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Forrester reveals how to optimize mobile ROI

?How do I justify the cost of building out our mobile services?? is a question that Forrester is fielding with increasing frequency. Here is the research firm?s advice to brands and marketers.

Offline and online returns are dwarfing the revenues derived from mobile services outside of media today. Consumer product and service companies must look to attribute and quantify the broader set of benefits that mobile services generate.

?There are three general categories of benefits: increased revenues, lower costs and higher performance on key performance indicators driven by consumer delight with convenient services,? said Julie Ask, San Francisco-based vice president and principal analyst at Forrester Research, in the study.

?With an emerging medium like mobile, it is difficult to forecast consumer adoption and usage?two key elements for assessing the return on investment of mobile services,? she said.

In the study, Forrester broke down the process of calculating the ROI of brands? mobile initiatives into four key steps?identifying benefits, estimating the value of the benefits, calculating costs and building a model?to help justify the resources they need for mobile without getting lost in the details.

How to get budget for mobile initiatives
?No one is buying anything on their mobile phones! How do I get budget? How do I justify the cost of building out our mobile services offering??

These are questions that Forrester hears with increasing frequency from its clients.

Consumer product strategists know that mobile is the next frontier for their companies? strategies, but organizations have not yet institutionalized budgets for developing mobile initiatives.

?It?s a Catch 22?there?s no history to prove the concept, but it?s also clearly a critical competitive vector for 2010 across all business-to-consumer industries,? Ms. Ask said. ?The truth is that consumers are making purchases on cell phones today.?

For example, Pizza Hut reported more than $1 million in sales in the first three months that its Apple iPhone and iPod touch application was live in 2009 (see story).

?While this number remains small relative to total sales, it is not zero,? Ms. Ask said. ?And, equally important, we believe that mobile services will increasingly be table stakes for many consumer product and services companies?just as Web sites were in 1999.?

Calculating a positive return on a mobile service may be as simple as quantifying incremental revenues for those companies sitting in one of mobile?s sweet spots such as Pizza Hut or Marriott Hotels.

Most calculations will likely require multiple components of return, according to Forrester.

Calculating the ROI of an emerging medium has its challenges, but Forrester broke the process down into these manageable steps:

1. Identify the benefits (and which business objectives they support).
2. Estimate usage of your mobile services, and quantify the benefits.
3. Calculate the total cost of ownership (TCO).
4. Build a model to calculate the return over a period of time.

Forrester?s recommendations
Ms. Ask recommends being methodical, but warns not to kill yourself adding up the pennies.

Calculating the ROI of emerging technologies and services that depend on consumer behavior is challenging. Some argue that it is part art and part science.

Ms. Ask provided various tips and pitfalls to avoid that should help marketers through the process of obtaining the resources they need to build their mobile services.

First, do not let ROI alone drive decision-making.

There are a wide range of qualitative reasons to invest in mobile services.

Moreover, there are mobile services that will not drive sizeable benefits today but are increasingly becoming table stakes for many consumer product and services companies.

?Consumer expectations and use of their cell phones are growing rapidly,? Ms. Ask said. ?These changes in consumer behavior will drive the need for mobile expertise internally.

?Learning and gaining experience with mobile is a very real objective for many Forrester clients, even though the value is difficult to quantify,? she said.

Do not introduce more complexity than you can accurately quantify.

For example, marketers will likely use consumer survey data for interest in, adoption of and usage of mobile services in their calculations.

There is a margin of error in the data of a few percentage points.

Therefore, it does not make sense to try to estimate consumer adoption down to tenths of percentages, even if each percentage point represents 2 million to 3 million people in the U.S. or 3 million to 4 million in Western Europe.

?Build scenarios beyond two years out to account for potential game-changers like the Apple iPhone or Apple App Store that are difficult to anticipate today,? Ms. Ask said.

Do not get carried away with the theoretical calculations.

Saving 10 minutes per day, per pharmacist in 1,000 stores is effectively not a saving, because you cannot eliminate 2 percent of a person.

?Could they leave 10 minutes early, and could you save that money if you pay them by the hour? Yes,? Ms. Ask said. ?However, they will instead likely use the time for tasks they omit today, like tidying stock.

?Increased job satisfaction may be an added benefit, but it is difficult to quantify beyond lower staff turnover,? she said.