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Understanding mobile coupons

By Dean Macri

For advertisers, the mobile phone is an ideal medium for communicating promotions to targeted consumers.

Advertisers are increasingly launching campaigns that include mobile coupons, driving retail traffic and increasing sales. Mobile phones are always with the consumer at checkout.

For that reason, mobile coupon redemption rates today exceed print coupon redemption -- on average 5 percent to 6 percent versus paper's 2 percent.

Effective approaches to mobile coupons
Mobile couponing takes many forms, each with strengths and limitations.

In most cases, a mobile coupon itself is not an actual coupon, but rather a promotional communication displayed on the consumer's mobile device. Mobile coupon types range from:

â?¢ A simple text message alert offering discounts and promotions
â?¢ A uniquely coded offer that requires validation at point of sale
â?¢ An alert containing a link to an advertiser's promotional offer
â?¢ A mobile coupon tied to a retailer's loyalty program

Text-message alerts
The simplest form of a mobile "coupon" is a basic text-message alert that merely communicates an offer.
For example, "Receive 10 percent off all flat-screen TVs. This weekend only."

Such promotions, of course, are available to all consumers. However, consumers who opt-in for alerts improve the success of the promotion, since an alert is targeted and provides added incentive for consumers.

Another advantage of text-alert campaigns: They reach a mass-market audience across virtually all phones, and are relatively easy to execute.

In addition, consumers can opt in for periodic alerts through the advertisers' traditional media.

Mobile promotions validated at point of sale
Advertisers often want to offer unique promotions to select customers through a conventional coupon.

In this case, only consumers who opt-in to receive mobile promotions get the offer. Consumers simply display the offer on their phones at the point of sale, validating their discount or promotion.

Mobile messages can also contain a unique code that can be entered at the register. These codes allow advertisers to measure and track the promotion and guard against consumers reusing the coupon offer.

Beyond the limits of text-based coupons
The problem with text-based mobile coupons: They contain just that -- only text.

Moreover, wireless carriers limit the size of each text message to 160 characters -- actually less given characters required for disclaimers.

Furthermore, a text message cannot accommodate UCC and EAN bar codes, nor contain a unique or impactful image.

MMS-based mobile coupons
In contrast, mobile alerts can be delivered to consumers via an MMS (Multimedia Messaging Service), which can contain multimedia objects such as images, audio, video and rich text.

While more graphical than plain text, an MMS transmission is much more expensive to deliver than text messages. (Imagine a 50-cent coupon that costs 20 cents for the advertiser to send and 10 cents for the consumer to receive.)

An MMS can include images of UPC bar codes, but those images cannot be accurately scanned by most point-of-sale scanning devices, preventing tracking and measurement.

Mobile phone scanning snags
If today's POS scanning devices fail to read the code on a mobile phone screen, the cashier must manually enter both the UPC and the discount offer code directly into the register.

However, manual entry of codes is less than ideal. Grocers, in particular, take exception to anything that slows check out.

Mobile links to coupons
An economical alternative exists to MMS couponing with significant benefits to the advertiser.

A mobile text message can be sent with a link that, when selected, opens to a page with a coupon image (for example, "$25 off H&R Block's tax preparation for new clients").

The landing page's design can contain rich objects, colors and type styles, delivering a more eye-pleasing and effective mobile coupon than just plain text. The tracking code can be made easier to read than plain SMS text. And after a given expiration date, the coupon can literally disappear from the consumer's mobile phone.

Coupons within branded mobile applications
A mobile coupon can be packaged as a feature within a retailer's mobile Internet (WAP) site or downloadable handset-resident application.

The coupon appears as one of several menu choices. For example, WAP sites and applets might display a menu item such as "Alerts and Coupons" -- as shown in the Lowe's mobile site -- or "What's free today."

Consumers who click on "Alerts and Coupons" can opt in to receive periodic text messages for store specials, promotions and discount offers.

The text message contains a link that returns the consumer to the WAP site, where the coupon is displayed. This method encourages frequent use of the advertiser's mobile app.

Coupons delivered within a mobile application give advertisers the ability to track and capture the behavior of consumers.

They understand, for example, how often particular offers are viewed and how many are forwarded to friends.

In addition, some mobile vendors can track the behavior of unique consumers and provide their clients with valuable information for segmentation and targeting.

Advertisers must decide what coupon types to offer within their mobile applications.

For example, does a consumer simply display his or her mobile coupon to a store clerk or does a tracking code need to be captured for redemption?

If consumers only need to display their coupons at point of purchase, what is to prevent them from using a coupon several times to obtain multiple discounts or offers?

Mobile technology exists that allows advertisers to set the number of times each coupon can be opened -- say no more than two occurrences before it expires -- literally disappears.

Mobile coupons attached to loyalty cards
Most coupon marketing today still requires the collection of an actual paper coupon.

The reason: a paper coupon, printed with its unique codes, is essential for financial reconciliation of trade-dollar agreements. Therefore, the use of paper coupons will continue, especially in the grocery industry.

Nevertheless, mobile coupon campaigns can still be implemented successfully.

These campaigns integrate the mobile promotion with the grocer's loyalty card program. Consumers register to receive discounts and promotions offered in the packaged-goods marketer's mobile application. Consumers simply enter their loyalty card ID into the mobile application once.

This action effectively ties the mobile application to the retailer's loyalty program.

From this point forward, consumers receive automatic discounts at the register when they use their loyalty card.

Because the consumer has registered for the discount, the packaged-goods marketer can then send mobile alerts to the consumer's phone that announce new discount offers.

Retailers become proponents of these mobile applications, since they provide an additional incentive to use loyalty cards and drive store traffic.

A typical mobile application scenario for retailing:
Step 1 The packaged-goods company promotes its mobile application on in-store displays and other demonstration collateral. The promotion encourages consumers to use their phones to register their retailer loyalty card number in the mobile application in order to:

â?¢ Obtain automatic discounts at the register, and
â?¢ Receive text-message alerts of store discounts

(When a consumer enters his or her loyalty card number, the mobile application updates the retailer's loyalty program database, which in turn triggers store registers to discount products from packaged-goods companies offering price reductions.)

Step 2 The packaged-goods company sends a text message to consumers' phones, alerting them of a discount campaign, and explaining that the use of the store's loyalty card at check out will automatically apply the discount.

Step 3 Consumers, incented by the mobile alert, enter the store and select from the shelf the packaged good promoted on their phone. They proceed to checkout and, upon presenting their loyalty card, receive the price reductions.

How will consumers discover your mobile coupons?
How can retailers and brands promote mobile discounts and promotional offers along with their mobile applications?

For mass-market reach, they can acquire mobile common short codes (five-digit phone numbers) and keywords and use them in traditional media (print ads, out of home, radio and television).

Also, short codes can appear in catalogs and Web sites, posters, store circulars and direct mail.

In addition, in-store sales staff can be trained to collect customers' mobile phone numbers at checkout, indicating that the phone number will be used to send only occasional text messages on discounts, coupons, new products and events.

It is important to send an opt-in text message confirming the consumers' interest to participate.

This message might also include a link to a branded mobile application, offering free utility of strong interest to subscribers, in addition to the coupons.

What to offer?
Many offers can be presented within your mobile application, among them: price reduction; free merchandise; buy-one-get-one free; time release (coupons, distributed together, that have different expiration dates, encouraging repeat purchases); crossruff (the consumer gets a coupon for one product, often related, when purchasing another); sweepstakes entry redeemable only at specification stores or locations; and universal (a manufacturer distributes a coupon good on multiple products).

Although mobile couponing, in its various forms, will not make paper coupons extinct immediately, coupons on mobile phones will continue to flourish.

Mobile coupon benefits
â?¢ Increase store traffic and Net Outside Sales (NOS)
â?¢ Deepen brand loyalty and encourage return visits to your mobile presence -- through text alerts and in-application offers that change frequently
â?¢ Encourage use of store loyalty cards using mobile coupons as a new customer-acquisition and retention channel
â?¢ Promote products based on consumers' behavior within a firm's mobile application
Gain a database of opt-in mobile numbers

Dean Macri is founder CEO of Boston-based Cielo Mobile, a mobile technology and marketing services agency. Reach him at .