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PRESENT & FUTUREO F M O B I L E M A R K E T I N G

N O V E M B E R 2 0 1 2

A Forrester Consulting Thought Leadership Paper Commissioned By Velti

Mobile’s Potential Lies Beyond an Extension of the Desktop A Market Research Study On The Strategic Use Of Mobile In Marketing

November 2012

Forrester Consulting

Mobile’s Potential Lies Beyond an Extension of the Desktop (A Forrester Consulting Thought Leadership Paper Commissioned By Velti)

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Table Of Contents

Executive Summary: Use Of Mobile Is Tactical, Not Strategic, In Marketing ............................................................................ 2!

Advertising Dominates Mobile Marketing Mindshare Today ...................................................................................................... 2!

Mobile Offers Untapped Opportunities To Marketers ................................................................................................................... 7!

Few Marketers Are Preparing For This New World ....................................................................................................................... 8!

Key Recommendations: Marketers Must Build A Broad Set Of Competencies ....................................................................... 14!

Methodology ......................................................................................................................................................................................... 14!

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Executive Summary: Use Of Mobile Is Tactical, Not Strategic, In Marketing Mobile is the catalyst for seismic changes in how brands will engage with consumers; these will create both new opportunities and challenges for marketers. The majority of mobile marketing spend today has been a reflection of desktop, primarily focused on advertising or anonymous consumers. With the potential intimacy and rich context offered by mobile, however, the true potential lies in the acknowledgement that mobile is a unique channel on to itself and a significant opportunity exists not only in advertising but also lower-funnel marketing or engaging with existing customers. In August 2012, Velti commissioned Forrester Consulting to evaluate the state of mobile marketing and advertising in the United States. To further explore this trend, Forrester developed a set of hypotheses that tested the assertion that marketers are spending the majority of their mobile efforts on initiatives that mimic desktop campaign planning and as a result, neglect the opportunity to develop the competencies they will need to take advantage of the mobile platform in two to three years’ time.

In conducting in-depth surveys with several agency professionals guiding the mobile marketing strategies for their clients and 150 mobile marketing professionals within consumer product companies, Forrester found that the majority of mobile marketing tactics employed were upper-funnel branding and promotions, i.e. spray & pray, that focused on acquisition; the majority of mobile marketing spend was on advertising; and few mobile marketers were developing strategic, long-term plans to build a holistic mobile marketing competency. Too few are taking advantage of the unique opportunities offered by mobile.

Key Findings Forrester’s study yielded three key findings for mobile marketers:

• Most mobile marketing spend is allocated to upper-funnel tactics. Among the executives surveyed, 90% use mobile advertising tactics, while only 48% use mobile marketing tactics to engage with their customers. Among the executives interviewed, 33% self-report using mobile advertising tactics more often than mobile marketing tactics.

• The planned use of context falls short of its potential. Mobile phones are personal devices — not shared devices. The combination of sensors and observed behavioral data from the broad use of phones provides a phenomenal amount of contextual information that marketers can use to simplify mobile experiences, offer utility, or push more targeted advertising. Too many mobile marketers — 78% — are rooted in their PC and audience paradigms, while only 43% use real-time information including time of day, but not behavioral data.

• Too few marketers are building competencies for holistic mobile marketing. Mobile marketers primarily rely on their agencies for mobile marketing strategies while simultaneously failing to build the relationships, gain the buy-in, and understand the requirements of those outside interactive marketing. Only 45% of mobile marketing executives surveyed felt they had strong expertise in-house, while 52% rely on their agency for strategic guidance.

Advertising Dominates Mobile Marketing Mindshare Today With the number of mobile phones exceeding 6 billion globally, according to the United Nations, and smartphones taking a majority share in the US in 2012, mobile is the most ubiquitous digital medium. Few marketers, however, capitalize on the potential of mobile today. Marketers recognize the need for mobile in their marketing mix, but they still rely heavily on the (PC-based) interactive experiences and paradigms. Despite 82% of marketers having a strategy,



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only 34% were running marketing campaigns in alignment with that strategy — and 46% revealed that they were still in the “test and learn” phase. Our research found that:

• The majority of tactics employed fail to take advantage of the entire mobile funnel. At 90%, the adoption of upper-funnel mobile advertising tactics (e.g. display ads, search, 2D bar codes) far exceeds that of lower-funnel marketing tactics (48%) (see Figure 1). Social media and display ads topped the list. The migration of familiar tactics from online (PC) interactive marketing to mobile devices is a natural progression that fits within the comfort zone of marketers. Among those not yet leveraging mobile tactics, “lack of expertise internally” was cited by 18%. The use of advertising tactics is not accidental — fewer inexperienced mobile marketers are pursuing lower-funnel objectives such as increasing customer satisfaction or improving customer service (see Figure 2). In fact, “acquisition through sweepstakes and contests” is the only objective pursued by more less experienced marketers. More experienced marketers have moved on to more strategic tactics.

• Mobile targets are anonymous individuals within broader audiences — not customers. Marketers continue to rely on aggregate demographic data or paradigms carried from non-mobile media to target their audience rather than building profiles of individual consumers based on trust and offered utility. Among the marketers surveyed, 78% were using audience data and 71% individual behavior information for targeting, while only 64% were leveraging profile information unique to mobile devices (see Figure 3). Looking to PC best practices falls within the comfort zone of interactive marketers. Naturally, when individuals first adopt new technologies, they do old things in new ways. It will take time for marketers to embrace mobile to leverage the unique opportunities offered.

• Mobile marketing spend is lower overall, with upper-funnel discovery claiming the largest portion. The average spend on mobile marketing media in 2012 is just over $500,000, with only 36% of companies surveyed spending more than $1 million (see Figure 4). Furthermore, 12% don’t know how much they are spending on mobile. Marketers are allocating 49% of spend to upper-funnel objectives, with customer acquisition claiming the largest share with 23% of spend. Spending on loyalty is also high at 17%, but loyalty programs typically offer instant savings or after-the-fact accounting; they do not engage with the consumer either during the consideration phase or after purchase while trying to use a product or service.

• Metrics rely on PC paradigms more than on mobile metrics. The majority of marketers focus more on engagement with ads and traditional business or marketing objectives (e.g. coupon conversion) than on tapping into unique mobile KPIs (see Figure 5). To be fair, engagement with advertising is easier to measure than cross-channel attribution. However, relatively few marketers were measuring engagement with known customers — preferring to focus on anonymous interactions.



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Figure 1 Majority of marketers utilize mobile advertising - not marketing tactics

Base: 139 mobile marketers

Source: A commissioned study conducted by Forrester Consulting on behalf of Velti, August 2012

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Figure 2 Inexperienced mobile marketers are far less likely to pursue lower funnel marketing objectives

Base: 139 mobile marketers Source: A commissioned study conducted by Forrester Consulting on behalf of Velti, August 2012

Figure 3 Fewer marketers take advantage of unique mobile, contextual information



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Figure 4 Despite potential of mobile marketing, spend is nearly equally split between advertising and marketing


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Figure 5 Too few marketers leverage unique mobile metrics to gauge success



Mobile Offers Untapped Opportunities To Marketers Mobile offers a phenomenal number of new opportunities to marketers to engage directly and in highly relevant ways with their customers. This “always on, always with me, personal, not shared” device generates highly contextual information that marketers can use to support their customers through utility, relevancy, and simplified experiences. Marketers must migrate away from the paradigms of the PC, think “mobile-first,” and embrace the new opportunities that mobile offers. Mobile will:

• Be highly contextual. Forrester defines context as the sum total of everything customers have told you to date as well as what they are experiencing at their moment of engagement. Context includes a consumer’s situation, preferences, and attitude. The combined power of the network and device (through sensors) collecting data as well as user behavior (e.g. banking, shopping, talking, posting photos) means that the mobile phone will know more about consumers than any other device, person, or organization. Marketers must focus first on utility and using context to improve the quality of the user experience by simplifying tasks. Highly targeted advertising that appears creepy will push consumers (and their state and federal representatives) toward protecting their information.

• Allow brands to meet and engage with their customers throughout their purchase journey. Mobile offers a first-time opportunity for manufacturers (e.g. auto, CPG, electronics), retailers, and media/entertainment companies, among others, to acquire customer names and engage directly — not through indirect channels or

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intermediaries. In the past, these companies have relied on low-conversion, post-purchase tactics such as product warranty registration or sweepstakes or loyalty programs (e.g. collecting points through proof of purchase) to obtain customer names and build limited profiles. Companies or marketers otherwise only knew their customers if they logged in or raised their hand. Mobile enables engagement with customers throughout the purchase journey, including at the shelf or even at the point of sale.

• “Commerce-enable” the physical world. From healthcare to automotive to retail, products and machines will increasingly have the ability to communicate with the mobile device. Running shoes and pill bottles will initiate replenishment. A purse seen on a bus will be identified with visual search and immediately purchased. Interactive walls and posters will be catalysts for immediate purchases. In some scenarios, consumers will be proactive in finding products to purchase. In other cases, messaging will be used to alert consumers to relevant deals. Marketers have a (phenomenal) opportunity to engage with consumers exactly when they are ready to transact.

• Add a digital services layer to physical products and locations. Digital mobile services will be overlaid on physical products (and local establishments) to create experiences. Nike already sells a fitness experience today with its in-shoe sensors and wristbands that track and relay workout information to the mobile phone. Manufacturers of everything from cars to shirts to savings accounts will have these opportunities. Marketing must consider its role to be one that extends throughout the customer’s life cycle. Given the small bandwidth or byte-footprint of messaging combined with the immediacy it offers, messaging will be a key carrier of information from products to phones.

• Force marketers to reconsider success metrics. Key performance indicators (KPIs) must transition from focusing purely on traditional marketing (e.g. click-through rates, impressions) and business success metrics (e.g., higher revenues or conversions, lower operating margins or COGS) to consumer-centric ones. Focusing on convenience or delivering mobile experiences with high utility that result in higher customer satisfaction and brand affinity may be the starting point. Companies must transition, however, to metrics that focus on questions like, “Have I made my customer’s life better with access to real-time data and applications to process that data?”, “If I am a bank, is my customer saving more? Or paying more bills on time?”, or “If I am an insurance company, is my member adhering to his or her treatment program (e.g. losing weight, lowering cholesterol)?”

Few Marketers Are Preparing For This New World The vision of future opportunities enabled by mobile is powerful, but few marketers have a road map, the expertise, or a plan in place to use mobile to its fullest potential. They must develop a mobile-first mobile marketing strategy — which means not simply taking tactics, campaigns, metrics, content, and services designed for the PC and shrinking them on to a small screen. They must plan infrastructure and staff to support the future scenarios described. The attributes of those marketing professionals who will fall short of maximizing the potential by failing to build a thorough set of competencies include:

• Relying on third parties for their mobile marketing strategy — thereby forgoing long-term planning. Forrester created a segmentation of marketers based on their approach to developing their mobile strategy, their level of expertise, and how they are executing campaigns. Among newbies, 47% reported that their agency has a strong influence on their mobile marketing strategy, but only 25% were running mobile campaigns as part of a longer-term mobile strategy (see Figure 6).

• Limited use of real-time, contextual information. Using real-time context today to target consumers or offer convenience by creating utility or simplifying tasks is limited. Many marketers use location, which is a first step,



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but very few interpret the meaning of a customer’s location beyond proximity to a brick-and-mortar location (see Figure 7). Marketers must develop the ability to create dynamic offers based on real-time information. Moreover, targeting individual consumers or creating rules to target consumers will trump mass outreach to audiences.

• A traditional view of what marketing is. In a very traditional sense, marketers have relied on TV, radio, print, and end-cap or displays in retail locations to promote their products — tactics very much focused on brand awareness and driving trial or purchase. Mobile affords marketers the opportunity to layer services on products and extend their dialogue or engagement with customers through to ownership and replacement or refill. Too few marketers have worked with product teams to actively develop these experiences (see Figure 8).

• Use of project-based work. Among the marketers surveyed, 60% reported that most of their mobile marketing and advertising initiatives involved project-based work. Project-based work implies silos and IT team workarounds rather than a high degree of trust and cooperation. Moreover, 7% reported they were running campaigns in the absence of an overall mobile marketing strategy, and 59% revealed their tactics were part of short-term programs running while they developed a long-term strategy (see Figure 9).

• Limited collaboration with eCommerce, brick-and-mortar, and product teams. Many marketers are doing well to collaborate across business and functional groups. The potential of mobile extends well beyond a siloed channel for mobile commerce or services. Mobile has the opportunity to enhance other touchpoints — especially those in the physical world, such as stores and bank branches. Only 37% of the marketers surveyed were collaborating closely with their operational counterparts (see Figure 10).

• A failure to view their IT team as a strategic partner. Mobile marketing campaigns, websites, and applications are not “one and done” projects. They are mobile services that must be watered and cared for, so to speak, with operating system and hardware updates. Moreover, creating dynamic offers based on customer profiles and information (e.g. customer accounts, pricing, and product availability) will depend upon access to services and content housed internally in back-end systems. Some 63% of marketers surveyed self-reported a good working relationship with their technology counterparts, but that didn’t necessarily translate into depending upon them for the development of mobile services. Marketers self-reported outsourcing mobile application development (30%) and mobile web development (33%), with only 38% wanting to hand over that responsibility to their IT counterparts (see Figure 11).



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Figure 6 Reliance on third parties combined with immature strategies is correlated to short term initiatives

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Figure 7 Experienced marketers are using mobile-specific contextual elements



Figure 8 Too few marketers have a broad definition of what marketing can be

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Figure 9 Project based work hampers long term infrastructure and talent build out

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Figure 11 Marketers work with their IT counterparts, but do not depend upon them

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KEY RECOMMENDATIONS: MARKETERS MUST BUILD A BROAD SET OF COMPETENCIES

Marketers must pursue a multi-pronged approach today to build the competencies necessary to leverage mobile to achieve marketing objectives — especially those marketers who self-identify as newbies or who have limited experience. They must develop a tactical plan to bridge the gap. If you are a marketer, this paper can serve as a benchmark to help you assess your readiness versus the internal competencies you need to take advantage of the opportunities that mobile offers. Mobile marketers positioning themselves for future success will:

• Understand consumer behavior across screens. Consumers are ingesting media across a growing number of screens — from portable devices such as mobile phones, eReaders, and tablets to TV screens, which will become interactive. Marketers must consider not only how consumers use these devices differently but also how they use them in parallel. Only 54% of marketing executives surveyed were leveraging data from multiple screens to build customer profiles.

• Embrace mobile as a unique, full funnel medium. The intimacy and contextual relevance offered by mobile devices gives marketers the ability to “get to know” or build profiles of individual customers. There is a cost associated with the opportunity. First, marketers must create holistic profiles that go beyond mobile device usage. Second, marketers must devise good reasons to engage with customers frequently.

• Develop both strategic and tactical plans to utilize context. The use of context is basic among advertisers today; other than information directly provided by consumers, context is primarily limited to location. Few marketers are thinking ahead to new contextual elements or how to use context to offer utility and simplicity — not just highly targeted advertising.

• Build competencies either in-house or through strategic partners. There’s a broad range of strategic and technology competencies that marketers must build or have access to through strategic partners. Too few marketers are looking to build in-house competencies to support strategy and services development.

• Create new business rules based on real-time data. Vendors have touted the ability to engage with consumers in exactly their moment of need. In reality, few consumer-facing companies have the ability to act on the information that they already have — let alone information collected in real time, such as a check-in or an in-store barcode scan.

• Work with product teams to extend the reach of marketing beyond purchase. The definition of marketing is expanding to encompass the entire consumer journey. Mobile opens up the opportunity both to launch entirely new products and services as well as to enhance existing services, products, and consumer touchpoints in the channels.

• Work closely with internal technology teams. Future mobile services will depend heavily on infrastructure and services. Marketing professionals will need not only customer profiles but also real-time access to data in reservation systems, accounts, loyalty programs, schedules (e.g. for buses or planes), pricing, product catalogs, etc. Long lead times are associated with building these capabilities. Marketing professionals will need multi-year services road maps and a close working relationship with their IT counterparts to capitalize on mobile opportunities in a few years’ time.

Methodology In this study, Forrester surveyed 157 US-based B2C marketers and agencies within the following industries: retail, automotive, CPG, travel, and financial services. All 150 marketeering companies we surveyed represent more than $100M in revenues, and the seven agencies represent $10M in revenues. The respondents were key influencers for the digital or mobile strategies within their company.

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