December 09, 2011

Starbucks: The Sleeping Giant in Mobile Payments Verizon fired the first shot in the battle for mobile payments by blocking Google Wallet from its new Galaxy Nexus smart phone. The initial posturing will focus on building exclusive audiences of users and by locking in payment functionality model-by-model and carrier by carrier. Similarly contenders will block out competitors in the race to reach a critical mass of mobile wallet/payments users. Getting mobile payments to market will be a 4-way fight. The contenders will be banks and credit card co-ops (Visa & MasterCard), Online Merchants (Amazon, eBay and Google), Telecommunications carriers like Verizon, AT&T, T-Mobile and handset builders (Nokia, Motorola). Each segment brings a different perspective and different set of skills, competitive advantages and perceptual baggage to the game. Mobile payments will be data-rich and complicated. Not only will players have to move transaction data around securely, they’ll have to instantly interact with multiple networks, process and bill payments and handle tricky customer service issues. The contenders track record in each of these areas is a mixed bag. Most are counting on large installed customer bases to give them a going-in posture and to piggy-back marketing efforts and reduce marketing costs. Many have exclusive phone models, like Verizon’s Galaxy Nexus, where they can control access and how the payment functionality actually works and the partners in the processing chain. Nobody wants to miss out on the huge potential revenue pie and nobody wants to pay the other guy transmission, access, systems or processing fees. Mobile payments will be a real dog fight since carriers, credit card issuers and online merchants have serious digital and CRM experience, big data bases and partners or affiliates in-place. The Banks will be the weak sister in this battle both because they are conservative marketers and because this is an extension or add-on service, that rarely gets the backing needed. But the scale of the potential market – everybody in the US buying virtually everything using a pocket-held device -- is too big a pot of gold to ignore. Different technical approaches and framing compelling customer value propositions by creating reasons to believe or claims of superiority for one method will require considerable creativity. The horse race will draw consistent press attention and buzz, since it’s hot, a natural extension of mobile service and something that is very useful for consumers. The branding and lead generation work will have to be extremely creative and will live at the nexus of social-digital-mobile. The sleeping giant is Starbucks; not exactly one of the usual suspects. But Starbucks with 7000+ stores and concessions in Target, Barnes & Noble, airports and countless other locations has been doing mobile payments on smart phones for a year using a proprietary app. Customers loaded $110 million onto their iPhones, Blackberries and Android phones in 2011 and completed 6 million mobile transactions at the point of sale. Starbucks has enjoyed a hockey stick growth curve in the acceptance and use of both pre-paid cards and its mobile app. They have processed more than 26 million individual payments. Essentially Starbucks taught early adapters and average customers how to use mobile payments. They set fundamental expectations about ease-of-use, speed, utility and the overall mobile brand experience. Anyone promoting a mobile wallet will have to meet or beat Starbucks on these dimensions to get serious consumer traction. If I were a retailer I’d want to ally with Starbucks and use their system to jump-start a mobile payments program. And while there are probably some technical and legal gating factors, who wouldn’t want the Starbucks crowd visiting your locations and swiftly completing mobile transactions? Stay tuned. Let’s see how Howard Schultz plays his hand.
10 Things That Won't Happen in 2012 As the year winds down, allow me exercise my older, crankier, opinionated and contrarian side in looking at the year ahead. Here are 10 things that won’t happen in 2012 in no particular order. Mobile Ads Will Explode. Consumers still either resent them or can’t exactly figure out how to use them. Brands can’t efficiently buy them or measure ROI or engagement value. Look for the bulk of ads to remain embedded in games and in apps. Facebook Will Grow Exponentially. The focus will shift from 800+ million users to the quality of the experience and the virility of sharing. Brands will figure out how to get more of their messages through the EdgeRank filter and how to prompt brand advocates posting original brand-oriented messages and/or passing along posts crafted by brands. What is said, by whom and to whom, will replace the fan count as a measure of brand page success. QR Codes Will Blossom. Too many different or not enough code readers, no technical standards, low consumer penetration and poor customer experience will doom this technology. Magazines and others will continue to use them as a badge or signal that they are tech forward, but few consumers will buy that act. Even if you build it; they will not come. Groupon Copycat Competitors Will Succeed. The bloom is off this rose both in terms of local merchant satisfaction and the inability to scale and customize the product or the deal for national brands. The business model was set up for onesies at the local level. It cannot easily accommodate brands with thousands of stores or franchisees. Retailers resent the 50/50 revenue share. And they aren’t seeing enough upsell to justify the steep price cut used as a buying lure. Plus, they doubt whether coupon redeemers will become repeat or regular customers. Gross volume will drop. There will be a shakeout among the me-too and also-ran players. Social networks, payment vendors like PayPal and major online merchants like Amazon and eBay will emerge as Groupon killers. Appetites for Apps Will Grow. With 1 million available apps and more than 100 million downloads from iTunes alone, nobody needs any more apps. The number of apps downloaded and used once or less is ridiculous. Consumers will edit their apps into two buckets; useful time savers and entertaining time wasters. Anything else will go by the wayside. New variations and new competitors will emerge. Some will gear content and user experience to reflect different expectations and behaviors for geared specific devices like iPhone, Android, iPad or other tablet formats. But if an app doesn’t help or doesn’t distract it’s a goner. Banners Will Die. In spite of being widely ignored, brands will continue to pump dollars into banners primarily because they can. Banners, like billboards, are a media format every marketer understands and one that media agencies love to buy. And even though the metrics prove that banner blindness is endemic and that there is no positive ROI for using banners to build awareness, marketers will spend against them to demonstrate their commitment (to their bosses) to the digital medium. Mobile Payments Will Reach 50 Million Subscribers. In spite of the incredible utility of mobile payments, the lack of technical standards, limits on smart phone penetration, competing technical and processing systems and tentative uptake by consumers and retailers will retard the growth of this channel. Mobile payments will not take off with a hockey stick curve like Google+ did. Instead we will witness a fog of uncertainty and doubt as the competing interests fight it out, make confusing claims and build daisy chains of retailers and allies. When the battle is settled and a single standard approaches, mobile payments will generally replace credit cards, wallets and checking/debit accounts. Email Saturation Will Occur. Everyone uses it. Most of us opt-in. Retailers rely on it. Email is the ubiquitous reliable retail channel that consistently delivers personalized offers. Email will become even more segmented, more targeted, more tied to expressed preferences and purchase histories and more integrated into social networks, search and loyalty channels. SPAM has pretty much been controlled. The email workhorse will continue to perform as expected and measured. TV Budgets Will Migrate to Digital. Not! TV remains the only way to simultaneously accumulate mass audiences and quickly tap into the mainstream culture. Digital channels complement, enhance and supplement TV. In some segments, TV viewing takes place on digital devices and is tweeted or posted in real-time. But marketers aren’t seriously reallocating media...

Danny Flamberg

I am a veteran marketing consultant working with leading and emerging brands

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