Retailers are beginning to send promotional text messages and coupons to willing shoppers’ cell phones, but is mobile marketing ready for prime time?
Like many food retailers, Fresh Encounter, Findlay, Ohio, tries to help shoppers resolve their daily dilemma: What to have for dinner? But this wholesaler-supported chain of 32 stores has come up with an unorthodox strategy for communicating meal suggestions: texting them to shoppers' cell phones.
Last month, for example, Fresh Encounter, which operates under Community Markets and three other banners in Ohio and Indiana, sent a text message to the cell phones of shoppers at a group of stores who had opted into its Text-N-Save mobile advertising program; the message, sent at 2 p.m. on a Thursday and Friday, offered a deal on a whole rotisserie chicken or eight pieces of fried chicken to shoppers who came to the stores after 5 p.m. on those days.
“We asked them, ‘What's for dinner?’ and if they don't know, then how about this for $3.99?” said Eric Anderson, co-president and chief marketing officer for Fresh Encounter. Takers would inevitably buy complementary items as well, he added.
Fresh Encounter is among a small but growing number of food retailers that are taking advantage of the ubiquity of the mobile phone — there are 267 million mobile phone users in the U.S., according to limbo.com — as a way to communicate marketing messages to shoppers. The communications, usually via text but sometimes using images as well, are taking the form of special offers, coupons, lists of weekly circular items, and other messages. They are typically managed for retailers by third parties.
For grocers leveraging this medium, including Wal-Mart, Kroger, Marsh Supermarkets, Giant Eagle and Meijer, mobile marketing is still in its infancy, and the number of shoppers opting into mobile programs remains modest. But these retailers also see the cell phone as a potentially powerful vehicle for reaching the growing ranks of consumers who are increasingly using their phones — especially the new breed of smart phones such as Apple's iPhone — for purposes other than just making or receiving calls.
“We feel confident that [mobile marketing] is a tool that will help us implement our consumer strategy,” said Chris Collier, director of marketing at 104-store Marsh, Indianapolis. “It will be as important as email and our website, part of our new-media strategy.”
COUPONS FROM KROGER
Perhaps the largest mobile marketing program currently in the grocery industry is that operated by Cellfire, San Jose, Calif., on behalf of about 2,200 Kroger stores, just about every outlet operated by the Cincinnati-based retailer across its multiple banners.
Tested in the Atlanta market last June, the Cellfire/Kroger program launched nationally in late October. Shoppers opting into the program receive new coupon offers every two weeks from eight CPG manufacturers, including General Mills, Kimberly-Clark, Pepperidge Farms and Del Monte, as well as from Kroger for private-label items.
By selecting an offer on their cell phone, shoppers automatically channel the information to their loyalty card account; to redeem their offer, they simply purchase the product and present their card at the checkout.
“This is the first time any company has done a direct mobile-phone-to-POS integration,” said Brent Dusing, chief executive officer, Cellfire. “Kroger has led the way on this.” Other food retailers will be offering Cellfire, said Dusing, who declined to discuss the cost of the program to Kroger or the CPG companies.
The Cellfire program is supported on most mobile phones that can link to the Internet, and by most cellular providers; the program is either downloaded to a phone or accessed via the Web. Consumer charges vary by carrier. Program offers can also be accessed directly at cellfire.com.
Dusing would not disclose the number of shoppers who have signed up for the Kroger mobile coupon service. But he said that between 15% and 30% of shoppers who select an offer on their phone go on to redeem it at a store. In addition, more than half of the people who redeemed one offer went on to redeem additional offers. Kroger declined to comment on the program.
Karl Schmidt, director of promotion marketing for General Mills, Minneapolis, said the redemption of its mobile coupons in the Kroger program has been “in line with what we are doing online with print-at-home coupons.” But he said that in the long term, mobile coupons may prove advantageous because they don't have to be printed and taken to the store. “The promise of mobile coupons is that they are there with you whenever you need them.”
Still, food retailers will need to educate consumers about the coupon opportunities that exist on their cell phones, said Hung LeHong, research vice president for Gartner, Stamford, Conn. “Consumers know they can research prices for electronic items on their cell phones, so they don't have to be trained, but at the grocery end there needs to be training.”
Smaller retailers are also pursuing mobile marketing programs, albeit less technically robust ones. Fresh Encounter's Text-N-Save program, for example, relies only on SMS text messages and requires no Web connection.
Partnering with IDT Telecom, Newark, N.J., Fresh Encounter launched its program in May, signing up 2,000 shoppers in the first weekend. The program now serves about 4,500 consumers, which Anderson concedes represents a “very small percentage of customers.” Some participants forward their text offers to friends and family. “I want this to be viral,” he said.
Shoppers in the program receive a new text offer each Sunday, ranging from free items (such as milk and soft drinks) to 5% off a total purchase of $50 or more. The offers can be customized by store. To cash in, shoppers present their cell phone to the cashier, showing a PLU number in the text message.
The text program complements an email marketing program Fresh Encounter also runs. “We send out 13,000 emails per week, and I'd like to get to a similar number for the text program,” said Anderson.
But getting people to join the program, which requires sending a text message to Fresh Encounter, has been a challenge. “You have to physically set up a table at the store to sign people up,” said Anderson, noting that older shoppers often need help sending a text message. Otherwise, store signage and entreaties from cashiers are good for only 10 to 12 new members per day.
Once shoppers agree to receive text offers, they redeem them at a high rate — 20% or more. “It's unbelievable,” Anderson said. When Fresh Encounter sends out a same-day offer, as in the chicken promotion, redemptions can exceed 30%. “With the weeklong offers, we see lift and traffic at the stores,” he said. “But the ones with a sense of urgency, which have an immediate call to action, we definitely see lift and foot traffic. It has an impact, even though it's a small percentage of customers.”
Giant Eagle Express, Giant Eagle's downsized format, with one store near Pittsburgh, is also sending text messages to shoppers telling them “to get to the store by, say, 4 p.m. in order to get a great deal on rotisserie chicken,” said Erik Yorke, a spokesman for Giant Eagle, Pittsburgh. The store is also texting offers for smoothie drinks “on very hot days,” he said.
Observers attribute the high redemption rates of mobile phone programs to the fact that shoppers have opted in to receive the offers. “People who opt in — they want it,” said Anderson. “They complain if they don't get their text.” Consumers incur text charges based on their cell-phone plan, but the promotional savings typically outweigh those charges.
Fresh Encounter doesn't run a loyalty card program, so it is not in a position to send text messages tailored to a shopper's purchase history. But the retailer may begin asking demographic questions such as age or occupation in the sign-up process.
The Text-N-Save program costs Fresh Encounter less than 10 cents per text — far less than direct mail, noted Anderson. Most of the promotions are supported by the chain, not manufacturers. Overall, the cost of the program has not been such that other marketing programs have been affected, he said.
TAPPING COLLEGE KIDS
In partnership with SmartReply, Irvine, Calif., Marsh has taken a somewhat different approach to text marketing.
Beginning its program about 16 months ago at 20 stores in its collegiate markets, Marsh targeted young people, who have a well-known penchant for text messaging. “Long-term, this is set up for everyone, but short-term we knew we'd have a receptive audience in those towns,” said Collier, Marsh's marketing director. Students who opted in received texts for special incentives following school breaks as they moved back on campus.
About a year ago, Marsh began offering what has become its standard text-message program, called Marsh Mobile: a weekly list, sent on Thursdays to all subscribers, containing five or six of its front-page circular promotions, as well as special promotions sent every six weeks. The program was ramped up last June and went chainwide. Like Fresh Encounter, Marsh pays less than 10 cents per text message.
The special promotions — coupons that could be shown to a cashier from the phone or forwarded to a subscriber's email account and printed out — are basket-based offers, such as $5 off a $25 basket. Redemption rates are as high as 35%, said Collier.
To drum up interest in Marsh Mobile, Marsh partnered with local radio stations on store-based contest promotions. One such contest asked shoppers to text “Kenny” to Marsh for a chance to win a free trip to a Kenny Chesney concert, provided by the station; they could also opt into Marsh Mobile. “We got several thousand subscribers to sign up,” said Collier.
Marsh also started promoting the program in its weekly circular and website, inviting shoppers to text “JOIN” to Marsh (62774). It also runs online ads on university sports team websites and social networking sites like momslikeme.com, as well as ads on local TV media.
Collier said the number of Marsh Mobile subscribers is now in “the thousands.” The program is growing by 10% every four weeks, similar to Marsh's email program. He hopes to have up to 10% of “active shoppers” enrolled by year's end.
Unlike Fresh Encounter, Marsh runs a sophisticated loyalty card marketing program, based on technology from NCR's Copient system, that it plans to leverage to bring targeted offers to the Marsh Mobile program. “We're still in the entry phase, and we're working on the background technology to make text interactive and personal,” said Collier. He expects to start offering targeted text offers by early summer 2009 and to eventually offer CPG coupons as well.
Collier acknowledged that the Marsh Mobile program to date has not returned a positive ROI. However, as the program becomes more refined and targeted in the future, “I'm positive that it will measure up positively,” he said.
“The biggest challenge is being patient and allowing this to build over time,” said Collier.
In addition to Marsh, SmartReply has been working on texting programs with Giant Eagle, such as the same-day chicken offer at its Express format. In November, Giant Eagle started texting shoppers at its GetGo convenience stores, including an offer for the WetGo car wash locations, said Daniel Donovan, Giant Eagle spokesman.
SmartReply has also been behind Meijer's gas-price text alert program, which the Grand Rapids, Mich.-based chain launched in 2006. When gas prices at specific Meijer locations are set to increase, the program sends alerts a few hours in advance, allowing shoppers to fill up at the lower price. “The first eight months [of 2008], when gas prices were increasing, it was very active,” said Mike Romano, executive vice president, SmartReply. “Tens of thousands of people opted in to receive the alerts.”
The next phase of the Meijer gas-price text program will include offers to draw shoppers inside the store, Romano said. Meijer did not respond to a request for comment.
NOT READY YET?
Not all cell phone programs have succeeded at food retailers. In 2006, a few independent retailers, including Potash Bros. Markets, Chicago, and Broadway Marketplace, Cambridge, Mass., partnered with MobileLime, Watertown, Mass., to offer loyalty marketing programs linked to shoppers' cell phones; the programs included the ability to send text messages about promotions and events.
In 2007, MobileLime merged with Cuesol to form Modiv Media, Quincy, Mass., which ended those programs. “Mobile marketing is exciting and will be a big play, but it's not yet ready for prime time; it's not yet scalable in the grocery business,” said Paul Schaut, CEO of Modiv Media.
What Modiv Media has instead focused on is supporting a mobile in-store shopping device — Motorola's MC17 unit — that loyalty card customers can use to scan and bag items as they shop, thereby speeding up the checkout process; the handheld device also displays targeted offers on a small screen.
Stop & Shop, Quincy, Mass., has been offering these devices at more than 100 stores for more than a year, while sister chain Giant Food, Landover, Md., has them in about 25 stores, said Schaut. “We are focusing on something that is scalable now, with tens of thousands of shoppers using it,” Schaut said.
In a year or two, Schaut expects the scanning capability of the Motorola device to be available widely on cell phones. “That's when you will have a mobile phone with real value to the grocery consumer, beyond just a gimmick,” he said. “That value will give consumers reason to look at the offers on the phone.”