Mobile Commerce for the Holidays

© Copyright 2008. Yankee Group Research, Inc. All rights reserved. www.yankeegroup.com

Mobile Commerce for the Holidays

Jon PaisnerSenior Analyst

Andy CastonguayDirector

© Copyright 2009. Yankee Group Research, Inc. All rights reserved. www.yankeegroup.comNov. 17, 2009

© Copyright 2009. Yankee Group Research, Inc. All rights reserved. Page 2Nov.17, 2009Mobile Commerce for the Holidays

Agenda

• Device Trends: Mobile Phones as Gifts

• Integrating Mobile into the Retail Shopping Experience

• Using Mobile to Drive Incremental Store Traffic

• Conclusions and Recommendations

• Q&A


This holiday season, will you use your mobile phone to compare prices or product information?

Poll 1Poll 1


Future smartphone brand

What brand of multimedia handset do you expect you'll buy?

34%

43%44%45%

41%

46%

40%41%

44%

25%23%24%

27%

33%33%

37%

29%31%

10%8%

9%7%

6%4%4%

6%4%

8%

12%

6%6%5%

3%4%

11%

7%8%

5%6%5%5%

6%

3%

7%6%

12%

6%7%

6%4%

3%5%

2%

5% 4%2%2%

3%5%5%

8%

5%4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

13-15 (n=236) 16-17 (n=152) 18-19 (n=172) 20-24 (n=429) 25-34 (n=851) 35-44 (n=748) 45-54 (n=499) 55-64 (n=275) 65+ (n=157)

Percentof

RelevantRespondents

Blackberry Apple Windows Mobile-based phone Nokia Palm Other Android-based phone (such as the G1)

Base: People who say they are very likely to likely to buy a multimedia handset


Strong demand for advanced OS devices is driving the growth of that segment, at the expense of others

How Likely Is It That Your Next Mobile Phone Will Be a Multimedia Device with a Data Plan?

Very Likely

16%

Likely16%

Unsure

29%

Not Likely 21%

Very Unlikely

18%

Total Device Volumes (in Thousands)

32%

27%9%

Source: Yankee Group Anywhere Consumer: 2009 U.S. Survey Suite, Wave 1-6


As smartphones go, so will feature phones

WiFiWiFiCDMA EVDO revACDMA EVDO revA3G HSPA3G HSPA

ARM1176JZF 620MHz

ARM1176JZF 620MHz

Qualcomm MSM7201A 528 MHz

Qualcomm MSM7201A 528 MHzProcessorProcessor

DeviceDevice

Samsung Instinct

Samsung Instinct

Qualcomm MSM7600 528 MHz

Qualcomm MSM7600 528 MHz

Blackberry Bold Storm

Blackberry Bold Storm

ConnectivityConnectivity

Apple 3G iPhone

Apple 3G iPhonePalm

Pre

PalmPre HTC G1HTC G1

LaptopsLaptopsNetbooksNetbooks3G Smartphones3G Smartphones2G Phones2G Phones MIDsMIDs

N97N97

“Smart” feature phones will drive significant volume


Monetizing mobile services

Which applications are you prepared to pay for?

50%

31%

30%

26%

16%

16%

8%

1%

37%

0% 10% 20% 30% 40% 50% 60%

None of the above (n=6134)

Other (n=6134)

Live TV (n=5017)

Navigation (n=5017)

Access to an online community orsocial networking site (n=1352)

Photo messaging/MMS (n=6134)

Mobile internet access and data(n=5017)

E-mail (n=1352)

Text messaging/SMS (n=6134)

Percent of respondents

Base: People with a mobile phone

Communications-centric, not entertainment-centric


Number of paid applications

How many applications have you paid for? (n=649)

1337

35

13

34

64

105

384

0

50

100

150

200

250

300

350

400

450

0 1 2 3 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29

Numberof

respondents

Base: People with a smartphone who have downloaded apps

• 60% have not paid for an app

• 16% have paid for one app

• 10% have paid for two apps


U.S. smartphone app store revenue will exceed $4.2 billion in 2013


Agenda





• Q&A


How do you plan to use your mobile phone to compare prices or product information?

Poll 1Poll 2


Case study: Starbucks 2-D bar code application

• Starbucks 2-D bar code: fill prepaid card and pay at the point of sale (PoS) with a bar code

• Run all authentication through PoS infrastructure

• On a pilot basis, available at just 16 stores in the Silicon Valley and Seattle areas

• Replacement for lost/stolen phones

• Launched a 2nd application nationwide to check balances and reload

• Average Apple App Store rating of 3.5 stars with 2,165 ratings


Technology challenges facing mobile coupons

• The quality of the camera phone is a determining factor

• Screen distortion can be a problem

• Multiple code types require multiple application readers

• Accessing coupons at the PoS, whether through SMS or WAP, must be instantaneous


Drivers and inhibitors for mobile coupons

• Key Drivers– Consumer income level skews to the higher end– Availability of data packages

• 61% of SMS, MMS packages• 22% have data plans and can search and download coupons through the mobile

Internet

– Personalized coupons see higher redemption rates, and mobile enables that– QR codes are a zero-cost approach, with no licensing costs from the patent

holder

• Key Inhibitors– What happens when a campaign is run and the advertiser wants to change

vendors? Who owns the codes?– Requires a national clearinghouse model, similar to number portability– Integration at the PoS

• Cost of redeeming coupons• Queue management

– Consumer understanding of the code types


Evolution of mobile coupons


Mobile coupon interest increases with annual household income

The higher the income, the higher the interest in mobile coupons. Regardless of whether the consumer is sent an MMS, SMS or a bar code.


Consumers don’t care about the mobile coupon delivery method, as long as it’s free

Thinking about mobile couponing, please rate your experience or interest in the following activities on your mobile. (n=1931)

73%

74%

6%

12%

7%

4%

13%

9%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Using the phone's camera toscan images or bar codes

(such as in a magazine or ona billboard) to get more

information on a product orservice or receive coupons

Using the phone to receivecoupons via SMS or MMS

Percent of respondents

I'm interested, but only if it were free I'm interested, and would pay extra for it I've done this in the last 3 months I would not want this

Base: Anyone who would consider mobile couponing


The mobile coupon market remains small until 2013

• Advertisers and merchants are wading slowly into the mobile channel

• Merchants are quite concerned about redemption at the PoS

• Integration into a loyalty program is expensive and time consuming; should you just invest in Near Field Communication (NFC)?

• Market isn’t open; there are too many closed code types and app readers

Mobile Coupons Redeemed

0.2 2.311.3

34.4

66.9

0

20

40

60

80

2009 2010 2011 2012 2013

Millions

North America

Value of Mobile Coupon Transactions

2365

1122336625

0

1000

2000

3000

2009 2010 2011 2012 2013

North America

Millions


Agenda





• Q&A


If you plan to visit a mobile Web site to compare price or product information, where will you go?

Poll 1Poll 3


Driving incremental store traffic

Main question: Is this going to help me sell more widgets?

• Link consumers to:– Location– Reviews– Real-time promotions– Content /video

• Focus on perishable items such as concert tickets, sporting events and food – Deal of the day– Approaching storm (can drive foot traffic)

• Technical challenges– App developers must have access to location– Mobile content delivery networks (dedicated pipes) are necessary if you want to

download video and ensure QoS– 3G/4G network certainly impacts the customer experience

• Align retailer and manufacturer interests– Price comparisons are not what the merchant wants, but maybe the manufacturer

doesn’t mind if the consumer visits another store for a cheaper price


Mobile codes provide more than coupons

Loyalty Programs

Personalization

Device Detection

Location

Mobile Campaigns

• They require limited upgrade to infrastructure if PoS redemption is not required

– Handsets from Nokia, Pantech, Samsung, LG, etc., are shipped with code readers

• They avoid consumers having to enter long URLs; great for in-store opt-in campaigns

– Can provide coupons, content, video, etc.– Can integrate inventory, location, directions

• The cost of embedding them in a poster, newspaper, etc., is essentially $0 (vs. $$$ cost of integrating NFC chips into a campaign)

– Access mobile Web pages, download content, engage with mobile advertising, find a location, etc.

• Extremely popular in Japan but haven’t expanded further


Case study: IKEA’s use of SMS

• Customers text to a predetermined short code

• Customers scan the SMS from their handset when they arrive at the store

• Customers print a paper coupon to use at the checkout PoS

• IKEA sees a 10-45% response rate through the bCode campaigns– Key user demographic is females aged 18-49; secondary demographic is

families

• Scan and redemption data are offer-specific, store-specific and user-specific

• Campaign management– Offers can be configured online and deployed in real time– All reporting data is available online in real time, and for CSV exports– All touch-screen interactions are Adobe Flash-compatible, allowing for a

variety of rich multimedia interactions in-store– Adobe Flash content can be updated in real time via online tools


PullPush

Push vs. pull: bar codes or SMS?

• Push messages are best through SMS because consumers have already opted-in through another channel

– Asking consumers to remember a short code can cause fallout in a “pull” scenario

– Contrast: Highly successful for voting, e.g., American Idol

• Cost of MMS/SMS should not be borne by consumer

• SMS/MMS is a common format used around the world (want lowest common denominator to reach prospects)

• Use SMS short codes as a way for consumers to opt-in

• Pull interactions should be handled through an application

– Should be as easy as possible for consumers to obtain content

• Hybrid approach of SMS and bar code scanning is best

• Sales/transactions should not occur yet; push only information or free content

– Linking consumer pull activities with coupons should not occur at the PoS

– Consumers can opt in through a pull mechanism but discounts should be received via a monthly statement


Agenda

• Device Trends: Mobile Phone as a Gift




• Q&A


Conclusions and recommendations

• The time is now: Mobility should be integrated into your 2009 holiday season

• Launch SMS for push and 2-D bar codes for pull campaigns

• Do not charge consumers to receive MMS/SMS messages if they do not have a messaging bundle

• Create time-sensitive and personalized campaigns, but don’t try to combine offers and sales directly through the mobile channel


Q&A

Look for these reports from Yankee GroupAvailable from shop.yankeegroup.com or through our client Web portal

– ‘Tis the Season: Mobile Retailing Will Transform the 2009 Holiday Shopping Season by Christopher Collins

– Bundle Up for the Holidays by Dmitriy Molchanov

– Yankee Group's Mobile Coupon Forecast: Integrating Mobile Into the Retail Shopping Experience by Jon Paisner

– Forecasting the U.S. Mobile App Gold Rush by Carl Howe and Andy Castonguay

© Copyright 2008. Yankee Group Research, Inc. All rights reserved. www.yankeegroup.com

Jon Paisner, senior analystAndy Castonguay, director

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