Not just impulse: Mobile promotions work longer than expected

Marketers are starting to harness location-based mobile technology to send text messages to customers who are nearby their clients’ businesses. These promos are usually designed to spur impulse buys, but businesses that use the one-day coupon could be missing out. Information Systems Professor Bin Gu has found that location-based mobile promotions work the day smartphone users receive them, the next day, and for several days thereafter.

Anyone who’s ever used the maps on a smartphone knows that Google knows right where you are. With mobile devices, marketers too can know where you are — like a block away from a restaurant that’s angling for new diners.

Marketers are starting to harness that information for location-based mobile promotion (LMP), which generally features text messages offering short-lived incentives that are designed to spur impulse buys. For example, the restaurant might offer you a free appetizer with your dinner.

Quick, impulsive purchasing is what most marketers target and expect from LMP, but coupons with one-day life spans and immediate sales goals may be selling marketers short, according to recent research conducted by Bin Gu, a professor of information systems at the W. P. Carey School of Business.

Gu found that location-based mobile promotions work the day smartphone users receive them, the next day, and for several days thereafter. He says it’s a mistake to assume such promotions prompt only immediate response. Even if customers don’t use the discount right away, chances are, they’ll come back another day.

Hand-held power tool

Location-based mobile promotions may be relatively new to the advertising scene, but they’re growing rapidly. Analysts at Gartner forecast that the mobile advertising market will more than double during the next two years and, by 2015, it’s likely to increase to $20.6 billion worldwide, or around 4 percent of total ad expenditures.

There are good reasons for marketers to jump on the mobile-promotion bandwagon, too. For one thing, consumer pay more attention to text messages than TV spots, magazine ads or just about any traditional marketing venue you can name, Gu says. According to the Mobile Marketing Association (MMA), mobile coupons get 10 times the redemption rate of traditional coupons, and 70 percent of mobile searches result in some type of action within an hour.

MMA statistics also reveal another reason promotions are so potent: We’re highly attached to our phones. A whopping 91 percent of U.S. citizens keep their devices within reach at all times. Since the communications carriers that keep us connected via our devices know where we are, they can help marketers reach us when we’re in the right spot to buy. It’s real-time marketing, Gu says, and it means hitting people when they’re in the right place at the right time to prompt a transaction.

What’s more, Gu adds, mobile devices let marketers reach exactly the right people at that right time and place. “A TV or a computer can serve a whole household,” he explains. That’s not the case with a mobile device. “It’s always carried by one individual, and marketers know a lot about that one individual.”

Gu points out that, unlike computers, which only track what sites you’ve visited via cookies, the service providers who support mobile devices know every app you’ve downloaded on your phone, plus they know your address, your social network, as well as the demographics that marketers would use to target you. “They have a huge amount of information from the consumer.” he says.

The medium is still the message

Because of this, there are several ways marketers can target consumers via smartphones or other mobile devices, and Gu’s research examined three of them. One communications vehicle was location-based mobile promotion via text message; another was based not on location but on past purchasing behavior, and Gu calls that behavior-based mobile promotion or BMP. The third was a communications tool popular in China, where Gu’s study took place. It’s an instant messaging feature linked to the mobile phones of people who use a service provider for their fixed-line internet service, as well. These consumers could receive the promotion two ways: via the IM client on their computers, or via a text message sent to their mobile phones.

Gu teamed with Xueming Luo from the University of Texas at Arlington, as well as China-based Zheng Fang from Sichuan University and Yunjie Xu from Fudan University to see if reaching people with mobile promotions when they were close to a movie theater would prompt folks to buy tickets for the show. The researchers were able to track the effectiveness of their promotions because recipients who received the offer had to buy the tickets from a designated mobile app in order to get the special discount, which meant payment went through the mobile service provider. Some three million mobile phone users came under review in the study.

The research examined same-day or contemporaneous movie ticket sales among the promotion recipients, plus it looked at next-day sales and long-term effects.

As it turns out, immediate sales accounted for only 34 percent of those who responded to the location-based mobile promotion. Another 19 percent of sales showed up the day after the promotion was sent. But the big surprise was the long-term impact of mobile promotions. Nearly half of those who responded – 47 percent – responded two or more days after they received the coupon. Responses persisted for nine days, indicating that location-based mobile promotions are longer-lived than most marketers think.

Location-based promotions also proved more long-lasting than those that were behavior-based or sent via the IM feature. The two latter promotion vehicles only spurred response for three days and one day respectively, while LMP kept bringing in sales for nine days.

Given the impact of mobile promotions, should marketers hit consumers via several channels? It depends on the channels, Gu say. He and his team examined the relationship between behavior-based mobile promotion, the mobile-linked IM message and location-based mobile promotion.

Study results showed that behavior-based mobile promotion and location-based promotions could be used as substitutes for each other and used alternatively. To a lesser degree, the same is true for the IM promotion and LMP, but when the IM showed up on the person’s phone instead of via the on the recipient’s computer, that promotion was 27 times more effective.

Gu maintains this is because LMP offers both a deal and a visual cue that makes it easier for customers to recall the promotion later on. People say, ‘Oh, I know the location for that. It’s right across the street.’

Wider horizons

Results from his study leave Gu feeling that marketers underestimate and underutilize LMP. “Right now, most mobile marketing is coupon based,” he notes. “But, you could use it for other things. You could say, ‘we have a new product,’ and customers will come to see that new product. Or, you can send a general marketing message.” In fact, he even thinks LMP has business-to-business applications.

Gu also believes LMP has impact for small, immediate purchases — like a snack from the local lunch truck — or bigger things … much bigger. “Someone isn’t going to walk in a store and buy a truck because he got a message on his phone,” Gu admits, “but that person may register that the Ford dealership has the new F150. Customers are paying attention. They may come back down the road.”

Bottom line:

• Mobile devices give marketers the ability to offer location-based mobile promotions (LMP).
• LMPs usually target immediate sales by offering short-lived coupons aimed at getting consumers to make impulse buys.
• Research shows that LMP is actually more long-lived than markets think. These promotions drew response for nine days during a study conducted in China, and two-thirds of responses came the day after the promotion was sent.
• Compared to behavior-based mobile promotions (BMP) and instant messages (IM) that can be relayed to mobile devices, LMP is the most persistent approach.
• Bin Gu and his co-authors believe marketers underestimate and underutilize LMP.