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How to create an effective mobile coupon program

By Meaghan Schaefer

Are die-hard paper coupon clippers finally ready to embrace technology and change their ways?

According to a study by Yankee Group, the answer looks like a resounding, “Yes.”

The study found that the number of mobile coupon users in North America is set to increase more than tenfold in 2010, followed by triple-digit increases in both 2011 and 2012.

All in all, some $2.37 billion-worth of mobile coupon transactions will take place in North America in 2013, up from just $5 million this year, per Yankee Group.

Many marketers have experienced great success with targeted and measurable online discounts and affiliate programs, and have started using mobile coupons to extend the capabilities of their online marketing to reach in-store customers.

A recent study from Harris Interactive shows that only 4 percent of Internet users have redeemed mobile coupons, compared with 86 percent who clipped paper coupons and 65 percent who used online or email coupons.

But the reality is that these digital coupon incentives are catching on quickly and marketers have an opportunity to leverage this new technology to enhance their consumer targeting and advertising efforts.

Targeting the “perfect” customer
Mobile coupons are highly measurable. Marketers can see not only how many coupons were redeemed, but which type of customers or segments responded to which offer.

Marketers are mastering the creation and delivery of these personalized digital coupons, either by sending an actual coupon to a mobile phone, with a bar code or coupon code embedded in it, or by alerting a customer to a personalized digital coupon promotion via email or text message.

Some platforms take into account an individual’s past purchases as based on recent credit card transactions, using behavioral targeting to deliver relevant discounts. Consumers find out about the current incentives loaded onto their cards via emails, text messages, or an online portal.

For example, a sporting goods retailer could target all people who have bought sports equipment in the past 60 days from other retailers with a 20 percent-off incentive on their next purchase. A shopper receives a text message that the “coupon” is on her card and heads back to the store to make a purchase.

Execution is key
Getting started with mobile coupons can be tricky, but, following are tips to get marketers on their way:

1. Define your goals. Do you want to connect with a hard-to-reach target audience? Do you need to increase average order value or transaction amounts?

Maybe you want to focus on new customer acquisition, build loyalty with existing customers, or get them to return sooner and buy more frequently.

All of these goals are valid, and the type of incentives you offer will vary depending on which goal is most important to your brand today.

2. Select the right marketing technology partner. The mobile marketing platform you choose to communicate and reconcile the incentives is key.

The right technology will enable you to analyze customer purchase trends to come up with the right incentives for each target group, as well as ensure your incentives are easy for consumers to redeem.

The system should also allow you to track redemptions and analyze purchase patterns so you can fine-tune future incentive offers, as well as compare bottom-line ROI results of your incentive offers against other marketing programs.

3. Gather data and optimize campaigns. Another added benefit of mobile coupon programs are the data you can collect on individual shopping patterns and preferences as people redeem the incentives in-store.

By mining and analyzing this cross-channel data, you will get a clear picture of which promotions are working and how different segments and demographics react to specific offers.

You can then create more effective incentives, targeting key customer segments based on demographics, preferences, geography and purchase data.

Redemption methods
Redemption is imperative, and at this point in the industry’s evolution, the best options for redeeming digital coupons are systems that require the least amount of change for both the consumer and the marketer.

It is critical to understand how the system you choose will work on the backend to reconcile an offer.

Five most common redemption methods
1. Consumer presents a phone displaying a discount offer and the cashier rings up the purchase with a discount.
2. Cashier manually enters a code displayed in the mobile coupon to generate a discount.
3. Cashier scans a bar code embedded in the mobile coupon.
4. Consumer downloads coupons to a store’s loyalty card through a Web site or smartphone application, and the discount is applied when both loyalty card and payment card are swiped at the checkout.
5. SMS and smartphone applications alert consumers that discounts have been loaded directly to a consumer’s credit or debit card, and discount is automatically applied when the consumer uses a card to pay.

Challenges and looking ahead
The challenge for many of these redemption methods is getting both consumers and retailers to alter their behavior.

Many consumers are not yet comfortable with handing over their phones at the checkout to receive a discount.

Even more problematic is the training required for store clerks to accept mobile coupons.

A customer waving a mobile phone in front of them saying, “I have a coupon on here,” is still a rare occurrence that most cashiers are ill-equipped to handle. That is why “coupon alert” services tied to payment or loyalty cards are quickly gaining popularity.

Mobile coupons hold the promise of both direct marketing and one-to-one marketing.

By delivering highly personalized incentives to a person’s mobile phone, marketers are promoting their brand right into the pocket of their target audiences at key influence points.

The mobile commerce and coupon ecosystem will be one to watch as brand advertisers capitalize on this innovation.

Meaghan Schaefer is chief marketing officer of ed? Interactive, San Francisco. Reach her at [email protected].