Marketers have long been giddy about the prospect of sending ads to consumers' cell phones, but consumers haven't always been too keen on the idea. That, however, is starting to change. Though cell-phone owners still seem resistant to the idea of advertisers randomly pinging their phones, a recent survey by HipCricket, a mobile advertising firm, found that 37 percent of consumers would be interested in participating in a mobile customer-loyalty program. In fact, as coupon usage has experienced an upswing during the recession, more and more shoppers have signed up to receive special offers through third-party cell-phone applications and text-message programs.
New free mobile applications, such as Yowza, MobiQpons, and Cellfire, allow consumers to check for nearby businesses offering special deals. Phones that have built-in GPS capabilities, such as the iPhone and T-Mobile G1, can usually pinpoint a customer's location down to the city block. In many cases, a customer simply shows his or her cell phone at the register, where the cashier scans a bar code on the phone's screen. Although most of these applications have been around only for a few months, millions of people have downloaded the software to their phones. Because mobile coupons target customers who are near a store's location, the redemption rates can exceed those of paper coupons.
For instance, Rubio's Fresh Mexican Grill, a West Coast chain of 195 restaurants, started placing coupons on Yowza this summer to reach people searching for a lunch spot. Larry Rusinko, the chain's senior vice president of marketing and product development, saw a 4 percent redemption rate on coupons offered through Yowza, four times what he was getting through direct mail or ads in the Sunday paper. Rusinko, who posts new offers on Yowza as often as every two weeks, says each coupon receives thousands of views and hundreds of redemptions.
Another mobile application, Foursquare, recently began allowing small-business owners to offer coupons to its 100,000 users. People who download Foursquare use it to let friends know where they are at any given time. Using the program, members "check in" when they are at a local establishment, like a restaurant or a boutique, and sometimes add tips about what to buy. Local businesses that use Foursquare can offer frequent visitors special offers -- say, 10 percent off on the 10th check-in.
BJ Emerson, director of information and social technologies for Tasti D-Lite, a chain of frozen-dessert shops headquartered in Franklin, Tennessee, began testing the service in four of the company's stores in the fall. Emerson says he likes the data Foursquare offers, such as the number of people who have checked in at a Tasti D-Lite store and how many other Foursquare users got the announcement. "It's not just a matter of click throughs and impressions; I know when I have actual feet in the door," says Emerson.
Although applications such as Yowza and Foursquare have a devoted following, their membership consists primarily of people who own smartphones -- about 19 percent of cell-phone users. Businesses can reach a broader audience by sending mobile coupons via text message. Typically, a company will use a "short code," a five- or six-digit phone number from which it can send and receive text messages. The business will promote the short code in online advertisements or in-store banners ("Text COUPON to 12345 for $5 off your next order").
One of the benefits of text-message coupons is that you can offer them at a specific time of day. Ashok Desai, owner of Family Dry Cleaners, a chain of four stores in southeastern Tennessee, started sending coupons via mobile text message in August, through Money Mailer, a direct-marketing company. Desai was looking for a way to target coupons based on the time of day and day of the week. "Certain days are very slow for us, like when it rains or the middle of the week," he says. Now, on Tuesday mornings, he sends out a promotion to the 100 people who have signed up.
To get customers to register to receive the text-message coupons, Desai put out fliers in each of his stores and sent direct mail to local residents, urging them to send a text message to the company's short code to receive special text-message offers. He calculates he gets about a 10 percent redemption rate per coupon. The initiative, which costs $65 every four to six months, has generated an extra $2,000 a month in sales, he says. After seeing the results, Desai stopped paying to place coupons in his local newspaper. "I'm not doing anything besides text ads right now," he says.