Embed Size (px)
Citation preview
Opportunities for Action in Consumer Markets
M-Commerce Changes theMarketing Game
M-Comm 01/01 1/8/01 9:11 AM Page 1
M-Commerce Changes the Marketing Game
Mobile commerce will sweep across much of theWestern world over the next three years, creating new opportunities to captivate the most valuable consumers. Advanced second- and third-generationbroadband technologies (2.5G and 3G) will offerwhat has only been dreamed of: the chance to com-municate with and promote products and services toindividuals in all segments of a market. The promiseof instantaneous one-to-one database marketing isnow a reality.
That reality began over the past year with auctions for3G mobile-phone licenses in Europe, where the bid-ding was far higher than expected. In the UnitedKingdom, offers capped out at nearly U.S.$34 billion.Bids in Germany reached $50 billion. In both coun-tries, bidders have committed to paying more than$600 per capita just for the licenses; start-up costs andadditional investments in technology are likely to beequally large. Since those auctions, the market hasbecome disenchanted with the telecom sector, andauctions in other European countries have failed toreach the same heights. However, expectations for thepotential of next-generation mobile networks remainhigh. Within a few years, 3G auctions are expected inthe United States; their outcome is anyone’s guess.
The high costs of setting up 3G mobile services havesignificant implications for retailers and consumerservice providers. We believe that the power nowresiding with the companies that control the commu-nication spectrum will shift to the companies thatown customer franchises. Mobile network operators,particularly new entrants with small or nonexistentcustomer bases, will be under immense pressure to
M-Comm 01/01 1/8/01 9:11 AM Page 3
recoup their license and network investments. Con-sumer companies that can deliver large numbers ofloyal customers to those operators could be in a posi-tion to negotiate favorable deals for themselves andtheir customers. Furthermore, these deals could gofar beyond traditional cobranding and comarketingarrangements, opening up many opportunities.
Third-generation technology promises to provide abundle of Internet-enabled mobile services—every-thing from instant messaging and video games toalerts and reminders—as well as myriad forms of per-sonalized and location-specific commerce. These ser-vices represent much more than just a new channel.Depending on which forms of m-commerce con-sumers eventually favor, marketers could use 3G tech-nology to extend their brands in many directions. Aretailer could, for example, act as the middlemanbetween existing customer bases and m-commerceproviders. In that role, the retailer could obtain ashare of the revenue stream—in the form of commis-sions or fees from transactions involving m-commercegoods and services—while enhancing its own cus-tomer franchise.
Banks, retailers, media companies, and even car com-panies could also step into the shoes of some of theweaker 3G license winners and become so-calledmobile virtual-network operators (MVNOs). In thatrole, they would become the newest wireless players,offering competitive phone service and a free phone,which would just happen to connect directly to theirown Internet portals.
There is little time to waste. Within four years, 350million people worldwide are expected to be usingthe mobile Net, up from a relative handful now. Thattransformation will have a lasting effect on all aspectsof buying and selling. As consumers begin to think
M-Comm 01/01 1/8/01 9:11 AM Page 4
differently about how they shop and make purchases,marketers will have no choice but to think differentlyabout how they attract and retain those consumers.
The New Retail Connection
Wireless service providers make money selling “talkminutes.” But as competitors have proliferated, tariffsfor phone calls have plunged. Mobile data and theInternet will now be the strongest drivers of growth.
As mobile technology advances, consumers might usetheir wireless phones to pay for products from vend-ing machines, locate parking spaces, call up moviereviews, check train schedules, book concert tickets,and even contact prospective mates through datingservices. They will be able to send pictures and music,gamble, balance their checking accounts, and makepoint-of-sale purchases. A consumer in a bookstoremight be able to compare the cost of buying a book atthe store with the costs of ordering it online andreceiving it in a few days or in an hour.
The benefits on the supply side are equally exciting.In Japan, NTT DoCoMo’s i-mode service, which deliv-ers both voice and data through a palm-sized termi-nal, is providing retailers with opportunities to steercustomers into their stores. For example, Tsutaya,Japan’s largest video-rental chain, e-mails i-mode usersdiscount coupons, which they can redeem in videostores. During periods when the company has offeredsuch promotions, it has seen rental fees jump nearly60 percent and sales of nondiscounted productsincrease substantially as well. In the future, retailerswill be able to beam real-time offers to i-mode sub-scribers on the basis of where they are at any mo-ment, so that a restaurant, for example, might enticea hungry passerby.
M-Comm 01/01 1/8/01 9:11 AM Page 5
In addition, the ability to link an e-mail address to thesender’s phone number creates an opportunity formarketers to send text messages to mobile phoneusers while customer service representatives stand byfor voice replies. And because marketers can easilyaccess callers’ buying preferences and other personalinformation, they can send customized advertise-ments and discount coupons to individuals over theircell phones.
Consider what TeleVend is doing. This small telecom-munications vending company based in Israel is pilot-ing a program with several fast-food and other retailbusinesses in New York to allow customers to pay forpurchases using their mobile phones. Customers sim-ply dial a number and, after a brief authenticationprocess, the transaction is charged to their phone bill,credit card, or bank account. Once they are in thesystem, users can receive customized ads and dis-count coupons.
One of the most interesting features for retailers maybe the speech recognition technology that TeleVendis developing, which will allow customers to makepurchases using a “voice signature.” If the technologyworks, the security it provides could pave the way forclerkless transactions in stores.
The ability to speed the transfer of personal datafrom customers to service providers will also affectthe transportation industry. Delta Air Lines is alreadyworking with IBM and Modem Media, an e-commercecompany, to develop and test a service that will notonly give customers wireless access to flight and gateinformation but also allow them to purchase ticketsand make flight changes using their hand-held organ-izers and mobile phones.
M-Comm 01/01 1/8/01 9:11 AM Page 6
From E-Commerce to M-Commerce
As the mobile Net becomes a bigger force, how willm-commerce marketers attract and keep customers?Early data from Japan suggest that controlling portalaccess will be crucial. Retailers can’t control portalaccess for personal computer users, but they could fortheir own mobile phone subscribers. Through theirown portals, retailers could offer services provided bythemselves or by others with whom they have revenue-sharing arrangements.
Retailers gain another advantage from mobile tech-nology. Whereas online retailers have to wait for peo-ple to log on to their computers, mobile retailers willbe right beside them, in their purses, briefcases, andglove compartments. And i-mode service is alwayson—the user doesn’t have to dial in to access theInternet or to receive messages.
The most successful mobile retailers will use theseadvantages to add richness to their reach. Rather thansimply booking a customer’s plane reservations, forinstance, a mobile retailer could serve the customerthroughout her vacation by providing informationabout flights, recommending accommodations, sug-gesting activities and venues, finding local doctors,and helping with itinerary changes.
Some branded marketers are already leaping into themobile business. Richard Branson, chairman of TheVirgin Group, purchased idle cell-phone capacity inBritain and launched his own phone service, VirginMobile, in November 1999. By leveraging Virgin’sbrand, customer franchise, and distribution skills,Virgin Mobile has grown rapidly, gaining half a mil-lion customers in its first year.
M-Comm 01/01 1/8/01 9:11 AM Page 7
Planning Ahead
Now is a good time—before 3G has arrived—for con-sumer marketers to investigate whether they mighthave real m-commerce opportunities. Some compa-nies may even want to jump in with a 2.5G deal, asVirgin Mobile has, and be ready when 3G hits. Bearin mind, however, that not all of the m-commerceproducts and services that have been predicted willmaterialize. Therefore, marketers should ask them-selves several questions before they commit to an m-commerce strategy:
Do our target customers have mobile phones? If theydo, you can expect that those people will soon ownwireless Internet-enabled personal assistants, whichwill provide a range of services.
Could we enhance and deepen our existing relation-ships with customers by offering personal mobile ser-vices linked to our core proposition? If the answer isyes, then you should play in the m-commerce space.Otherwise, you risk losing your customers to competi-tors with a superior proposition.
Is our brand strong enough to market a bundle ofpersonal mobile services? If this answer is also yes,you need to consider offering your own mobile ser-vices as an MVNO. This would enable you to controlthe total customer proposition—as well as the cus-tomer data—and capture m-commerce commissionsas the mobile portal. In particular, you should con-sider how becoming an MVNO could enhance youroverall offline and online brand.
If you decide that there is a wireless opportunity foryour company, the next steps are to develop youroffering and the commercial relationship that youcan bring to a mobile network operator as a partner.
M-Comm 01/01 1/8/01 9:11 AM Page 8
Without a doubt, mobile technology will elevate con-sumer database marketing to a new level. Althoughno one knows which forms of m-commerce will provecompetitively sustainable, the ability to communicateand do business with individual consumers—whereverthey might be, whenever they might choose—willundoubtedly pave the way for new kinds of productsand services as well as new ways of marketing them.Armed with enormous customer bases and marketingsavvy, retailers entering the mobile services businesshave the potential to become powerful forces in theirnewly adopted industry. The brave new world ofmobile buyers and sellers is just around the corner.
Henry ElkingtonMia Kirchgaessner
Tomas Linden
Henry Elkington is a vice president and Mia Kirchgaessnera manager in the London office of The Boston ConsultingGroup. Tomas Linden is a vice president in the firm’sStockholm office.
You may contact the authors by e-mail at:
We invite you to post comments and questions to the authors
online at www.bcg.com/discussion/board.asp?forum=6. Or just
visit the site to see what other readers have to say about this topic.
Authors will respond within three days. We hope to generate a
lively discussion and welcome your participation.
© The Boston Consulting Group, Inc. 2001. All rights reserved.
M-Comm 01/01 1/8/01 9:11 AM Page 9
AmsterdamAtlantaAucklandBangkokBerlinBostonBrusselsBudapestBuenos Aires ChicagoCologneCopenhagenDallasDüsseldorfFrankfurtHamburg
HelsinkiHong KongJakarta Kuala Lumpur LisbonLondonLos AngelesMadridMelbourneMexico CityMilanMonterreyMoscow MumbaiMunichNew York
OsloParisSan FranciscoSão PauloSeoulShanghaiSingaporeStockholmStuttgartSydneyTokyoTorontoViennaWarsawWashingtonZürich
01/01www.bcg.com
M-Comm 01/01 1/8/01 9:11 AM Page 12
