ePayments Week: The rise of location-triggered offers

Very local deals, iPhone users ready to spend, and Androids attract crapware

Here’s what caught my attention in the payment space this week.

Geofencing: As long as you’re here …

Fence Friday by DayTripper Tom, on FlickrOne of the promises of mobile advertising — at least from the merchant’s perspective — has been the potential to advertise to customers when they’re near your store and can act immediately (and impulsively) on your offer. To make these location-triggered offers, merchants need to delineate a “geofence” around their retail outlets — a radius or polygonal area in which customers who have opted into a deal program can be notified on their mobiles that an offer is available nearby. Indeed, Groupon is working on adding such location-based deals to its daily offers, according to a letter sent from its general counsel David Schellhase to two U.S. Representatives who were asking about Groupon’s privacy policies.

Placecast is one company that has been working on this issue. Its service allows merchants or event planners to delineate a virtual perimeter around their locations that marks their space. When customers who have opted in to receive alerts about their retail brand or event enter one of these locations, they get a text message (a “ShopAlert”), describing the offer or event. In an interview, Placecast CEO Alistair Goodman said the company has focused on text messages thus far because they’re very effective. By some measures, 90% of all texts are opened within three minutes of receiving them.

This week the company expanded its service so that ShopAlerts can also work as notifications that are linked to apps. Just as with other notifications on iOS and Android, the relevant app doesn’t need to be open to receive the notification, but clicking on the notification can trigger the app to open. The new notification capabilities would seem to go well with expected improvements in the way that iOS handles notifications.

Goodman said the key to success in mobile coupons is making the message relevant. “We’re only sending a text if it’s the right place and time.” That’s key since most of us are not very good coupon clippers; we’re unlikely to retain, remember, and use an offer if we don’t do so almost immediately. Goodman said that location-triggered delivery is highly effective with “exceedingly high” response rates: between 11% and 60% of users are likely to visit a store when pinged with an offer if they’re nearby, and up to 46% are likely to make a purchase.

More than three million subscribers, mostly in the US and UK, are currently receiving offers from Placecast — though they don’t see them as coming from Placecast, which operates as a “white brand” service to other businesses. Goodman emphasizes that subscribers have all opted in via their telecom carriers or a retail brand like North Face. With that much data, there’s a back-end business for the company in aggregating and anonymizing the information so it can analyze it and feed data back to merchants on which offers are most effective and when. Indeed, the company’s self-service tool with which clients can manage their offers online also includes some data tools for this type of analysis.

It remains to be seen how many customers will be comfortable with this level of interaction with stores — even if they are their favorite brands. On the up side, services like Placecast are merely sending out information based on location awareness; consumers aren’t being asked to divulge any financial information. On the down side, some percentage of customers are always going to remain fairly uncomfortable broadcasting their locations in this way to businesses, even if doing so offers tangible rewards. The key to success will depend on how large that percentage is.

Survey: iPhone users keen on mobile payments

Results of a UK survey about customers’ willingness to use mobile payments and banking apps suggest that iPhone users are somewhat more likely to embrace mobile payments than their Android- and Blackberry-carrying peers. According to a summary report on GigaOm, the survey found 46% of iPhone users said they would pay bills with their mobiles compared to only 21% of the total group surveyed. Not surprisingly, younger folks (18-24 years old) were also more comfortable with the idea than their older brothers and sisters.

YouGov’s ongoing research has provided
some other insights on platform differences among UK users. Loosely generalized, they paint a picture of Blackberry owners as more driven and responsible compared to iPhone users who are more likely to overdraw their bank accounts and spend the day on social networks. According to YouGov:

  • BlackBerry users are likely to earn more, with 10% earning over £50,000 a year compared to 7% of iPhone users and 5% of Android users.
  • iPhone users spend more time on their phones than users of any of the other top models, with 18% spending more than four hours a day on it compared to 4% apiece of Android and BlackBerry users.
  • 63% of iPhone users say social networking apps are among the three they spend the most time on compared to other types.

These results, combined with other research that has found iPhone users may be a more lucrative market for developers than Android users, suggests iPhone users are quicker to spend money on their phones. We can speculate on the reasons. Certainly the higher price point (in many cases) of an iPhone attracts a user who is willing to spend more on technology and its accoutrements. Another possible factor could be their familiarity with the Apple retail model: iPhone users are accustomed to a tightly controlled shop where they deal with a single company that they trust — the same company that made their phone and its software. The Android platform, by comparison, may require users to navigate a telecom interface, Android’s operating system, a hardware maker’s device, and perhaps a fourth-party app store. That could create a less-structured environment where users may be less comfortable spending money. McAfee’s recent report on Android’s greater susceptibility to malware may only compound this feeling.

Android phones are the new destination for crapware

And speaking of trust, are telecoms burning up the goodwill of their customers who choose Android handsets by loading them with crapware? Mike Jennings on PCPro.co.uk compares this trend to the same syndrome experienced on Windows-based desktops and laptops in recent years, where the excitement of discovering your new gadget is often dampened by splash screens with offers to sign up for security or media services.

Jennings notes that it’s worse this time around since the mobile software, which can degrade performance, is more difficult if not impossible for average users to uninstall. He blames the network carriers, who load up the handsets to fulfill lucrative deals they’ve signed with software vendors. But there may be a limit to what customers will accept. Earlier this month, the same publication reported that Vodafone was backpedalling on an over-the-air upgrade that loaded up HTC Desire handsets because customers had complained of being tricked into installing the software. “We’ve listened to feedback from customers on a number of points around the recent 360 Android 2.1 update and made some changes to the rollout plan,” Vodafone posted sheepishly on its own forums.

Got news?

News tips and suggestions are always welcome, so please send them along.

If you’re interested in learning more about the payment development space, check out PayPal X DevZone, a collaboration between O’Reilly and PayPal.

Fence photo: Fence Friday by DayTripper (Tom), on Flickr


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