rogers, VP of digital at CatapultRPM, says that traditional mobile tools like downloadable coupons or e-mail offers have a proven ability to address basic shopper needs, i.e., saving time or money. Others, such as the “Easy Shop” self-scan technology implemented at Ahold’s Stop & Shop grocery stores—an iPhone app from Modiv Media that allows users to scan products and build their shopping carts on their mobile phones—have the additional potential to address “higher” experiential needs while making shopping more enjoyable.

“Things that work really well in terms of helpfulness for the shopper tend to be low fidelity: text alerts, e-mail newsletters, retailer websites,” says Rogers. “When you look at tools like scalable QR codes or location-based check-ins like Foursquare or social networking like Facebook, these may generate buzz for the marketer and therefore ROI through earned media, but they’re providing no utility for the shopper.”
Which is why he and others urge marketers to build programs around insights into what motivates consumers to shop, and then identify the best tools—including mobile—with which to reach them.

Last fall, for example, Catapult worked with Walmart on a mobile-based “Pets Love Walmart” campaign to promote the retailer as a primary shopping destination for pet food and related products—a perception that was lacking among its customers. Walmart placed QR codes on packages of the Mars Pedigree pet food brand, which when scanned sent users to a mobile website (a unique destination within Walmart.com) containing promotional offers and information about Walmart’s in-store educational events, content involving pet care and a link to make a charitable donation to local pet shelters.

All of this helped create an important value exchange that motivated consumers to shop at Walmart, says Rogers. The program drew high engagement levels with the QR codes and generated a significant increase in category traffic as well as incremental sales for Pedigree.

Generally speaking, the core promise of mobile lies in its ability to deliver highly personalized, highly targeted messages to a desirable subset of one’s audience—i.e., those consumers who are most likely to respond. For the shopper, these so-called “hypertargeting” practices can occur anywhere along the path to purchase.

Until recently, efforts to reach shoppers inside stores with technologies like RFID strips attached to shopping carts have generally proven too costly or otherwise fallen flat. Newer innovations such as Stop & Shop’s self-scan iPhone app, which also includes an RFID sensor and delivers data to the retailer on the mobile phone owner’s cumulative purchase history, have revived the notion of targeting by shopping intent. Thus, if a consumer is detected, say, price checking cereals and is a known purchaser of a particular brand, a company like Kellogg’s could instantly send her a relevant offer on Special K.

What has proven most effective in this realm are geo-targeting programs involving a network service that uses local mobile search as a trigger to send promotional offers to opt-in participants based on their proximity to stores at the time of the search. Research firm Strategy Analytics estimates location-based services (LBS) could be a $10 billion market by 2016, with more than half its value attributable to mobile search advertising.

“The idea is to deliver an offer to the shopper at the time and place he or she is most likely to use it,” says Jim Lucas, EVP global retail insight and strategy at Draftfcb. “You often see much higher conversion rates with these programs. It’s a smaller but much more relevant group of shoppers.”

Lucas cites one test program last year in which AT&T teamed with Placecast on a Kmart shop-alert promotion involving products such as cleaning supplies that generated store visits by more than half of the participants and redemption rates in the 20-percent range.

There’s no question that mobile has revolutionized the way in which consumers shop. It has empowered shoppers, perhaps above all, by imparting them with product and pricing knowledge. “In the old days, everything was an impulse purchase,” says Ken Barnett, CEO of shopper agency MARS. “Today it’s flip flopped—70 percent is planned purchase. People are coming into the store more informed.”

The reality of retailing today is that price is no longer enough to establish a winning edge. Rather, the success of Target, Whole Foods and others suggests that the ultimate drivers of brand loyalty will remain merchandising, selection and the overall in-store experience.

“Mobile provides a great conduit to the shopping experience, but it cannot replace that experience,” says Aidan Tracey, CEO of Mosaic Sales Solutions. “The mechanics of shopping have changed. Today’s consumer is armed with much better information in real time than ever before, so that just puts more importance [on all of those other] differentiators that drive foot traffic, increase basket size and retain customers.”



Shoppers Check In

Smartphone users seem to have no qualms about sharing their location with friends and family, and a new study from the National Retail Federation’s Shop.org found that they’re also interested in sharing location information with retailers. One third (33 percent) of those who own smartphones say they have shared their location with retailers.

The challenge for retailers and shopper marketers is what to do with this data. “While check in and store location functionality are already gaining popularity, retailers have only just scratched the surface of using location data to better serve their customers,” says Jennifer Vlahavas, senior director of comScore, which co-sponsored the study. “In-store shopping maps and customized shopping lists are a few of the possibilities that will cater to the consumer.”

Interestingly, the study found that men are more likely than women to share their location with a retailer (40 percent vs. 25 percent respectively), and nearly half (46 percent) of those aged 18-34 say they have shared their location, compared to just two in 10 (22 percent) of those aged 35-54.