Thinking is moving along on the use of smartphones with Near Field Communications (NFC) for Location Based Marketing.  How can NFC help to drive customers to your door and encourage them to buy something?

The first thing to say is that it’s not primarily about payment.  Payment by mobile is rolling out at an excruciatingly slow pace – not because of any technology challenges, but because of the battle for control between Mobile Network Operators, Financial Institutions, and large disruptive players like Google and Apple.  That’s a story for another blog.

Instead, let’s consider two traditional ways of attracting customers and increasing sales: outdoor advertising and coupons.  There are problems with both that NFC can potentially solve.

With outdoor advertising, it’s hard to know how effective it is: you don’t know who’s seen it, you don’t know where they saw it, and you don’t know whether it encouraged customers to come to your retail outlet/restaurant/bar/night club/website.

Now imagine your ads contain an NFC tag (known as a “smart poster”).  You place them in likely places: bus shelters, motorway service stations, shopping malls, railway stations, outdoor maps – anywhere where people are walking by, potentially interested in what you have to offer.  The ad invites the customer to touch their phone to the tag; this will: give him/her information about you; give them the opportunity to come to you for your latest offers; invite them to register with you so you know who they are; and tell you which locations are most effective for advertising and when.  The fact that they have touched your ad tells you they are already minded to visit you – the rest is up to you.  You can try different tactics in different places, and you will quickly build up data on what works and what doesn’t.

The second traditional tool is coupons.  These are usually paper or card currently; the most common examples are coffee houses offering a free cup of coffee after you’ve had, say, ten.  Presumably these are felt to work, or these chains wouldn’t keep offering them.  However, they too miss a lot of tricks: the cards say nothing about the person presenting them, there is no capture of data about preferences, and there is no follow up – you don’t know who to follow up with.  In addition, the time to get data about redemption of the coupon scheme is lengthy and the process is manual.

Now imagine your coupons are awarded and redeemed from a customer’s NFC phone.  The customer would need to download your voucher app, and give some basic information to register – email address, mobile number, and basic demographics.  Then they can tap a poster to download a voucher.  Alternatively, they could touch their phone (with your app open) to a terminal in your store/restaurant to increment a counter which will qualify for a free coffee or whatever.  Ideally, you will have a terminal in your retail outlet which will do this automatically.  But if not, this can be done (as an interim solution) by QR code or barcode.

The other thing that mobile NFC allows you to do is to deploy collaborative campaigns.  I think one of the areas of greatest potential co-operation is between transport operators and restaurants.  So a football supporter travelling to an away game can get information about where to eat by tapping a smart poster at the bus or rail station, or even on the train or bus.  Why not? – NFC smart posters require no power or networking – they can be placed as near to people as you like.  Alternatively, you could encourage people to travel to a shopping centre by public transport – tapping a tag on the bus could qualify them for an offer from a shop or restaurant, located where the customer is travelling to, not just an anonymous billboard with no feedback mechanism.

I’m pleased by what I see as the growing number of business working to offer the elements of this solution and to bring it all together.  It’s not too early to begin!

Fenbrook Consulting advises businesses about the commercial opportunities and technical requirements of Near Field Communications

 Michael Koployof Software Advice in Austin, Texas recently posted a blog about the adoption of mobile payments by retailers.  The blog is at http://blog.softwareadvice.com/articles/retail/mobile-payments-faqs-1012512/.  In it, Michael talks about the basics, the ecosystem, and the merchant opportunity.  This is an interesting take on the subject and here are my thoughts.

Michael is correct in saying that for retailers upgrading their PoS terminals, it’s a relatively simple matter to incorporate contactless functionality.  This has already begun, especially in the fast food sector, with companies such as Subway and McDonalds adopting contactless, and seeing steadily growing transaction volumes.  The terminals are pretty much indifferent to whether what is being presented is a card or a mobile phone.

However, in my view, contactless payment on mobiles is being held up by the turf war between banks, handset manufacturers and mobile network operators.  This is severely (and, to the consumer, arbitrarily) restricting the choices available.  For instance, I have a Samsung Galaxy Nexus NFC mobile phone, which I love.  I also have a Barclaycard, and my UK MNO is O2.  Barclaycard is available on mobile in the UK – but if I want it I can only get it by switching to a Samsung Tocco handset and MNO Orange, neither of which I wish to do.  This is because of a fight to control the Secure Element within the phone.  But I don’t think many people will change their handset or mobile provider just to get a payment application.

So I think this is going to mean mobile payments are going to roll out more slowly than they could.  So what do retailers do in the meantime?  I think the answer lies in the last section of Michael’s blog.  It will lie in locating shoppers and presenting them with attractive offers – that are time, location, and consumer specific.  Mobile phones offer retailers the opportunity to learn much more about their customers – where they go, what they like, what they buy.  And social media networking has shown large numbers of phone users are only too happy to share this information.  Michael mentions some applications which retailers can use – I would also bring in Location Based Marketing schemes such as Foursquare and Facebook Places.

The beauty about these applications is that, unlike payment, they don’t require a complex infrastructure to implement.  Merchants can start small, experiment to find out what works, and expand at whatever rate they are comfortable with.  Then, when payment by mobile is finally allowed, this will naturally complement the coupon/discount applications, and deepen the relationship between the merchant and the consumer.

I’m quite sure the early adopter retailers in this space “get it”.  I think we’re witnessing a profound shift from mass advertising, relatively untargeted, towards highly personalised messaging and offers, tailored to the known preferences of customers.  Michael’s advice – to have a vision in place and stay alert – is spot on.

Fenbrook Consulting advises businesses about the commercial opportunities and technical requirements of Near Field Communications

Michael Koploy of Software Advice in Austin, Texas recently posted a blog about the potential for NFC in the city.  The blog is at http://www.softwareadvice.com/retail/.  In it, Michael outlines five ways NFC could develop.  This is an interesting take on the subject and here are my thoughts.

From Michael’s blog, it’s clear that Austin is an early adopting location in the US, with high tech companies, a large university, and a technology friendly population.  It’s also one of the two cities where the new Isis NFC mobile wallet joint venture between AT&T, T-Mobile and Verizon is launching.  Here are Michael’s five points, with my comments on each, particularly in relation to the UK:

1. Spread the Word with Festivals and Conferences

This is certainly an area of great potential for NFC, including payments.  Fenbrook and partners have been working closely with MasterCard for 2 years on the possibilities for contactless payments in festivals.  It’s clear festival organisers are very interested in this, and not just for the benefits of removing cash.  Virgin Media, organisers of the V-South festival in Chelmsford, reported that 75% of festival goers last year had smartphones.  OK, these were not NFC enabled, but Virgin Media sees huge potential from being able to target customers with special offers in a relevant context, and have them able to make impulse purchases immediately.

2. Find Innovative Ways to Integrate NFC With the University

Universities everywhere have huge potential for NFC, for cashless payment, access control, attendance monitoring, and other applications.  A number of these institutions in the UK are looking at NFC.  However, until all students have NFC enabled smartphones, it’s difficult to introduce NFC services.  I think the solution is to introduce contactless card systems and migrate these to NFC as students get the phones.  Given the other services being delivered, and student propensity to use mobile phones, I don’t expect this to take longer than about 3 years.

The other way to look at this is as students as a demographic body, across multiple universities, rather than from the institutional point of view.  If you do this, you can integrate purchasing in student bars, location based marketing, social media, and even festival attendance.

3. Create NFC Purchasing Habits at Hip Food Venues

I think the big opportunity for NFC at Hip Food Venues is through Location Based Marketing, so customers can get ready access to special offers from nearby outlets, share messages and tips with their friends, and use the NFC phone to pay, thereby creating a rich source of data which merchants can use to encourage further spending.  Fenbrook and Near Field Solutions have written a white paper on this subject at http://www.fenbrook.com/white-papers.

4. Integrate NFC into High-End Supermarkets

I saw the Korean subway scheme where busy commuters can “shop” using QR codes on pictures of grocery items, scanned to their smartphones, to order from a supermarket and have the items delivered to their homes at the end of the day.  This is a great idea, and one I would expect to catch on quickly in other busy Asian locations.  Will it catch on in Europe and the US?  I think more research is required to understand this, and it would be interesting to talk to the major supermarket chains to see if it’s on their radar.

5. Attract the NFC Crowd in Merchant Neighborhoods

Most definitely, I think the convergence of social media interaction, product browsing, “likes” and reviews are going to change the way people shop.  Amazon has this model off to a fine art for online shopping; I think NFC brings the same possibilities to the physical/on the move world.  Again the white paper discusses this in more detail.

In summary, I think NFC deployment will be all about critical mass.  If Austin has several NFC strands going, which feed off each other, it could be well placed to be an early adopter city.  The French government is doing this in Nice, with its Citizi initiative.  This is rather a top down approach, whereas I expect Austin to be bottom up.  Both will have their place and it will be fascinating to see what unfolds.

Fenbrook Consulting advises businesses about the commercial opportunities and technical requirements of Near Field Communications

This follows on from my earlier blogs on the subject of NFC mobile phones being used in conjunction with Location Based Marketing services.

One of the challenges is getting consumers to interact with a physical location (café, bar, store…).  This is vital, because this is where engagement with the consumer begins and gives the business a chance to make offers to the consumer, create brand loyalty, and plug into the consumer’s social network (with permission of course).  A potentially powerful way to accomplish this is “gamification”.

The idea is that if you turn a new activity into a game, then consumers who would otherwise be wary will be encouraged to take part.  Wikipedia describes it succinctly, thus: Gamification is the use of game play mechanics for non-game applications (also known as “funware“), particularly consumer-oriented web and mobile sites, in order to encourage people to adopt the applications. It also strives to encourage users to engage in desired behaviors in connection with the applications.  Gamification works by making technology more engaging, and by encouraging desired behaviors, taking advantage of humans’ psychological predisposition to engage in gaming. The technique can encourage people to perform chores that they ordinarily consider boring, such as completing surveys, shopping, or reading web sites.  There’s more there you can read for yourselves.

This is perfect for NFC.  If a business wants to engage with consumers where they are, as they go about their lives, then with NFC they can tap a tag enabled poster.  This could give them a special offer, and could also be another step in the game.  It is human nature to compete and collect, in return for status and/or rewards.

It will be interesting to see how gaming supports and enhances the adoption of NFC as a tool to support mobile as an important and growing channel to reach target markets.

Fenbrook Consulting advises businesses about the commercial opportunities and technical requirements of Near Field Communications

Millions of people are using social media networks to keep in touch with their friends.  Increasingly this encompasses mobile phones as well as PCs, so that there is no location restriction on the interaction.  Comments can range from the mundane: “My train is late – I’m bored,” to the helpful: “Avoid the High Street – it’s gridlocked,” to the recommendation: “Great NZ Sauvignon Blanc at the Watershed.”

Amazon has shown the power of user reviews and personal recommendations on customer choice.  This power will quickly expand to businesses which embrace the potential of rapidly developing technology.  It will have the potential to deepen loyalty, get the friends of a loyal customer on board, and make offers that are context specific and can be immediately taken up.  These could have a significant effect on revenue.  They could also generate a wealth of valuable consumer data which can be further used to target interested (and amenable) consumers.  Consumers may be willing to share location information if they receive something of value in return.

Now the possibilities of Location Based Marketing (LBM) based on smartphones are being extended, as a result of Near Field Communications (NFC).  Social interaction and the availability of local offers can be extended to physical interaction with the local environment, and paying.  These are new tools – check in, voucher, like, review, recommend, pay – all with the same device.  Marketers will need to apply their creative talents to applying these tools innovatively, capitalising on the social interaction that lies at the heart of LBM.  For instance, campaigns could tie in with interactive packaging and Point of Sale promotions.

A new white paper, written in collaboration with Near Field Solutions, explores these possibilities:

1. Introduction
2. What is the Current State of Location Based Marketing?
3. What is NFC?
4. How can NFC enhance Location Based Marketing?
5. Pros and Cons
6. How to Start
7. About the Authors

These services and technologies could apply equally to large organisations or Small and Medium Sized Enterprises (SMEs).  There is a white paper available here

Fenbrook Consulting advises businesses about the commercial opportunities and technical requirements of Near Field Communications

In 2004 I was presenting NFC at a conference in Japan, which meant there would be simultaneous translation through interpreters.  The two charming Japanese ladies who were doing the interpreting wanted to check the technical vocabulary with me beforehand, so I told them about smart posters…

“Imagine you’re at a bus stop, waiting for a bus.  There is a poster, advertising a new product from your favourite range of cosmetics, or shoes, or handbags.  The poster has a target saying, ‘Touch your NFC phone here!’.  You touch your phone to the poster and it downloads a website which you then log on to, because you’re still waiting for your bus.  You can browse the new delights on offer, until you see something you really like.  By this time you might be on your bus but you can continue browsing.  Then the website asks you if you want to buy.  Assuming you have set up a payment facility (commonplace in Japan), you click ‘Yes’ and before you know it your new treat is on its way to your home.”

The ladies looked at each other, then at me, and said, “You must not give this to me!”

What this illustrates is the potential power of smart posters – the ability to prompt impulse purchases.  It requires the integration of several elements – phone, posters, retailers, payment – and this will be the challenge for marketers in the future.  So far I haven’t seen many organisations show they appreciate the scale of what is around the corner or the threat if they don’t get involved and their competitors do.

The key elements are: it’s non-invasive – consumers have to take a deliberate action to participate; for retailers this means the audience is already qualified; it maximises use of time when consumers are not otherwise occupied, so a good sales message has a chance of being heard; and it can close for an order as part of the same process.

Some commentators have said they think smart posters will be a more important application of NFC than contactless payment or mass transit.  For the gadget hungry Japanese, it may be a more natural fit – they will probably be the early adopters, as with so many other things.

For more information and to download Trevor’s White Paper on Location Based Marketing and NFC Mobile Phones