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Coupons Take to Third Screen

By Oct 01, 2006

Twelve Subway sandwich shop franchises in Buffalo, NY, broke a campaign in mid-August that offers consumers alerts and discount coupons via customers’ cell phones. Customers opt-in to receive periodic coupons, last minute specials and event alerts from their frequented Subway locations by texting 7299 (SBWY) to 35562. Restaurant signage supports.

“[These coupons] are a prime tool for brands wanting to portray a modern image and wanting to reach consumers 18- to 34-years old,” says Robert Wesley, president and CEO MobileLime, the Watertown, MA-based mobile marketing agency that developed the program for franchise owner QSR Brands. “We’re in the first stage of what we saw happen to the Internet,” he says.

With more than 200 million cell phone subscribers in the U.S., the opportunities for marketers to use the technology to reach a cross-section of consumers in the $7.23 billion coupon industry is endless.

Experts say the wireless coupons are cheaper to produce and distribute over a wireless carrier’s network than a paper coupon drop in newspapers and tabloids nationwide. And the coupons are not as prone to fraud (since cell phone numbers are used to ID customers in some cases at redemption). The latter is especially welcoming news for an industry notorious for consumers manufacturing coupon look-alikes.

But fine-tuning is needed and obstacles must be overcome, both on the merchant and consumer side, before the realm of Internet use described by Wesley is achieved.

On the consumer level, the Wal-Marts of the world are not rushing to use the technology just yet because “they don’t see this being used by mainstream consumers for at least five years,” explains Charles Golvin, a principal analyst at Forrester. The biggest impediment is uprooting consumers from the paper coupons they maybe comfortable using and taking them to mobile, he says.

On the merchant side, equipment needs to be developed to accommodate the redemption process at check out lines. Coupons reproduced as barcodes instead of a text code on cell phones will need to be scanned, Golvin says. “We’re talking about changing in a significant way the way [consumers] interact with retailers. Those things are quite compelling and take time to take effect,” he says.

Additionally, some wireless carriers are not as open as others to allowing companies to use their platform for mobile coupons, says Dan Bailey, co-founder of San Diego-based Astroleap, which develops discounts and promotions for clients via wireless phones.

“Cingular has an open platform where you can utilize their network to roll out these applications,” Bailey explains. Other carriers operate in a more closed environment, which means meandering through tons of rules and restrictions to implement a campaign, he says.

Nevertheless, brands have warmed up to the idea of planting discounts on to the ubiquitous mobile device.

One T.G.I. Friday’s franchisee offers Cingular Wireless customers a free appetizer or $5 off a meal of $15 or more by using a wireless coupon. Phoenix-based Main Street Restaurant Group, Inc., the T.G.I. Friday’s franchisee, brought the offer to life after testing the concept in 30 of its California restaurants in the spring. With more than 700 coupons redeemed, the franchisee expanded the offering to 57 other restaurants in several states including Arizona, Kansas, New Mexico, Nevada, and Nebraska.

San Jose, CA-based Cellfire, Inc. developed the platform for Cingular’s customers to use the discount. Customers get offers by entering their cell phone numbers on the Cellfire.com Web site. Coupons are then downloaded to phones. Main Street Restaurant Group pays CellFire $1 for each of the coupons redeemed at its T.G.I. Friday’s locations.

Meanwhile, with more than 1,500 stores nationwide, Bath & Body Works also uses the CellFire platform to offer customers a coupon for a free body lotion. Brian Beitler, VP of customer marketing for Bath & Body Works, says the company is excited about the prospect of connecting with its customers through the innovative new medium.

Other brands using CellFire include Hollywood Video, which dangles a rent-one-get-one-free movie coupon, Carlson Travel and 1-800-Flowers.com.

“The price of postage is going up,” says Cellfire CEO Brent Dusing. “So is the price of paper. Meanwhile, paper coupon redemption rates are steadily declining, as consumers are becoming increasingly inundated by paper. In fact, many paper campaigns cost more on a cost-per-acquisition basis than the product they’re promoting.”

Additionally, the coupons are more cost effective than paper with redemption rates from 15-30%, Dusing says. The coupons can also be updated instantly over wireless carriers’ networks, rather than the four-week lag-time for re-printing and re-distributing a paper campaign, he adds.

Last month, Southern Californians began using the coupons. Astroleap launched Eureka!mobile, an application that lets Cingular customers in the region text EUREKA to 90430 to receive coupons searchable by category. Southern California locations of fast-food chains Wienerschnitzel and Del Taco, smoothie franchise Juice It Up! and a Discount Tires franchisee use the technology to drive customers to their establishments.

“I’m very optimistic that this will be the way of the future,” Astroleap’s Bailey says. “From a vendor and user perspective, if you leave [a paper coupon] at home you won’t be able to use it.” Everyone carries their cell phones with them, he says.

In fact, according to a Visa USA Survey, 18- to 34-year olds are four times more likely to carry their mobile phone with them than cash; and 61% of those 25 to 34 would like to make purchases with the device.

Postal Annex, a San Diego-based shipping service, hopes its mobile coupons will translate into ringing cash registers at 64 of its locations citywide.

“We think this mobile application is exciting since many of our customers are often looking for our services at the last minute,” says Steve Goble, director of marketing communications at Postal Annex.

The shipper offers consumers $2 off ground shipping and $5 off air transportation charges for packages sent via UPS or FedEx. Consumers show the coupon on their phone to have the discount applied to their payment. Astroleap handles. In-store signage, TV and radio ads support.

Many of Astroleap’s client base consists of local merchants. As for bigger retailers, “We’re talking to them,” Bailey says.

QSR giant McDonald’s jumped on the coupon frenzy last spring when it dangled a free small order of fries or a hash brown to consumers in 74 Tulsa-area locations. Fast-food lovers text Open L8 to 73260 to receive the coupons on their wireless phones. Recipients then brought their cell phones to participating restaurants and showed the coupon to a cashier to redeem the offer. Dallas-based Moroch Partners and San Francisco-based Gamut Industries, which developed the mobile technology that delivered the mobile coupons, handled. At that time, Jennifer Smith, McDonald’s spokesperson for the west division, told PROMO that “a number” of other markets were sure to follow its lead.

As these brands and others implement, or figure out, where the technology fits, analysts predict wireless coupon usage will continue to climb.

“In the long term, the prospects for [mobile coupons] is fairly positive,” Forrester’s Golvin says. “It allows retailers and brand owners to improve the experience with their consumers and directly connect with them.”

Coupons already connect with 76% of the U.S. population, according to the Promotion Marketing Association. Marketers offered consumers more than 323 billion coupons last year and shoppers saved $3.47 billion using them, according to PROMO’s Industry Trends Reports.

Coupon Speak

Fingers are flying on cell phone key pads and with all that “clutter” about boyfriends, pink versus blue nail polish and whether to meet at Starbucks or Target, brands that want to slip in a coupon may fear that getting seen on the small screen may require a minor miracle. Here are a few tips to make sure your cell-phone coupon cashes in:

  • Discounts work; offer a great deal
  • Keep it simple. The best deals are easy to understand.
  • Provide a local store location for easy purchase
  • Use one-click ordering; consumers push a button on
  • the key pad and the lead gets to the order center
  • Include catchy graphics, the number of uses allowed for
  • the coupon, expiration time and length of campaign.
  • Brand. Brand. Brand: include an image of the logo and product.
  • Keep text to a minimum.
  • Source: Brent Dusing, CEO, Cellfire, San Jose, CA