Low Consumer Awareness and other challenges inhibit Mobile Coupon growth.

Gary Lombardo
Multichannel & Mobile Product Marketing Lead

Gary Lombardo manages mobile, multichannel and social commerce product marketing for Demandware, an on-demand ecommerce platform. Demandware’s platform enables retailers and brands such as Barneys New York, Kiehl’s, Lifetime Brands, Marks & Spencer, Michaels Stores and Procter & Gamble to deliver customized, multichannel shopping experiences to consumers. Lombardo spoke with eMarketer Writer/Analyst Tobi Elkin about the obstacles and opportunities presented by mobile couponing.

eMarketer: What are the key drivers for mobile coupons?

Gary Lombardo: The key drivers are smartphones and smartphone technology, which enable a better experience than what consumers are able to get on feature phones. For example, Michaels Stores lets customers see an entire coupon via a mobile app or potentially through mobile text alerts. Retailers can also offer coupons through their mobile websites.

eMarketer: What are the inhibitors?

Lombardo: One inhibitor is the lack of consumer awareness. Consumers don’t necessarily think of using their mobile device for coupons today. Instead they think of traditional paper coupons.

The world of ecommerce is separate in a lot of ways from the in-store systems, and that’s a common pain-point for retailers. Mobile coupons can be managed only through the mobile channel in the short term. But in the long term, retailers are going to need to figure out how to make mobile coupons truly multichannel.

“In the long term, retailers are going to need to figure out how to make mobile coupons truly multichannel.”

Campaign execution is also an issue in terms of how the display and creative are implemented and the frequency of distribution. There may be too many steps for the consumer to follow.

eMarketer: Are there redemption problems with mobile coupons?

Lombardo: Retailers must be able to say, “We issued this offer or that coupon. It was redeemed through this payment service.” Many retailers are still trying to figure that out.

Also, a lot of retailers don’t have optical scanners to scan mobile coupons. Most mobile coupons need to be printed out or shown to the person at the register. Sometimes there’s no matching of the issuing offer and redemption.

From the retail perspective, a lot has to happen in terms of the number of point-of-sale registers, rolling out the right hardware and software, employee training, reporting and everything else. It’s an enormous investment. Once those issues are overcome, retailers can close the gap and tie a particular consumer to a redeemed coupon.

eMarketer: Is fragmentation in the mobile device market a challenge for mobile coupon growth?

Lombardo: It remains a challenge because most retailers are issuing mobile coupons via native apps, and they need to develop apps for all of the platforms. A better way is to think about it is to offer coupons through a mobile website and third-party services with mobile capabilities.

This means leading everything back to your mobile website, which overcomes the fragmentation of devices issue. It enables customers walking into your store to pull up the mobile website and access the coupons and offers. In the long-term, I don’t think it will be a critical factor. Increasingly, the majority of mobile devices will be smartphones.

eMarketer: What is the potential for location-based services in mobile couponing?

Lombardo: Coupling mobile coupons with location-based services has huge potential. We’re already seeing that with third-party services like foursquare, Gowalla and others. Retailers should be viewing those services as distribution channels to get their offers out into the marketplace.

In addition, they need to aggregate those offers, coupons or loyalty components back to their websites or native apps. We’re going to see a lot of retailers look at how to offer location-based services in a much more intelligent, contextual and relevant way. That might be through the third-party services or via the mobile device’s GPS capability and mobile alerts. There are platforms out there like Placecast and a few others that allow for the geo-fencing concept. We don’t see anyone doing this today but hopefully we will soon.

“We’re going to see a lot of retailers look at how to offer location-based services in a much more intelligent, contextual and relevant way.”

eMarketer: Can you suggest any mobile couponing best practices?

Lombardo: The instructions should clearly indicate how to redeem the coupon or offer. Retailers or marketers need to make sure the UPC and barcodes are very clear. It’s also important to include an alpha or numeric promotional code in case the primary validation method, like the scanner, doesn’t work at the point of sale and a salesperson needs to input the code.

I’ve seen so many bad examples of coupons where you don’t understand what the offer actually is, or there’s so much fine print. The consumer getting confused over how to redeem the coupon—that’s also a key inhibitor to mobile coupon growth. We’re in the early days of being very clear about how to redeem mobile coupons.

Achieving the right frequency for mobile coupon offers is also important. We have a customer that did some mobile alerts about an offer around Super Bowl time. They had great results but hadn’t done a subsequent offer in three months. Establishing the right cadence is really important once you’ve established initial awareness. They should have taken advantage of existing channels to disseminate more offers.

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