Academic Review
Mediating effects of Privacy & Preferences Management on Trust and Consumer Participation in SMS Based Mobile Marketing Initiatives: Part One of a Two Part Article
<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Michael Becker, EVP Business Development, iLoop Mobile, Inc.

For more information, or to discuss this article in more detail, please contact Michael Becker at [email protected]

Over the past few years consumer adoption of mobile phones has swelled and along with it a new channel of marketing has emerged.  Marketers have shown increasing interest in communicating with customers and prospects via the mobile channel, i.e. employing mobile marketing within the marketing mix and engaging consumers over their mobile phones.  Mobile marketing initiatives include everything from simple messaging alerts to intelligent, real-time, interactive sessions between marketers and consumers.  Both subscription services (also referred to as alert services) and interactive mobile marketing initiatives occur via text (SMS) and multimedia messaging, Bluetooth, location aware services, voice, the mobile internet, device resident portals, and much more.  Mobile marketing is no longer a fad on the horizon, it is here and here to stay.  As Gerry Purdy, a leading mobile industry analyst, points out: "probably the most important medium for advertising in the 21st century is going to be the cell phone, not print media, not billboards…” (SMS Marketing 2006).

While there are many mediums for mobile marketing the most prevalent mobile marketing medium today is SMS.  Nearly 95% of mobile phones are SMS enabled, and as noted by m:metrics, nearly 38% of the population, and not just the youth, is actively using text messaging (Hodgman 2006).  BIGresearch’s Sixth Simultaneous Media Study shows us that text messaging usage is on the rise in the United States, by all age groups.  iMedia, quoting BIGresearch’s study, notes that “leading the way in text messaging on cell phones is 18- to 24-year-olds, but the occasional use of 29 percent among the 25- to 34-year-old and 21 percent among the 35- to 54-year-old age groups is indicating a growing use-value to highly converted consumers” (BIGresearch 2006).   Up until now most text messaging initiatives have been campaign-based, i.e. single interaction voting, poll, contest entry, and related programs, like American Idol voting, Deal or No Deal sweepstakes entry, or Coca-cola on-pack promotions. However, recently, major brands and marketers have begun to realize the benefits of ongoing contact with their consumers and are beginning to launch alert services, i.e. services that are able to maintain an on-going interaction between the marketer and the consumer, for example:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

·          Starbucks with their SMS Scavenger Hunt

·          Secret antiperspirant with their “Share Your Secret” campaign

·          Limbo with its reverse auction service

·          McDonald’s with its mobile coupons program

·          Hershey’s SMS-based “frequent chocolate eater” program

·          Epicurious.com’s “EpiToGo” mobile recipe downloads

·          Stolichnaya’s “Stoli Insider” program, which provided consumers with “insider” information on new product launches, time-sensitive messages like special Independence Day cocktail recipes, and tips on new Stolichnaya promotions

·          Zingy, Jamster, and others with their monthly content subscription packages

·          And others…[1]

As marketers embrace mobile marketing and extend their interaction with consumers from one-off ad hoc sessions to on-going interactions over time marketers must ensure that they obtain explicit consent from consumers before they continue the conversation.  The practice of obtaining this consent is referred to as Privacy and Preferences Management, and/or permissions marketing.   This article is the first part of a two part piece that looks at the mediating effect of privacy and preference management on trust and consumer participation in and acceptance of mobile marketing practices.  In this article a brief overview of the privacy and preferences management paradigm is provided within the context of mobile marketing, and the first two elements of privacy and preference management are reviewed: Choice and Notice.  The second part, to be released in January 2007, will address the final two elements of privacy and preference management, namely Value and Control, and will provide a conceptual model demonstrating the mediating effect privacy and preference management has on trust and consumer participation in mobile marketing services.

Personal Nature of Mobile Marketing and the Need Consumer Protection and Respect
The mobile phone is an incredibly personal tool.  Moreover, given the growing tendency for consumers to keep their mobile phone number over a long period of time and as people are finding more use for their mobile phone beyond simple voice communications (m:metrics reports that 57% of U.S. subscribers and 80%~90% of European mobile subscribers use data services (Hodgeman 2006)) the personal ties between the consumer and the mobile phone are only going to increase.  Mobile marketing is a very powerful marketing tool and marketers have demonstrated time and time again that they can cut through the fog and cacophony of traditional media with its use.  However, if they are to protect this growing, interactive, channel of communication, marketers must take great strides in protecting the privacy and respecting the preferences of each and every consumer.  

Unfortunately, however, marketers in other emerging mediums have not had the necessary restraint to protect and respect the consumer and consequently have tainted mediums like email.  Luckily though, the mobile industry has proactively taken strides to address the risks of rouge marketers.  Both industry self-imposed guidelines, like those put out by the Mobile Marketing Association (see MMA Code of Conduct 2003) and the UK ICSTIS’s (see the recently released eleventh edition of the Code of Practice 2006) and legislative regulations, such as the  U.S. Can-Spam Act 2003 or European Directive on Privacy and Electronic Commerce, provide a framework for marketers to work off of so that they can establish their corporate privacy and preference policies and practices.

The Privacy and Preference Policy—a Foundation of Trust
The establishment of a well thought out consumer privacy and preference management policy is critical to the long term success of a marketer’s mobile marketing program.  Not only will the privacy policy help the marketer stay in line with industry self-imposed best practices and legislative regulations it will help the marketer build trust with the consumer.  Since, as reports show, many consumers are concerned for their privacy.

The challenge with simply following the regulations when establishing a privacy policy is that regulations alone are devoid of the key essence that binds the relationship between the marketer and the consumer.  Regulations provide a description of the mechanics of privacy management, i.e. giving consumers choice, value, notice, and control over their relationship with the marketer. Choice refers to the consumer’s ability to choose if and when to interact with a marketer.  Value refers to the fact that the consumer must receive value from the interaction.  Notice refers to the fact that the marketer must inform consumers exactly how their information will be used and Control refers to the fact that consumers should be provided access to the information marketers have collected and given the power to revoke a marketer’s access to it.  However, while regulations provide a description of the mechanics of privacy and preferences management, implementing these mechanics is not enough.  Successful marketers go beyond the mechanics of following the rules and proactively work towards establishing a relationship of trust with their consumers, since trust is the key variable in establishing a longstanding relationship.

The first step a marketer can take to generate trust with the consumer is to demonstrate respect for a consumer’s privacy and preferences.  This is accomplished through the publication of a privacy and preferences policy and communicating this policy and how the rules will be followed to consumers.  The next step in the process is to not just follow the rules, but rather proactively communicate with consumers and establish in their minds that the firm is not only capable of doing the right thing, but also, and more importantly, capable of consistently and predictably not doing the wrong thing (Personal Conversation with FMCG Privacy Manager 2006).  This consistent and predictable demonstration of the marketer’s concern for the consumer’s need for privacy and security is a leading factor in establishing consumer trust (Hurley 2006).  

The Mechanics of Choice: Opt-in, Opt-out, Renewal
As for the mechanics of privacy management, the first element is Choice.  The element of Choice is especially important with mobile marketing given that the phone is an incredibly personal space and marketers must be invited before entering it.  The mechanics of providing choice to consumers is fairly straight forward.  There are three of them: the Opt-in, the Opt-out, and the renewal management processes.

Consumers can initiate their opt-in in a number of ways, by text messages into a service via the mobile phone, e.g. by texting Alerts to 47467, or through alternative methods—by posting a phone number into the mobile service via a web form, IVR service, Bluetooth alert, image recognition, QRC code, or related service. Through this opt-in process the consumer can communicate and demonstrate their choice to interact with the marketer. In many, if not most situations however, especially when alterative opt-in methods are used to gain the initial opt-in, if the messaging is a premium service (i.e. fee service) or sensitive in nature (i.e. financial, medical, or with the youth) the marketer must confirm the initial opt-in.  To do this, the marketer’s mobile marketing application should be configured to send a second message to the consumer upon the receipt of the first asking the consumer to reply and confirm their choice to opt-in to the service and participate in the mobile program.  The second opt-in and/or confirmation opt-in is commonly referred to as the double opt-in process.   In some age sensitive programs and marketing with the youth, the additional opt-in may be required above and beyond the double opt-in.  For instance with age sensitive programs age verification may be needed, and/or when marketing to the youth parental consent may be needed per COPPA—the Children’s Online Privacy Protection Act. 

The other half of the opt-in process is the opt-out process.  When marketers give a consumer the opportunity to opt-in they must also give the consumer the opportunity to opt-out of a service and suspend all interactions with the marketer.  The most common method given to consumers to opt-out of a mobile marketing service is to have them text message a designated/reserved keyword into the service, such as Stop, End, Quit, Cancel, etc., (e.g. by texting Stop to 47467) and/or have them submit their stop command via a web form or related alternative opt-out method.  When the mobile marketing application service receives a text message from a consumer containing one of these opt-out commands the application and marketer must send a confirmation message to the consumer and then cease the sending of all future messages to the consumer immediately.

The last element of choice is the automatic renewal process.  Consumers should not be expected to remember when or how they opted into a service or how to opt-out.  There is a standard that marketers must establish and follow.  On a regular basis (daily, weekly, monthly, quarterly, or annually, depending on the nature of the service and the operator network requirements) marketers should extend the courteously of inviting the consumer to renew their consent to allow the marketer to engage them (please note, however, with many services, like premium for fee services, this renewal process is not simply a courtesy but an industry requirement). 

There are two types of renewal process models, explicit opt-out and explicit opt-in.  In the explicit opt-out model, a few days before the end of the renewal period, the mobile marketing alert service will message and inform a subscriber that he/she will automatically be re-instated, and charged in the case of premium programs, into the mobile marketing service if he/she does not send a message to stop the service.  An explicit opt-in renewal model is the opposite, the subscriber is notified that he/she will automatically be taken out of the service if he/she does not reply and choose to continue the service.  A couple of other points worthy of note regarding automatic renewals are that, today, industry guidelines only require explicit opt-out renewal notifications and most United States operators only allow monthly automated services, they do not allow services that require and/or support daily, weekly, quarterly, or annual renewal.

The Keys to Notice
The next element of Privacy & Preferences management is Notice.  Simply providing the mechanism to facilitate Choice (opt-in/opt-out, renewal) is not enough, the marketer must also provide the consumer with Notice.  That is, the marker must provide the consumer with notice on exactly what types of personally identifiable information (PII) the marketer is collecting (e.g. mobile number, name, email address, etc.) as well as the types of non-personally identifiable information (non-PII) that is being collected (e.g. click streams, visit web site, location, etc.).  In addition, the marketer must, as part of notice, inform the consumer on how this information is to be stored, secured and used or combined with other online and offline PII and non-PII for the purposes of marketing to the consumer.

Notice is a key element in the privacy and preferences management process for establishing trust since it is the first line of communication with the consumer.  In mobile marketing, Marketers can provide Notice by placing their privacy and preference management policy on the Internet, by providing a text trigger, e.g. enabling it so that consumers can text Privacy to a short code so that they can receive the company’s privacy policy in the form of a text message or a mobile internet link, as well as providing the consumer with alterative and other traditional and mobile lines of communication. Notice, like Choice, is not a static situation but an on-going dialogue between the marketer and the consumer.

Conclusion
Mobile marketing is a very powerful and engaging medium and can continue to be so over time.  Through mobile marketing practices marketers can entertain, inform, build brand awareness, create loyalty, and drive purchase decisions amongst their target consumers; however, to ensure continued success and long term longevity of mobile marketing as a viable medium consumer trust must be established and maintained.  The first two elements of privacy and preference management, Choice and Notice, are critical and provide the foundation for establishing consumer trust.  These elements give the consumer the ability to make an informed consent when initiating an interaction with the marketer. By respecting this consent marketers can achieve their objective of maintaining a long lasting and profitable consumer relationship.

Notice to readers:
This is part one of a two part article on privacy management and its effect on trust and consumer participation and acceptance of mobile marketing.  The next and final piece to this article, to be released January 2007, will address the next two elements of privacy management, Value and Control. The piece will also provide a conceptual model on how all four of the elements of privacy management can be tied together and managed in such a way that they will mediate consumer trust and encourage participation and acceptance of the marketer’s mobile marketing initiatives.   Readers that are interested in this topic are encouraged to contact the author at [email protected] and share their thoughts and ideas.

References

BIGresearch (2006, 6/July).  BIGresearch Examines Text Messaging.  iMedia.  Retrieved, 11/13/06
http://www.imediaconnection.com/content/6271.asp

Hodgman, W.  (2006), President & CEO, m:metrics. Mobile Broadband Mobile Advertising: The Opportunity is Now. Presentation.

Hurley, R. (2006, September). The Decision to Trust. Harvard Business Review, p. 55~62.

Personal Communication with FMCG Privacy Manager, 2006.

SMS marketing no longer taboo? (2006, 25/Sept.). Retrieved 11/11/06, from http://www.fiercemobilecontent.com/story/trend-sms-marketing-no-longer-taboo/2006-09-25.

[1] The most common alert services provide weather, sports, and news information, however, we’re being to seem additional services like horoscopes, beauty tips, recipe ideas, trivia, joke of the day, product announcements, network application trials, birth control reminders, reverse auctions, promotions, discount coupons, helpful tips and other equally as relevant and potentially engaging services.