Academic Review

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Academic Review
Mediating effects of Privacy & Preferences Management on Trust and Consumer Participation in SMS Based Mobile Marketing Initiatives: Part Two of a Two Part Article
Michael Becker, EVP Business Development, iLoop Mobile, Inc.

For more information, or to discuss this article in more detail, please contact <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Michael Becker at [email protected]

This article is the second part to the November 2006 article “Mediating effects of Privacy & Preferences Management on Trust and Consumer Participation in SMS Based Mobile Marketing Initiatives: Part one of a Two Part Article” http://mmaglobal.com/modules/article/view.article.php/642).  Part one of this article presents the hypothesis that a firm’s privacy and preferences management program could positively influence consumer trust in a brand and consequently lead to increased consumer loyalty and consumer participation in the firm’s mobile marketing initiatives, which in turn could lead to an increase in consumer consumption of the firms goods and services.  In addition, part one analyzes two key elements to privacy and preferences management, Notice and Choice.  In this article, part two, the final two key elements of privacy and preference management are discussed, Value and Access & Control.  In addition, a conceptual model is presented which visually represents the interaction between privacy and preferences management, trust, and consumer participation in mobile marketing initiatives.  Marketers may use the concepts presented here to increase the long-term effectiveness of their mobile marketing initiatives and the relationship they have with their audience.

Mobile marketing is a new and exciting channel that can be added to a marketers marketing mix relatively easily.  When properly executed, mobile enhances traditional media.  Marketers can inform, entertain, engage, and sell to their audience with pure mobile marketing programs..  However, it is important to note that the mobile channel is unlike any other medium. Mobile marketing is personal (Ideas & Strategies 2001; Barnes & Scornavacca 2004; Karnell 2005; Swiley 2006; Koskinen et al. 2006), interactive (Ideas & Strategies 2001’ Buckely, 2003), and time (Ideas & Strategies 2001; Barnes & Scornavacca 2004; Buckely, 2003) and location independent (Barnes & Scornavacca 2004).  The personal nature of the mobile phone is singularly important to individual subscribers, and should be to marketers as well, as was pointed out and substantiated by the most recent Mobile Marketing Association (MMA) 2006 Mobile Attitudes and Usage Study.  The MMA study found that across all age groups, the mobile phone has become an important part of our every day lifestyle with many respondents stating that they have become dependent on their mobile device(s). In fact, the study found that 82% of the total sample reported that their mobile phone is highly to moderately important to their daily life, and 79% say that they are highly to moderately dependent on their mobile phone (MMA 2006).  The personal ties between the consumer and the mobile phone are only going to increase, and with this marketers must take special measures to protect the consumer’s personal space and privacy (Roussos et al. 2003; Byron 2006; Karnell 2005; Chowdhury et al. 2006). 

As discussed in part 1 of this article, employing Notice and providing Choice are two critical elements to privacy and preferences management, and in fact are required elements of the industry’s best practices guidelines.  Notice refers to the fact that marketers must conspicuously inform consumers as to exactly how their personally identifiable information (PII) and non-personally identifiable information (Non-PII) are going to be used and stored, and Choice refers to the mechanics marketers give consumers to easily opt-in and participate in or easily opt out of any marketing initiative (see part 1 for details).  The final two key elements of privacy and preferences management are Value and Access & Control.

Value
The idea of value is fairly simple.  Markets need to recognize that a consumer should be rewarded for the sharing of their PII and non-PII with the marketer.  As pointed out by Deighton (2004) consumer PII and Non-PII is a tangible asset and consumers should be given value for sharing this with firms.  “Unless your offer is compelling and contains an incentive or reward, people will opt-out in droves and your brand will be tarnished” (Air2Web, 2003).  Typical forms of value include the personalization of services, the offering of contextually sensitive services, the offering of coupons, free minutes, free and or discounted binary content, monetary incentives, and more.  Hanley et. al, (2005) found that in a mobile marketing study of college students that “students are becoming more receptive to cell phone ads, but are not ready to give up their wireless privacy, unless of course they are rewarded, but the reward model seems to be changing.”  Hanley (2005) found that nearly 29% of the surveyed students would accept mobile advertising if they received something free (ringtone, wallpaper, game, free minutes, free access to the mobile internet, etc.) or monetary compensation.  In 2005 28% would accept a quarter per ad, 35% wanted a $1.00 per ad, and one-fourth wanted more than $1.00 per ad.  In 2006, in a follow-on effort to Hanley’s original study, Hanley found that 33% of the surveyed students reported that they would not accept ads at any price, up from 1% in 2005; however, 32% would accept ads for $1.00, 12% for 50 cents, and 25% for 25 cents or lower (Hanley et. al. 2005).  Note, one challenge many mobile marketing studies face is the fact that the definition of mobile marketing when used to introduce the concept of mobile marketing to consumers is often unclear and tends to focus on push and wireless advertising and not all the other elements that makeup mobile marketing.  The lack of a clear, concise, and well founded definition of mobile marketing could be a significant contributor to the apparent low consumer acceptance rates of the concept of mobile marketing or wireless advertising in many studies.

Access & Control
The final consumer facing element of the privacy and preferences management program is Access & Control.  Hann et al. (2005) found that users have a higher regard for web sites that give the ability to access and adjust their personal information.  In simple terms, the idea of access is to give consumers access and control over their PII and Non-PII so that they can 1) know what information is being collected, 2) correct any errors in the information, or 3) revoke access to parts or all of the information.  Providing access is a simple idea; however, as Loyle (2006) notes, it is not an easy one to execute.  Loyle (2006) raises a number of important questions when it comes to offering access to information gathered by an organization:

·          What data should be accessible?

·          Who should have the right to access it and how are these rules determined to authenticate the man or machine accessing the data?

·          What can be done with it?

·          What constitutes public vs. private data? What one person considers private another does not care about, how do you distinguish between the two?

·          What happens when this information is mixed, i.e. PII, with Non-PII, with 3^rd party data?

·          What are the liabilities of breaches to access to the data? Who cares?

An additional, and important point, also relates to ownership of the information.  Today, as Deighton (2002) points out, all PII and Non-PII is owned by the collector of the information, leaving consumers little rights or control over how information about them is used and disseminated.  While, as noted above, the idea of access and control on the web is maturing, it has not come very far with mobile marketing and is very limited.  The industry can benefit greatly from work on this area within privacy and preferences management models.

A Conceptual Model
Studies have shown that marketing, and in particular mobile marketing, can be a very effective tool of generating high-response rates to marketing initiatives, sales, brand awareness, and customer loyalty (Kavassalis et al. 2003; Bauer et al. 2005; Rettie et al.; Enpocket 2005;l Leppäniemi et al. 2006).  And, as was alluded to above, when consumer’s have trust in a brand and/or marketer they are more inclined to engage in the marketer’s program(s) and share more of their PII to enrich the experience of the interaction (future articles will explore the elements of trust in more detail, but at a minimum it should be understood that trust is both bounded by variables surrounding the one offering the trust, the Decision Maker or trustee, as well as situational factors at the time the trust is being extended, e.g. who is being trusted).   The following illustration shows the interactions between these constructs and many of the subordinate variables that support them.



Figure 1: Conceptual model: Mediating effects of privacy & preferences management on trust and consumer participation in mobile Marketing

To this author’s knowledge the above conceptual model represents the first time it has been proposed that privacy & preference management may have a mediating effect on consumer trust and consumer participation in marketing initiatives.  While this article puts forth the proposal that this effect exists, research needs to be performed to validate and quantify the level of any such effect.

Conclusion
This paper may be used as a foundation for future research into the relationships between trust, privacy and preferences management, and the consumer acceptance and participation in mobile marketing initiatives.  It is important for marketers to recognize that a relationship with a customer is not a static event, but an on-going process.  Mobile marketing, when properly used, can be an effective tool within the marketer’s arsenal to nurture this relationship.   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. 

Notice to readers:
This two part article is a brief summary of some of the issues of privacy and mobile marketing and is based on a larger work conducted by this author into the effects of privacy and preferences management on trust and consumer participation in mobile marketing.  Readers that are interested in this topic and the expanded work by this author are encouraged to contact the author at research@mmaglobal.com and share their thoughts and ideas.

References

Air2Web (2003). Permission Based Mobile Marketing. Atlanta.

Barnes, S. J., & Scornavacca, E. (2004). Mobile marketing: The role of permission and acceptance. Int. J. Mobile Communication, 2(2), 128~139.

Bauer, H., Barnes, S., Reichardt, T., & Neumann, M. (2005). Driving Consumer Acceptance of Mobile Marketing: A Theoretical Framework and Empirical Study. Journal of Electronic Commerce & Research, 6(3).Buckley, Russell. (2003, 3/25). Mobile Marketing - R U up 4 It? MarketingProfs.com. Retrieved 11/10/03, from http://www.marketingprofs.com/3/buckley1.asp.Byron, E. (2006, 10/July). And Now a Word From.. The Wall Street Journal (New York), sec. THE JOURNAL REPORT: LEADERSHIP, p. a.

Chowdhury, H., Parvin, N., Weitenberner, C., & Becker, M. (2006, December). Consumer Attitude Toward Mobile Advertising in an Emerging Market: An Empirical Study. International Journal of Mobile Marketing, 1(2).

Deighton, J. (2002, 26/May). Market Solutions to Privacy Problems?, Harvard Business School, Boston, MA.

Deighton, J., & Schindler, R. (2004, 12/May). The Presentation of Self in the Information Age. (. Harvard Business School.

Enpocket Mobile Media Monitor US reveals young adults value mobile more than traditional media.  

(2005, 21st July). Retrieved from Enpocket: http://www.enpocket.com/wrapper/page/news/2005/july21.html.

Hanley, M., Becker, M., & Martinsen, J. (2006, June). Factors Influencing Mobile Advertising Acceptance:  Will Incentives Motivate College Students to Accept Mobile Advertisements? International Journal of Mobile Marketing, 1(1), 50~58.Hanley, M., Martinsen, J., & Pryor, L. (2005, November). College Cell Phone Advertising Survey., Department of Journalism, Ball State University.

Ideas & Strategies for Implementing Mobile Marketing. SkyGo. (2001).

Information Age. (2006). Retrieved 12/15/06, from Answers.com: http://www.answers.com/topic/information-age.

Karnell, J. (2005, 14/February). Mobile marketing primer. Retrieved from http://www.onetooneinteractive.com/resource/whitepapers/0010.html.

Kavassalis, P., Spyropoulou, N., Drossos, D., Mitrokostas, E., G., Gregory, & Hatzistamatiou, A. (2003, Fall). Mobile Permission Marketing: Framing the Market Inquiry. International Journal of Electronic Commerce, 8(1), 55-79.

Koskinen, I., Repo, P., & Hyvonen, K. (2006, November). Journal of Usability Studies, 2(1), 22~38.

Leppäniemi, M., Sinisalo, J., & Karjaluoto, H. (2006, June). A Review of Mobile Marketing Research. International Journal of Mobile Marketing, 1(1), 30~42.

Loyle, D. (2006, 9/August). Privacy Under Scrutiny. Retrieved 8/9/2006, from http://www.targetonline.com.

Rettie, R., Grandcolas, U., & Deakins, B. Text Message Advertising:Dramatic Effect on Purchase Intension., Kingston University & BT.

Roussos, G., Peterson, D., & Patel, U. (2003, Fall). Mobiel Identity Management:  An Enacted View. International Journal of Electronic Commerce, 8(12), 81-100.

Swilley, Esther &  Hofacker, Charles (2006, December). Defining Mobile Commerce in a Marketing Context. International Journal of Mobile Marketing, 1(2). 18~23.

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.

September 8^th, 2006<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

(Revised from July 25^th, 2006)

Academic Review

Understanding the Common Short Code: Its Use, Administration, and Tactical Elements

Michael Becker, EVP Business Development, iLoop Mobile, Inc.; <?xml:namespace prefix = u1 />Michael Ahearn, Senior Director of Marketing, iLoop Mobile, Inc.

Including editorial contributions from:

Richard Vile, VP Wireless Products, NeuStar, Inc.

Prepared for the Global Mobile Marketing Association
(For more information, or to discuss this article in more detail, please contact Michael Becker at [email protected])

To view the complete Academic Review, please click HERE.

Academic Review
Mobile Marketing Research Priorities: Roadmap to Engaging the “Connected Customer”
Michael Becker, EVP Business Development, iLoop Mobile, Inc.; Michael Hanley, Assistant Professor of Advertising, Ball State University.

Prepared for the Global Mobile Marketing Association
(For more information, or to discuss this article in more detail, please contact Michael Becker at [email protected])

“…the ‘connected customer’ era may change the paradigm for effective marketing strategy.”<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

(Marketing Science Institute 2006)

Consumers and business customers are gaining significant power in today’s technologically advanced digital, virtual and globalized world. More than ever before, customers have the power to make informed choices through increased real-time access to a broad range of information, communication and decision making tools. It’s the marketers job to offer relevant services to their target audience, however, due to the fragmentation and explosive growth of media channels and the ability of customers to time-shift with DVRs, the Internet, mobile phones and related technology, it’s becoming increasingly more difficult for marketers to capture the attention and maintain an on-going, profitable, relationship with their target audience.

The customer has changed. The Marketing Science Institute (MSI) refers to this new breed of customer as “The Connected Customer” (Marketing Science Institute 2006). According to the MSI, Connected Customers are quite unique (as depicted in Figure 1). They continue to be exposed to traditional mass media and many-to-many marketing initiatives as in the past, but are now also simultaneously accessing information directly (anywhere, anytime) and using this information to make informed choices when engaging the brand, marketer and special-interest groups one-to-one through mediums like the mobile phone and the Internet.   

Figure 1: ‘The Connected Customer’ Relationships
(adapted from Marketing Science Institute 2006)

The idea of the Connected Customer is not just a phenomenon in industrialized markets; emerging markets are catching up fast. There are more than two billion mobile subscribers worldwide, about 30 percent of the global population, most of which are in industrialized markets. However, by 2010, according to the GSM Emerging Market Handset Initiative (EMHI), almost everyone will have a cell phone, especially in emerging markets. The EMHI estimates that mobile subscriber penetration rate will reach 80 percent worldwide (Taaffe 2006). Moreover, it is not just wireless phone technology connecting the customer. There are new networks, applications and devices emerging that are speeding the reach of the customer along. For example, network technology like WiMax, which can blanket a 10-mile radius with wireless Internet from one tower, will significantly enhance a customer’s ability to stay connected, not just from the phone, but from their car, iPods, computers and mobile terminals that have yet to be developed. Moreover, new context sensitive applications and solutions will enable marketers to enhance their initiatives and make their programs location, time and presence available. The emergence of mobile commerce and micro-payment solutions are also significant and interesting developments that marketers should pay attention to. It is an exciting time, but there is much work to be done in order to engage the Connected Customer.

Marketers must realize that current marketing methods, media types and guidelines may not work to engage the Connected Customer or to understand and report on such engagements. The MRI (2006) notes that “the ‘connected customer’ era may change the paradigm for effective marketing strategy.” Marketers must embrace this change. However, they should not just accept it or take it for granted. They must take an active role in understanding how they must adapt to face this change. If they do not, they run the risk of becoming marginalized. As noted by McAlister and Tay (2005), "...marketing will only improve its standing in organizations to the extent that its activities are methodologically rigorous, strategically relevant, and accessible to key decision makers in their own language…."  It appears that marketers understand this. Marriott (2006) notes, “the goal is to create new models that work for mobile, not merely more models that have been applied to other media types. This is the challenge for agencies and their brands, and one they're stepping up to.”

Marketers need to better understand the Connected Customer and what Connected Customers find relevant, informative and entertaining, and how the mobile channel and the practice of mobile marketing can help them accomplish their goals. There is much research that needs to be done, but for research to move forward it helps to have an agenda, to know where the research needs to go. The remainder of this article will help one formulate a research agenda and set priorities as it pertains to how marketers can use the mobile channel and the practice of mobile marketing to engage their audience. It briefly documents what we know about mobile marketing and details research priorities. It also helps focus academic and industry practitioners start a research agenda in regards to adding to the growing body of knowledge on mobile marketing.

What We “Think” We Know About Mobile Marketing
Simply put, mobile marketing is the practice of leveraging the mobile channel for marketing. It is the practice of brands and marketers interacting with their audience through the mobile channel, including through messaging (SMS, MMS, Email), voice, alternative alerts (Bluetooth, etc.), the mobile internet, wireless advertising, and data services like MobileTV, picture recognition, mobile portals, etc. The concept of mobile marketing is less then a decade old and has only been put into practice in the last few years. The Direct Marketing Association (2006) notes that marketers are employing mobile marketing for:

·          Response fulfillment

·          Sales promotion support

·          Direct sales (through downloadable content)

·          'Interactivity' (such as voting and competitions)

·          Customer service support

·          Research and data collection

·          Store traffic generation

·          Couponing and ticketing

·          CRM

·          Advertising

·          Branding

Much has been learned from industry case studies and academic research about mobile marketing and consumers’ acceptance of it. Through controlled research experiments, case studies and reflection of live mobile marketing initiatives we’ve learned that mobile marketing:

·          Can be very effective in generating responses rates from and is often a preferred channel for certain demographic segments (youth, ethnic groups, women, and others): WAP banner ads responses of 3%-5%; SMS programs 3%-10% or higher; MMS campaigns up to 20% are not unheard of (Kavassalis et al. 2003, Rettie et al., CTIA 2005, Baker 2006; Enpocket 2005; Baker 2006; Levey 2006; Young 2005).

·          Incentives (free minutes, coupons, sweepstakes, content, money, etc.) can be used to engage the Connected Customer; however, many incentive models are currently not allowed in certain markets.

·          Is interactive, turning normally static media (TV, print, radio) into interactive, personalized, informative and entertaining media (Marriott 2006, Bauer et al. 2005, Manis 2005, Bragge et al. 2005, Dickinger et al. 2004, Nysveen et al. 2005).

·          Can be an effective way to gather customer information that has been challenging, if not impossible, to previously gather and utilize through other means (location, time, presence, immediate purchase intentions).

·          Is being adopted by marketers at an increasing rate. By 2008 up to 89 percent (depending on geography) of marketers will be actively employing mobile marketing in its various forms (Marriott 2006; Pearse 2005; Airwide Solutions 2006).

·          Is an effective means for the promotion and delivery of content and personalization software.

·          Can be used to enable other research methods. For instance, a recent MediaAudit/Ipsos research study “found that adults are 3.5 times more likely to agree to participate in a panel study using a cell phone (66%) versus 18% who would agree to carry a pager” (Loechner 2006).

On the industry front, empirical evidence is time and time again proving the increasing effectiveness of mobile marketing; likewise, on the academic research front much has been done. However, more is needed. Published qualitative and empirical data shows us that mobile marketing can be very effective, but studies done to date to prove or disprove effectiveness hypotheses are limited. Moreover, additional longitudinal studies and studies validating what we already know are also hard to come by.  A review of several online advertising and marketing research sources and conference abstracts found a modest but growing amount of published material about mobile marketing. The World Advertising Research Center (WARC.com) database has 601 advertising or marketing research articles pertaining to mobile marketing, as of early August 2006. A Google Scholar search of “mobile marketing” found 28,500 sources; a “cell phone advertising” query returned 6,970. Mobile marketing-related conferences papers have also shown slow growth. At the August 2006 conference of the Association for Education in Journalism and Mass Communication, four papers about mobile marketing were presented in the Advertising Division, up from one in 2005. Leppäniemi et al. (2006) studied fifty conference papers and journal research articles published on the topic of mobile marketing between January 2000 and February 2006. Their analysis shows us the broad array of mobile marketing topics being studied, including the mobile ecosystem, consumer attitudes, value of mobile advertising, and more. They categorized the available research during this time into three segments: Consumer, Business and Management, and General. 



Even with all this work, however, Leppäniemi et al. (2006) note that “…despite the increasing number of publications, the growing body of literature on mobile marketing is somewhat inconsistent and highly fragmented. This is due, in large part, to the fact that a common conceptualization of the phenomenon is still lacking.” (p1).  For instance, in their article they cull over 21 different definitions of mobile marketing out of the studies they looked at. It is evident that focus is needed. Research plays a vital role in directing the future practice and development of mobile marketing. While much has been learned regarding the effectiveness of mobile marketing, there is much more to learn.

Research Priorities
In order to thoroughly study a topic, like mobile marketing, it’s important to define research boundaries, to establish a focus for everyone to work off of. Having a well defined list of research priorities will help with this. For instance, since 2000 the Marketing Science Institute has published research priorities based on member company input every two years to help focus research into marketing in general. MSI’s 2006-2008 priorities are encapsulated by the theme “The Connected Consumer.” This is an appropriate theme for marketing in general, and quite applicable for guiding research into mobile marketing. For the practice of mobile marketing there are many detailed topics to consider. The following list of research themes and their sub-topics seem to be the key areas of mobile marketing concern to marketers and practitioners alike, having been culled from articles, call-for-papers from the International Journal of Mobile Marketing and International Journal of Electronic Business and related sources:

1.      Understanding the Mobile Marketing Ecosystem & Technology Development

a.       Mobile marketing theory, frameworks, constructs and concepts.

b.       Research methodologies and models suitable for studying mobile marketing.

c.       Effective methods for bringing mobile marketing academic research to professionals.

d.       Review of industry typology and definitions

e.       Understanding the nature of alliances and business models amongst the player within the ecosystem in order to effectively monetize each other’s efforts

f.        Architectures and frameworks for mobile marketing models.

g.       Design, implementation and evaluation of mobile marketing software systems

2.      Mobile Initiative Creation, Delivery and Measurement

a.       Mobile initiative measurement and metrics: A need for a clearer understanding of mobile marketing ROI, critical success and failure factors, effectiveness and traceability perspective (Marriott 2006; Virtanen et al. 2005).

b.       Effectiveness of mobile content, such as ringtones, mobile TV, video and images, within the marketing mix

c.       Word-of-mouth marketing (Kim 2006).

d.       Content design of mobile advertising and promotions.

e.       Analysis of the various opt-in and delivery methods: SMS, MMS, mobile internet, IR, IM, Bluetooth, mobile email, mobile portals, picture recognition, Zoove method

3.      Consumer Perceptions and Attitudes Toward Mobile Marketing

a.       How is mobile effecting consumer interaction?

b.       The role of incentives in consumer acceptance of mobile advertising.

c.       Customer profiling, personalization and targeting in mobile marketing.

d.       Mobile customer relationship management.

4.      Legal, Privacy and Regulatory Issues, and Best Practices Guidelines

a.       Who owns the mobile customer relationship?

b.       CANSPAM and future regulations: Enabling or disabling?

c.       Opt-in or be left out: The minefield of permission-based mobile marketing.

d.       Issues surrounding privacy management within a mobile context.

e.       Analysis of future trends and impact of global, environmental, cultural, and political activities on mobile marketing.

5.      Mobile Use and Context Across Different Mediums.

a.       Effectiveness of mobile marketing across various traditional media channels: Interactivity of mobile-enhanced traditional media and pure mobile programs (Marriott 2006).

b.       Applications of multimedia within mobile marketing initiatives.

c.       mCommerce as it pertains to the marketing mix.

d.       Mobile marketing in the agency: Where does it fit – in offline or digital departments?

e.       Use of the mobile channel for philanthropy and politics.

The above set of themes and research topics can certainly be refined, but overall they paint a very good picture of the areas of mobile marketing that need further investigation.

Conclusion
Clearly, the practice of mobile marketing is immensely effective; however, there is much to learn and document on its varied uses. The above research priorities and themes are not in and of themselves an agenda, since they are not laying out a chronological roadmap; rather they are a starting point toward helping the industry and academia gain clarity on focus when researching the field. Note, however, while it is critically important that we begin to model and understand the Connected Customer and her relationship with brands and marketers and how the practice of mobile marketing can get her engaged, we must take note that we don’t need research simply for research’s sake. When taking up the charge to tackle research into mobile marketing practices and answer many of the questions that are at hand, researchers - academic or industry practitioners - must focus on creating commercially actionable insight, not simply knowledge for knowledge sake. Ultimately, through focused study and research, we’ll understand more fully the role and impact that mobile marketing can and will play in the coming mobile-enhanced economy.

If you have comments or insights about mobile marketing research priorities and would like to assist in the refinement of a research agenda for mobile marketing, send them to [email protected].

References

Airwide Solutions. (2006, 21//Feb.). 89% of Major Brands Planning to Market Via Mobile. Retrieved 5/11/2006, from Airwide Solutions: http://www.airwidesolutions.com/news.asp?nav_id=2324&lang_id=E.

Baker, M. (2006). Three Ways to Market on Mobile. Retrieved 08/05/06, from http://www.imediaconnection.com/content/10604.asp.

Bauer, H., Barnes, S., Reichardt, T., & Neumann, M. (2005). Driving Consumer Acceptance of Mobile Marketing: A Theoretical Framework and Empirical Study. Journal of Electronic Commerce & Research, 6(3).

Bragge, J., Tuunanen, T., Hengst, M. d., & Virtanen, V. (Speaker). (August 11th-14th 2005). A Repeatable Collaboration Process for Developing a. Proceedings of the Eleventh Americas Conference on Information Systems. Omaha: IEEE.

CTIA. (2005, 27/Sept.). Mobile Marketing Association. In Marketing- The Mobile Channel. CTIA Wireless I.T. & Entertainment 2005 San Francisco: Mobile Marketing Association & CTIA.

Dickinger, A., Haghirian, P., Murphy, J., &, S. (2004). An Investigation and Conceptual Model of SMS Marketing. Proceedings of the 37th Hawaii International Conference on System Sciences: IEEE.

Enpocket Mobile Media Monitor US reveals young adults value mobile more than traditional media.   

(2005, 21st July). Retrieved from Enpocket: http://www.enpocket.com/wrapper/page/news/2005/july21.html.

Kavassalis, P., Spyropoulou, N., Drossos, D., Mitrokostas, E., Gikas, G., & Hatzistamatiou, A. (2003, Fall). Mobile Permission Marketing: Framing the Market Inquiry. International Journal of Electronic Commerce, 8(1), 55~79.

Kim, P. (2006, 22/Feb.). Word-Of-Mouth Marketing Priorities For 2006. Retrieved 8/3/06, from http://www.forrester.com/Research/Document/Excerpt/0,7211,38901,00.html.

Leppäniemi, M., Sinisalo, J., & Karjaluoto, H. (2006, June). A Review of Mobile Marketing Research. International Journal of Mobile Marketing, 1(1), 30~42.

Levey, R. (2006). Gen Y Phones It In. Retrieved 8/5/06, from http://chiefmarketer.com/crm_loop/custom/topstory/gen-y-phones-it-in-080306/.

Loechner, Jack. (2006, 2/Aug). Cell Phone Better Research Monitor            . Retrieved 8/5/06, from http://publications.mediapost.com/index.cfm?fuseaction=Articles.showArticleHomePage&art_aid=46182.

Manis, J. (Speaker). (2005). Mobile Marketing Basics. CTIA Wireless I.T. & Entertainment 2005 Marketing - The Mobile Channel. San Francisco: CTIA  & Mobile Marketing Association.

Marketing Science Institute. (2006). Marketing Science Institute – Research Priorities 2006-2008. Retrieved 8/1/06, from http://www.msi.org/msi/rp0608.cfm.

Marriott, L. (2006, 17/July). Mobile Marketing: An Agency Perspective (1~2). Retrieved 7/28/2006, from http://www.clickz.com/showPage.html?page=clickz_print&id=3622971.

McAlister, L., & Tay, E. (2005, April). Choosing Priorities. Marketing Management, 14(2), 42~45.

Morrissey, B. (2006, 26/May). Marketers Wary of Emerging Media. AdWeek (http://www.adweek.com/aw/iq_interactive/article_display.jsp?vnu_content_id=1002576716).

Nysveen, H., Pedersen, P., Thorbjornsen, H., & Berthon, P. (2005, February). Mobilizing the Brand. Journal of Service Research, 7(3).

Pearse, J. (2005, 9/12). Coca-Cola believes mobile ads have potential to upstage TV           . NWA. Retrieved 12/9/05, from http://www.nma.co.uk/Document.aspx?did=da845be8-0ac0-49d9-8232-b5632ab552b4.

Rettie, Ruth, Ursula Grandcolas, and Bethan Deakins Text Message Advertising:  Dramatic Effect on Purchase Intension. Kingston University & BT.

Siau, K., Lim, E.-P., & Shen, Z. (2001, Jul~Sept.). Mobile commerce: Promixes, challenges, and research agenda. Journal of Database Management, 12(3), 4~13.

Taaffe, O. (2006, April). Reach for your Handset. Telecommunications International.

Virtanen, V., Bragge, J., & & Tuunanen, T. (2005). Barriers for Mobile Marketing and How to Overcome Them., Helsinki School of Economics.

Young, S. (2005, 24/Oct.). Telecommunications; Mobile Mavens: African-Americans and Hispanics are the early adopters when it comes to wireless phone service. Wall Street Journal (New York), Eastern ed., sec. R, p. 11.

Academic Review: 
Mobile Ecosystem & Strategic Alliances-- Practice, Elements, and Framework
Michael Becker, CTO, iLoop Mobile, Inc., April 25, 2006

Prepared for the Global Mobile Marketing Association
(For more information, or to discuss this article in more detail, please contact Michael at [email protected])
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The mobile age is upon us and the use of strategic alliances amongst the players within the mobile ecosystem is rapidly becoming a business imperative (Overby, 2005). This is due to the fact that the mobile industry, like other technically volatile and emergent industries (Porter 1990, Doz and Hamel 1998), is becoming increasingly impacted by the effects of globalization, the spread of inter-linked heterogeneous technology, and global acceptance of harmonized standards, all of which are blurring the boundaries of previously autonomous, unrelated, industries and firms that serve them (Contractor & Lorange 2002; Gomes-Casseres 1996; Bergquist & Betwee 1995). The cumulative effect of these trends is making it increasingly evident that the mobile ecosystem players—brands, content owners, marketing agencies, media & retail companies, enterprises, application providers, and even network providers—wishing to launch mobile and mobile enhanced initiatives (Becker 2005) will find it prohibitively difficult to fully internalize (while not exposing themselves to unnecessary risks) the necessary systems, processes, technology, skills, know-how, marketing, and managerial expertise needed to develop and sustain a competitive advantage in the markets they serve (Dacin et al. 1997, Glaister & Buckley 1996; Akio 2004; Gates 1993; Taysen 2004; Porter 1990). Firm’s interested in offering compelling mobile and mobile enhanced services are turning to strategic alliances with complimentary firms, and in some cases competitors, to reduce their risk, gain access to technology, know-how, new markets (local, national, and global), marketing expertise, and products and services in order to excel in today’s fast paced technically and socially complex mobile market. This paper discusses the nature of the mobile ecosystem and the use of strategic alliances by the players within it. It identifies key strategic alliance elements, and concludes with a framework that practicing managers may consider when formulating and managing their strategic alliances.  

Today, mobile voice and data services are being used by nearly 20% of the world’s population, 65~100% of the population in industrialized nations. Mobile services and mobile enhanced services are ubiquitous and used for personal communication, social networking, traditional media, data requests and dissemination, content sales and delivery, artistic expression, business, healthcare, gaming, fitness, and direct 1 to 1 marketing, to name just a few of the applicable arenas. Mobile terminals, the devices that enable access and interaction to and with these services, come in a wide range of shapes and sizes and can be found in some interesting places, including belts, lanyards, kid’s shoes and backpacks, pet collars, in pockets, watches, purses, art exhibits, cars, elevators, parking meters, and they can even be found on the backs of pigeons where they’re being used for air quality monitoring. Mature mobile services like voice, text messaging, mobile email, wallpaper, games, and ringtone sales have become immensely popular, but these services simply form the foundation for the next generation services to come.  Additional services are gaining mass-market awareness like push-to-talk, picture messaging, mobile instant messaging, mobisode and mobile TV viewing, full-length music downloads, and 3D and interactive gaming. Other services, including permission based location awareness applications, remote sales force and field management services, as well as mobile enhanced interactive customer relationship management are not far off, as are the availability of more elaborate services that will take advantage of the convergence of both long and short range wireless offerings, including 3G and 4G networks, WiFi, Bluetooth, RFID, near field communications, etc. All these services are powered by the interaction between professionally and technical diverse players within the mobile ecosystem.

Strategic Alliances and the Mobile Ecosystem
Given the wide range of converging and heterogeneous technologies and practices that are powering mobile initiatives within the mobile ecosystem it is no wonder that the use of strategic alliances is rising. Even though most alliances fail, typically 50%~60% of strategic alliances fail (Hosskisson 1999), studies have shown that across all business sectors strategic alliances increased by over 25% in the 1990s (Contractor & Lorange 2002), and the mobile industry has followed suite. Taysen (2004), in his recent study, informs us that strategic alliance use in the mobile space is growing, with the average firm in the mobile space by 2006~2007 estimated to be engaged in 31 strategic alliances, which is up from 16 alliances in 2001. Again, the increased usage of the strategic alliance vehicle is due to the fact that firms are finding it more and more advantageous to collaborate when reaching out to the market.

According to Becker (2005) the mobile ecosystem consists of four interlinking spheres, or micro-markets: Product & Services, Media & Retail, Applications, and Connections. The players within each sphere are domain experts specializing in discrete areas like creative design, product positioning, consumer interaction, content creation and publication, technology development, network management, and regulation development, etc.  Product & Services companies manage the conception, development, release of content, products and service to be sold to the markets.  Media and retail players provide channels for promotion, distribution, and point of sale commerce.  Application providers develop the hardware and software solutions that enable mobile interactivity, and Connection players are the backbone to the mobile industry providing the infrastructure and support for the fundamental business models powering wireless services. Mike Short, Chairman for the Mobile Data Association, recognizes the need for partnerships in the mobile space and knows they will drive the industry, he said:

“if Content is King, the Carriage is surely Queen- and Mobile Content a Royal Wedding!...This truly requires partnerships to blend the best of all Content on the relatively small screen of mobile, whilst also recognizing that historically it is the fourth screen coming in time after film, TV, and PC screens, but of course with the true attribute of mobility, interactivity, global reach and personalization.  These attributes could one day make the mobile the first screen if the partnerships work well…the need for mobile partnerships with specialists who understand how the various Messaging solutions are rapidly evolving, based on new Mobile and Internet combinations. While the key Messaging focus areas of Push to Talk, Mobile email and Instant messaging are all stressed, it is only the specialists who can match this to actual network capability, handset adoption and country penetration (this is far from uniform internationally), handset capability and real user needs…among these trends, the market fog needs to be cleared with real partners, able to show the way forward towards real solutions and growth” (Netsize Guide 2006, p8). 

Take, for example, a technically straightforward mobile initiative like the American Idol text messaging voting application, which is arguably the most effective and prominent mobile marketing initiative to date in the United States. A program like this requires the seamless interaction of many firms within the mobile ecosystem. To make the American Idol mobile initiative happen, the American Idol Brand Managers partner with players from each sphere of the mobile ecosystem. Within the Product and Services sphere they work with their marketing agency and content partners to conceive the program details, and they work with their media and retail partners to promote the program. The Brand Manager will also work with an Application provider to gain access to the mobile voting application, who in turn works with a Connection player for messaging delivery and related network elements. What appears to be a rather straight forward initiative, mobile enhancing a TV program with text message voting, is actually quite complex and seamless interaction and alignment between multiple companies across many micro-markets.

Strategic Alliances Defined
A strategic alliance, or partnership as it is often referred to, is a business relationship that exists between two or more firms, one that materially contributes to the firm’s competitive position (i.e. is strategic) and that takes on a governance form between two polar opposites, the open market and the hierarchy of the firm (Kogut 1988, Williamson 1991; Ireland et al. 2002; Gilroy 1993; Porter 1990). Prior to 1988 strategic alliances were not widely used and the most common form of the strategic alliance was a joint venture, an inter-firm relationship characterized by firms joining known resources and addressing known risks in order to address specific opportunities peripheral to the firm’s core strategy (Kogut 1988, Doz & Hamel 1998). However, since then the notion of the strategic alliances has matured greatly, today the strategic alliances exist in a continuum between the open market and firm. Gomes-Casseres (1996) notes that strategic “alliances blur the boundaries of firms, making it hard to discern where one firm ends and where another--or the market—begins… an alliance is any governance structure involving an incomplete contract between separate firms in which each partner has limited control… a contract is termed incomplete when, despite the fine print, it does not specify fully what each party must do under every conceivable circumstance” (p34).

What makes strategic alliances unique is that they are not as formal as the firm in terms of ownership, control, and structure or as informal as the market where no ownership, control, or structure is afforded to the firm. Another element within the strategic alliance framework is knowledge management which exists on a continuum between implicit knowledge, that which can be bought opening in the market, and tacit knowledge, or that which is socially complex and experience based and only accessible through the interaction with a partner or built internally over time within the firm.

The above elements alone do not make the strategic alliance relationship between firms unique.  In addition to these elements there is a host of other factors that act as stabilizers and de-stabilizers to the alliance relationship between firms, including partner experience and selection, the objectives of each partner, partner motivations, skills, individual firm and local governing and economic structures, culture, heritage and more. All these elements significantly affect the nature and success of strategic alliances as depicted in the illustration below.



Figure 1:  Strategic Alliance Framework

When identifying the critical elements in this framework practicing managers within the mobile space will improve the success of their alliances. Hosskisson (1999) reports that there is a high rate of failure of the general strategic alliances, but research also shows us that the firms that proactively manage their strategic alliances achieve higher than normal returns, specifically it has been shown that strategic “alliances have consistently provided a return on investment of nearly 17 percent among the top two thousand companies in the world for nearly ten years…[and that] successful alliance builders expect about 35% of their revenue to come from alliances” (Harbison & Pekar 1998). The builders of strategic alliances learn that while they do need to be concerned about the possibility of partner opportunism (and minimize it if at all possible), mutual trust, commitment, and cooperation forged over time will lead to the establishment of lasting foundations and strategic alliance success (Williamson 1985, Ireland 2002). When handled properly factors like trust and commitment can mitigate challenges in alliance formation and management. They can also contribute to the generation of social capital between the aligning firms. Social capital may be considered a resource since it is rare, valuable and difficult to imitate, and if managed properly the nurtured social capital may become a core competency of the firm and contribute to its competitive advantage. "Partnerships that move beyond form and structure--those that demand deeper changes, in principles and behavior--will recognize the interdependence of multiple parties and replace control with cooperation and collaboration… In an age of limited and diminishing resources, partnerships offer expanded capabilities, allowing organizations to do more with less or do something entirely different than their existing resources permit. Increasingly, professional people have found hierarchical structures too inefficient to achieve their goals” (Bergquist & Betwee 1995:PG9, 11).

The mobile ecosystem is a technologically and professionally diverse web of micro-markets and companies providing a complex mix of interlinking branded products and services, all seamlessly coming together to power mobile and mobile enhanced initiatives will be the most successful. As the trends of globalization, standards and regulatory harmonization and convergence continue the need for strategic inter-firm, or alliance, relationships will only increase. Successful alliances require a firm’s management to apply flexibly, patience, forbearance, time, and most importantly have a desire to learn and improve. 

This paper is a synthesis of a larger work by Becker on strategic alliance theory and practice. Contact <?xml:namespace prefix = u1 />Michael Becker at [email protected] if interested in receiving a copy of the complete piece.

References

Akio, T. (2004). The Logic of Strategic Alliances. Ritsumeikan Intentional Affairs, 25, 79~95.

Becker, M. (2005a, 6/Dec). Effectiveness of Mobile Channel Additions and A Conceptual Model Detailing the Interaction of Influential Variables. Retrieved 4/13/06, from http://mmaglobal.com/modules/article/view.article.php/131.

Becker, M. (2005b). Unfolding of the Mobile Marketing Ecosystem: A Growing Strategic Network. Retrieved 4/13/06, from http://mmaglobal.com/modules/article/view.article.php/74.

Bergquist, W., & Betwee, J., Meuel. (1995). Building Strategic Relationships. San Francisco: Jossey-Bass.

Contractor, F., & Lorange, P. (2002, 06/03/25). The Growth of Alliances in the Knowledge-Based Economy. In F. Contractor & P. Lorange (Eds.), Cooperative Strategies and Alliances (pp. 3-22). London: Pergamon.

Dacin, M. T., Hitt, M., & Levitas, E. (1997). Selecting partners for successful international alliances:  Examination of U.S. and Korea firms. Journal of World Business, 32, 3-16.

Doz, Y., & Hamel, G. (1998). Alliance Advantage. Boston, Mass.: Harvard Business School Press.

Gates, S. (1993). Strategic Alliances:  Guidelines for Successful Management. Ottawa: The
Conference Board.

Gilroy, B. M. (1993). Networking in Multinational Enterprises. South Carolina: University of South Carolina Press.

Glaister, K., & Buckley, P. (1996, May). Strategic Motives for International Alliance Formation. Journal of Management.

Gomes-Casseres, B. (1996, 06/03/29). The Alliance Revolution. Cambridge, Mass: Harvard University Press.

Hoskisson, R., Hitt, M., & Wan, W. (1999). Theory and research in strategic management:  Swings of a pendulum. Journal of Management, 25(3), 417-456.

Ireland, D., Hitt, M., & Vaidyanath, D. (2002). Alliance Management as a Source of Competitive Advantage. Journal of Management, 28(3), 413-446.

Kogut, B. (1988, 23/July). Joint Ventures:  Theoretical And Empirical Perspectives. Strategic Management Journal, 9, 319-332.

Overby, M. L. (2005). Organizing Innovation in Emerging Markets: The Case of Mobile Telecommunications.

Porter, M. (1990). The Competitive Advantage of Nations. New York: The Free Press.

Short, M. (2006). One of us must know The Netsize Guide (2006 Edition). Retrieved 21/02/06, from Netsize: http://www.netsize.com/index.aspx?id=5&sid=1.

Taysen, N. v. (2004). Commitment as Performance Factor of New Venture Alliances in Mobile Business [Electronic version].

Williamson, O. E. (1985). The Economic Institutions of Capitalism. The Free Press.

Williamson, O. E. (1991, June). Comparative Economic Organization: The Analysis of Discrete Structural Alternatives. Administrative Science Quarterly, 36, 269~296.

Academic Review:  Developing an Understanding of Mobile Commerce: A Review Billed to Phone Payment Methods
Michael Becker, CTO, iLoop Mobile, Inc., March 12, 2006
Prepared for the Global Mobile Marketing Association
(For more information, or to discuss this article in more detail, please contact Michael at [email protected])

In the last six to ten years the mobile channel, which is used for marketing, services and content distribution, and commerce has matured dramatically and drawn much attention from a wide range of constituencies, including brands, content owners, retail and media, marketing practitioners, application developers wireless network providers, popular press, industry analysts, government regulators, consumer activists, and consumers.  There are many reasons why the mobile channel is receiving so much attention.  The least of which is the clear consumer demand for mobile content and services and the recognition that the mobile phone may also be viable tool for facilitating payment for goods and services. The mobile phone is not only good for paying for content and services consumed on the phone but also for “non-digital” payment transactions (i.e. the purchasing of books, tickets, person-to-person payments, CDs, etc).  The mobile phone content and data services market, such as music, gaming and video, is forecasted to reach $43~$50 billion worldwide by 2010, up from $5.2 billion in 2004 (Sullivan & iSuppi 2006, Digital Music Report 2006), and according to analysts, non-digital transactions will be more prevalent by 2009, up from practically nothing today.  With all this industry attention, however, there is little research available to help industry practitioners and academics understand the key elements that drive consumer acceptance for the most ubiquitous method of mobile payment, Billed to Phone.  With the Billed to Phone method purchase transactions are billed to mobile subscribers’ phone bill and the proceeds for the transaction are split between all the parties in the value system.  There are a number of academic studies that propose conceptual models for mobile commerce and look at the consumer acceptance of the mobile channel, but there are no empirical studies that evaluate consumer acceptance and use of Billed to Phone payment methods.  This article provides a brief review of the Billed to Phone payment methods and addresses the need for additional academic research into consumer acceptance and effectiveness drivers of the Billed to Phone billing method.

Mobile content is sold either directly from the mobile operator’s “On-portal” storefront, which is often referred to as the “On-deck” storefront, or via third-party content service provider storefronts referred to as “Off-portal” storefronts.  These Off-portal storefronts can take many forms, including Web and Mobile web site, radio, TV, live event public announcements, email, Instant Voice Response (IVR), and various forms of print matter (flyers, magazines, newspapers, etc.).  Qpass reports that U.S. and European markets are quite different when it comes to Off-portal and On-portal sales demarcations.  In Europe the market has been primary driven by third-party content service providers with roughly 70~80% of content sold Off-portal as opposed to 20%~30% On-portal.  While in the United States Off-portal sales just became viable only 15 months ago and so the picture is reversed with roughly 31% of content sales Off-portal and 69% On-portal (Blanksteen 2006).  Another important aspect of the billing event is the way the product is package and the frequency of billing, i.e. is the content or service sold via a pay-per-view, pay-per download, or subscription model.  Moreover, how the content is packaged or bundled with other services needs to be considered (note, bundling is something that is difficult to do today given a number of technology and regulatory roadblocks in the mobile landscape). Frequency of the billing period (weekly, monthly, etc.) should also be considered.  These models and package programs are used by both operators and third party providers with varying degrees of success.

To process digital mobile content and services, and non-digital, purchase transactions a number of payment methods are applicable, such as credit card billing, Pay Pal, loyalty point, promotional or coupon code, retail pin, m-wallet, and Near Field Communication (NFC)[1] powered non-digital transaction solutions to name a few.  However, these methods are quite limited in their use compared to Billed to Phone methods.  Bango, a global mobile billing enabler estimates that nearly 87% of mobile content payments are Billed to Phone, with only 9% billed to credit card, and 2% billed through IVR and 2% via retail pin., see Figure 1 (above, right). 

The Bill to Phone payment method is employed primarily for mobile content and service micropayments, i.e. content and services with a value less than $10.00 consumed directly on the mobile phone, although there are some early trials in Europe and Asia for non-digital Billed to Phone transactions.   With the Bill to Phone Payment method a consumer purchasing a good or service (from an On- or Off-portal storefront) has the charge for this good or service appended directly to their mobile phone bill once they’ve completed their transaction.  Bill to Phone payment is preformed either through Premium SMS or WAP billing. 

Premium SMS billing refers to the use of mobile originated (MO) or mobile terminated (MT) SMS messages to initiate the charge.  A mobile originated message is a message sent from the mobile phone to a content or service provider, while a mobile terminated message is a message sent from a content or service provider to the mobile phone.  What distinguished a premium rate SMS message versus a standard rate message is how it is encoded by the service provider.  For a standard rate message the service provider simply sends the message, however for a premium rate message the service provider encodes a price to the message, e.g. $1.99, $2.99, up to $9.99, when sending the MT message or receiving the MO message.  In either case, depending on the marketing program or how the common short code and keyword is configured within the mobile operator network and service provider application, a charge can be applied to the wireless subscriber’s phone bill when the MO message is received by the service provider from the mobile subscriber or when the MT is sent from the service provider and received by the wireless customer.  In the United States only MT billing is accepted, while in Europe both MT and MO billing is possible.  Regardless of the method, MO or MT, best practices and more often than not regulations, call for obtaining confirmation from the wireless subscriber before the charge for the purchase can be billed by the service provider.  This confirmation process is referred to as the Double Opt-in Process and is performed in one of two ways.  The first way, Premium SMS billing, confirmation is performed through the sending of an SMS message to the mobile subscriber’s phone, which must be affirmatively replied to by the mobile subscriber.  Once the service provider receives the purchase confirmation the service provider sends the content download URL to the customer.  When customers have successfully downloaded the content to their mobile phone, the service provider sends a MT billing SMS (often in the context of a thank you message and billing receipt) to the customer to finalize the charge.  The second way Premium SMS billing confirmation is performed, and the more user friendly, is with Mobile Internet pages.  When customers initiate the purchase for content or service, the service provider sends a Mobile Internet link to the customer. By clicking on this link the customer is taken to a confirmation web page on their mobile phone where they are presented with a purchases confirmation buy button.  Upon clicking the confirmation buy button the content begins to download and once the content has successfully been downloaded a MT billing Premium SMS message is sent by the service provider to the mobile subscriber to charge the customer for the content. 

The second Bill to Phone method is the Mobile Internet Billing method, which unlike Premium SMS, does not leverage SMS messaging.  Rather, purchases and confirmation of purchases all happen on the Mobile Internet site.  The mobile subscribers select a piece of content, select the confirmation button, and the charge is applied to their phone bill without a Premium SMS message needing to be sent.  This practice is quite common and generally available across most European networks, but is only available in the United States via Cingular Wireless and T-Mobile wireless networks.  Bango’s SVP Marketing, Anil Malhotra, estimates that with the Billed to Phone model 60% of U.S. content is billed through WAP Billing, while 40% is billed through Premium SMS.  For the rest of the world Malhotra estimates that 65% of Billed to Phone transactions are WAP billed and 35% premium SMS. 

From the wireless subscriber’s point of view the Billed to Phone method is fairly straightforward, although, like any new technology, there is a learning curve.  As for the players in the value system there is a little more that needs to be understood, especially when it comes to revenue splits, which vary between the parties within the value channel.  Rulke (2003) identifies five different “elements” or parties within the mobile value system that share in the revenues from mobile commerce transactions: Content & Application Provider, Portals & Access Provider, Wireless Operator, Support Services, Delivery Platform & Applications providers.  Barnes (2002) provides a similar typology, Content Creation, Content Packaging, Market Making, Mobile Transport, Mobile Services & Delivery Support, Mobile Interface and Applications.  Rulke’s estimated revenue share splits are illustrated in Figure 2 (stacked, below).  Even though Rulke’s study is a little over two years old the findings seem consistent with today’s market.  Qpass estimates that the wireless operators retain 35%~50% of the revenues depending on the operator and traffic volume (Blanksteen 2006), and Bango has published similar figures.  As for the share of the parties other than the wireless operator, the Rulke findings also seem consistent with today’s market; although, it is important to note that branded content owners seem to be reaping a higher than average percentage of the revenues over generic content providers.

Although Billed to Phone models are evidently quite prevalent, they are not without challenges.  Successful billing is not always assured, Malhotra reports that WAP billing has a 90% transaction completion rate, while Premium SMS is highly variable, with success rates between 58% - 85%, depending on the network and whether or not the subscriber is on a pre or post paid account (i.e. with pre-paid being less successful than post-paid) (Malhotra 2006).  Qpass, in a recent web cast “Is Premium SMS a Sufficient Billing Mechanism?”, also points out challenges with premium SMS billing.  Qpass notes that non-intuitive user purchasing experience, lack of uniformity in the purchasing experience across storefronts, the lack of line item billing, revenue leakage, inability to initiate charge backs, revenue auditing and distribution, and automated business rules can all be significant challenges when managing Premium SMS billing methods (Blanksteen 2006).  To make Billed to Phone methods more effective, research is needed on how to overcome these and related challenges.

Even with all this attention just a handful of academics have studied and published research that helps explain and educate practitioners on how to best utilize this emerging medium for commerce, and none seem to focus on Billed to Phone methods.  Much of the mobile commerce literature tends to be conceptual in nature or it empirically evaluates methods other than Bill to Phone, which as shown above are the most viable billing methods today.  Much of the mobile commerce literature tends to look to the Internet e-commerce literature for guidance, or it employs the value system or value chain analysis as a lens to develop conceptual models and theories to understand mobile commerce.  Perhaps the theory often used in mobile marketing literature may be applicable to understand Billed to Phone mobile commerce, such as Fishbein and Ajzen’s Theory of Reasoned Action, Optimal Stimulation Theory, Roger’s Innovation Diffusion Theory, Theory of Cognitive Dissonance, Technology Acceptance Models, Uses and Gratification Theory, and Theory of Perceived Risk (Wu & Wang 2004; Bauer et al, 2005; Tsang et al 2004; Okazaki 2004), may help ground future studies.  But this has yet to be seen. 

Mobile commerce and usage of mobile for marketing activities is incredibly complex, and little is understood or has been proven about how it really works or what influences consumer response and acceptance to use the medium.  As discussed, the market for mobile content and services is growing rapidly, as is the use of the mobile channel for processing and billing for both goods and services consumed on the mobile phone and non-digital content products, and services.  There are still many unanswered questions.  What is needed are specific empirical studies backed by theory in order to develop applicable generalization that can be used by industry practitioners to develop and refine their services.  In particular, Bill to Phone services academic research is needed.

[1] Near Field Communications (NFC) is a passive communication technology developed by
Sony and Phillips being developed for a wide range of services, including point-of-sales commerce services.  See http://en.wikipedia.org/wiki/Near_Field_Communication for additional detail on NFC.

References
Barnes, S. (2002). The mobile commerce value chain: Analysis and future developments. International Journal of Information Management, 22, 91~108.

Bauer, H. H., Barnes, S. J., Reichardt, T. and Neumann M. M. (2005): Driving consumer acceptance of mobile marketing: A theoretical framework and empirical study. Journal of Electronic Commerce Research, Vol. 6, No. 3, pp. 181-192.

Blanksteen, S. (2006, 23/Feb.). Is Premium SMS a Sufficient Billing Mechanism? In Qpass Webcast. Seattle, WA: Qpass.

Digital Music Report. (2006, January). London: IFPI.

Academic Review:  Mobile Marketing, Predictions for 2006
<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Michael Becker, iLoop Mobile CTO
January 11, 2006

Barring any economic, political, environmental, or social catastrophe, 2006 is going to be a banner year for mobile marketing and mobile data services.  The following details seven predictions for 2006 and discusses their impact on the practice of mobile marketing.  These predictions are based on the recognition that while the key elements and innovations that impact a marketer’s ability to launch mobile services mature at different rates, enough of these elements have come together and aligned in recent years to create a stable foundation for marketers to successfully launch commercially viable mass-market, as well as niche market, mobile campaigns and services. 

Seven Predictions for 2006

Prediction 1: The Baseline Plateau for Mass Market Mobile Services will Continue to Rise
We’re in a time where many of the technology, business, and social innovations from 25, 15, 5 years ago have diffused, converged and been put to productive use, especially in the area of mobile marketing.  Handset technology, mobile network interoperability, ubiquitous message delivery, broadband data, industry technology regulations, mobile marketing guidelines, and user adoption have all matured and reached a common plateau where commercially viable and cost effective mobile marketing and data services can be launched.  These services include text messaging campaigns (quiz, votes, polls, contest entries), content downloads, instant voice response, community services, and mobile search which are ready to be offered to the mass market by brands, content, owners, and marketing agencies.  The figure below illustrates how these different key elements have formed a plateau to support nationwide, even worldwide, mass market mobile marketing programs.



           Figure 1: Mobile Service Element Diffusion Map

Additional services, like mobile TV and video, interactive and 3d gaming, alternate billing services, and more, will certainly be viable in 2006; however, they will not be ready for mass market use by marketers.  These services will be niche market solutions.  The reason for this is that the general population will not have adopted the phones and the data plans that support these services, the networks will not be fully open to all players, nor will the standards, guidelines, and regulations be mature enough to help guide marketers in delivering them on a mass market scale.  However, as noted below, progress with these niche market services will continue to be made and  the plateau supporting mass market services will rise to support some of today’s niche market solutions and set the stage for a very interesting 2007.

Marketing Impact:  Marketers need to pay special attention to their market segments, understand what phones are in use and make sure the operator services subscribers have signed up for (e.g. sms, data plans, picture messaging, etc.) to be able to determine if mass market or niche markets campaigns are appropriate for the targeted segment.

Prediction 2: Solidification of the Mobile Marketing Ecosystem in an Increasingly Borderless World
In 2006 we’ll see the solicitation of the mobile marketing ecosystem and increased specialization from focused players.  Unlike the mobile marketing entrants of the late ‘1990’s and early 2000’s companies don’t need to adopt a horizontal integration strategy and provide all steps within the value chain to successfully offer mobile marketing services. In 2006 we’ll see companies taking up a strategy of specialization, similar to how mBlox and Simplewire have focused solely on messaging aggregation.  We’ll see firms specialize and provide expertise in 1) marketing & promotion, 2) content & talent, or 3) technical execution and delivery.  Most firms will not handle all three, rather they’ll form strategic alliances to fill the missing gaps when delivering their solutions; however, with a few notable exceptions, a handful of firms will be able to successfully handle two out of the three roles.

The mobile marketing boutiques will help their clients craft mobile programs and select the right technology companies to partner with for campaign execution and delivery and possibly help source content. The content & talent firms will continue to leverage the valuable asset they have and develop new and exciting licensing and re-distribution agreements for their content so as to get it to market, and the technology firms will specialize in offering specific market segment applications and community services.  A few of these technology firms will rise to the top and successfully launch a platform that can be used to aggregate their own applications and those from other players within the industry.  In order to compete effectively these later few will be global and will efficiently utilize their global resources and knowledge to effectively respond to local market needs.

Marketing Impact: Marketers will have a much clearer picture on who to work with within the various spheres of the ecosystem to successfully launch mobile programs.

Prediction 3: Regulations and Guidelines will Stabilize
We’ve seen tremendous regulatory and best practice guideline output from the wireless operators, industry associations, and governments over the last five years, including from UK’s ICSTIS, EU, US Congress, Mobile Marketing Association, Wireless Operators, and others.  The regulations and guidelines from government bodies and industry associations have been quite stable; however, the rules from the individual operators, especially in the United States, have been changing regularly as the operators grapple with the challenges of opening of their networks while simultaneous protecting their customers from uninvited traffic.  In 2006 we’ll see the operators stabilize their business models and their rules will change less often and be clearer than they have been in the past. 

Marketing Impact: Significantly more mobile programs will be launched because the rules will be clearer to implement.

Prediction 4: Allocation of Marketing Budgets to Mobile
The industrial nations are approaching a saturation point with 70%+ of their populations subscribing to mobile services, including the United States (eMarketer reports that the United States will have 214 million subscribers, 71% of the population, in 2006), and with this marketers and agencies will take notice.  (Mobile Future 2005)  We’ll see more and more marketing dollars allocated to mobile services in 2006, with expenditures by brand and agencies on mobile advertising being redirected from traditional media budgets.  As Pearse reports, according to Coca-Cola’s marketing Manager James Eadie, "mobile marketing could be phenomenally important, when you look at the penetration of handsets and the passion the audience has for mobile…as a way of connection, it ought to be phenomenally powerful and more important than TV, and that should see spending 50% of our marketing budget within decades" (Pearse 2005). This will be just the beginning with even larger budgets allocated to mobile programs in the coming years as marketers educate themselves on how to leverage the channel and as the key elements empowering mobile services continue to mature.  Furthermore, in the 4^th quarter there will be numerous planning sessions and budget allocations within the agencies to plan for 2007.

Marketing Impact: This is the year that main stream marketers will take notice of mobile and launch programs.

Prediction 5: Proliferation of the mobile internet.
WAP is back.  WAP, or more aptly put the mobile internet, is just now emerging from Jackie Fenn’s “technology hype curve trough of disillusionment”.  The initial hype and overselling of the mobile internet and its capabilities in the late ‘90s and early ’00 almost killed the mobile internet, since the actual services being offered were oversold and did not meet customer expectations.  However, the industry has continued its efforts toward developing improved standards, such as WAP 2.0, XHTML, has launched new browsers, has increased network bandwidth, and more.  And, with more users signing up for data services we’ll see a re-emergence of the mobile internet.  These services will employ different commercial models, including free, pay-per-session, and subscription based billing.  One simply needs to look at the numbers. Hanley recently found that 96% of college student have a mobile phone and are becoming much more receptive to the receipt of wireless ads (a method of mobile marketing); moreover, nearly 71% of them access the internet through their phone regularly for the purpose of downloading ringtones, and to a lesser extent games and images.  With this increased adoption, marketers and their technology partners will be compelled to offer intriguing mobile internet services, which, when marketed properly, will be taken up by users.

Marketing Impact: Marketers will have yet another tool to use for mass market programs, in addition to SMS, which is the most robust mass market solution in the market today.

Prediction 6: Increased Diffusion of New Value Added Services, like Mobile Search
We’ll see an increased diffusion of new value added mobile services like text based mobile search, community applications, instant voice response, alterative billing methods like credit card and Pay Pal, and the mobile internet as noted above, in 2006.  In addition, to a lesser extent, we’ll see the promotion of mobile TV, mobile video and related high-profile services in the popular media, as well as continued development on location based services, presence and instant messaging services, and alternate point of sale billing solutions; however, while these services will make technological gains, and unique target segments will adopt them, it will still be awhile before they’re aligned with the other key mobile elements to be viable for the mass market.  This prediction is based on an understanding of technology diffusion as defined by Rogers.  Rogers, a leading theorist on innovation diffusion notes that for an innovative service to succeed it must have relative advantage over currently available services, be compatible with the consumer’s values and past experiences, not be overly complex to use or understand, and trialable and observable by the consumer, i.e. does the consumer see others using the service and can they experiment with it before they buy. (Rogers 2003)  The former services have met Rogers criteria for a technological innovation to successfully diffuse within the market, while that later niche services have not.

Marketing Impact: It is still early, and marketers just entering into mobile are not that far behind. Unlike previous years where most marketers sat on the sidelines, 2006 will be the year for marketers to learn by doing and prepare themselves for the future.

Prediction 7: Hockey Stick Increase in Published Mobile Research
There will be a significant increase in academic research looking at many angles of the mobile services phenomenon published by reputable academic journals in 2006.  This prediction is based on the understanding that it takes time to produce a publishable paper. First the field must be mature enough to peak the interest of researchers, who then must draft and get their research proposals accepted by funding bodies.  The research must then be planned, executed, written up, submitted, reviewed, edited, and accepted for publication, a process that takes years.  Most of this research will come out of Europe and Asia, but we will see many papers coming out of the United States as well.  Most research will be qualitative in nature, such as case studies designed to develop theories on how and why mobile services work and in what context; however, there will be a handful of useful quantitative studies coming out of Finland, Italy, and the United Kingdom, Korea, Japan, and similar countries with mature mobile markets. 

Marketing Impact: The industry will benefit greatly from these studies, since they will shed light on consumer response paradigms, effective business and implementation strategies, and help set benchmarks for success.


The above are just a few predictions for 2006, and clearly many more predictions can and are being made by other industry pundits.  In summary, we’ll see significant development in the key elements that drive mobile services.  We’ll see a stabilization of regulations & guidelines, as well as an increase in firms specializing and focusing on specific functions within the value chain and ecosystem.  Moreover, the there will be ample research published, which marketers may leverage as they re-allocate and increase their budgets to launch mobile services.  Marketers should be prepared to make their own predictions.  To do this, marketers may leverage the Mobile Service Element Diffusion Map logic above and develop their own keen sense of what will and will not work with their target marketers and what they can and should do to make 2006 a great success.

References
Becker, M. (2003, October). A Marketer’s View of High-Tech. Retrieved 1/6/06, from MettaTech, Inc.: www.mettatech.com.
Fenn, J. (1995). Hype cycle for Emerging Technology. Gartner Group.
Hanley, M., Martinsen, J., & Pryor, L. (2005, November). College Cell Phone Advertising.
Mehta, N. (2005, 05/Dec.). Already on a Phone Screen Near You [Electronic version]. iMedia Connection..
Pearse, Justin. 2005      Coca-Cola Believes Mobile Ads Have Potential to Upstage TV. Electronic document.NWA.
The Mobile Future. eMarketer (2005, 20/Sept). .
Rogers, E. (2003). Diffusion of Innovations (5th ed.). New York: Free Press.

Effectiveness of Mobile Channel Additions and A Conceptual Model Detailing the Interaction of Influential Variables
Michael Becker, CTO, iLoop Mobile, Inc.
November 11, 2005
(For more information, or to discuss this article in more detail, please contact Michael at [email protected])

“Half the money I spend on advertising is
wasted; the trouble is I don't know which half.” 
-John Wanamaker (1838 - 1922)
US department store merchant (Quote Details 2005)

Marketing professionals have lived under the shadow of John Wanamaker’s infamous quote for much too long, and Henry Ford did not make anything easier when he said, “People can have the Model T in any color--so long as it's black (Quote Details 2005).”  Statements like these have put into question the value of marketing.  Through the decades, marketers have been scrutinized about the viability of their programs; their expenditures are being analyzed under a microscope, and they’re expected to demonstrate the effectiveness of their programs by producing clear measures for returns on investment (ROI).  The mission of marketing is to oversee the company’s organizational processes that profitably service customer demand (adapted from American Marketing Association 2004, Postma 1999, Chapman 2003), including the management of product, price, promotion, place (a.k.a distribution), customer relationships, and internal and outbound company communications.  For decades, marketers have had to either live with the low response rates of direct marketing programs or be satisfied with indirect proxy measures like reach, impressions, brand and ad recognition and retention to gauge the effectiveness of their traditional mass-market media advertising and promotion campaigns.  However, with the growing viability of the mobile channel and recent discoveries as to its effectiveness, marketers can begin integrating the mobile channel both tactically and strategically into their marketing plans and improve the ROI of their programs.

This paper contributes to the process of understanding the impact the addition of the mobile channel has on a brand’s marketing effectiveness.  It highlights the decline of traditional marketing channels and reviews the literature on the effectiveness of mobile and mobile enhanced advertising and promotions.  It identifies and illuminates the relationship between variables that influence a consumer’s response to mobile marketing programs, i.e. marketing campaigns that leverage the mobile channel.  Furthermore, it forwards the notion that a number of influential variables are often left out of mobile marketing conceptual models and proposes a new conceptual framework that marketers can use to support future research and the development of new longitudinal effectiveness metrics that will be of value to managerial decision makers. 

With the introduction of the Internet, email, text messaging, wireless application protocol, relational databases and a host of other digital technologies marketers have gained unique access to direct one-to-one interactive channels, like the mobile channel, to reach out and engage their customers.  The mobile channel is a multi-faceted interactive, interoperable, network composed of various mobile delivery technologies used by companies to market to an individual and deliver to the individual communication, personalization, information and entertainment products and services (Manis 2005, Becker 2005, Bragge et al. 2005, Dickinger et al. 2004, Nysveen et al. 2005).  What distinguishes the mobile channel as a marketing medium from traditional channels like TV, radio, and newspapers is that it is personal, interactive, time, and location independent. Due to its infancy, there has been little substantive research published that evaluates how these unique characteristics and related variables influence a consumer’s response to a mobile or mobile enhanced advertisement or promotion, or how the advertisement or promotional medium itself, i.e. TV, radio, print media, Internet, text messaging, wireless Internet, multimedia messaging, etc. may affect response to or outcome of a campaign.  In fact, as reported by Virtanen, industry practitioners and participants of a Nokia Mobile Marking Summit '04 workshop ranked mobile marketing effectiveness and ROI research as one of the top challenges facing industry practitioners today (Virtanen et al. 2005).

It would be easy to stay with the status quo of traditional marketing channels and ignore the effect new alternative channels like mobile are having on the practice of marketing, but this would not be wise.  There is an increasing body of evidence supporting the belief that the effectiveness of traditional retail, broadcast, and media channels is waning in the face of the hyperframentation of traditional channels. With the introduction of new media channels, network TV audiences, newspaper and magazine circulation, and radio listenership are in an accelerated decline (Anderson 2005).  A recent Enpocket Media Monitor US survey revealed that 58% of all adults would give up newspapers and magazines, 12% would give up TV, before giving up their mobile phone (Enpocket 2005).  One only needs to look at traditional TV advertisers to understand the true rate of decline.  Major corporation like the Coca Cola Company have begun redirecting TV media funds over to new channels (Foust 2004), including mobile. For example, Coca-cola has launched some of the largest mobile marketing campaigns in history, including their Beijing Coke Cool Summer program in 2003 and their 2005 summer campaign in Germany where they put a text code on 800 million bottles (Morrissey 2002, Marketing Goes Mobile 2005).  Even traditional telemarketing and market research are being affected by the diffusion and use of mobile phones as a primary communication channel (Callegaro & Poggio 2004), and there’s no doubt that the adoption of mobile phones is on the rise, as evidenced by the growing trend toward individuals giving up their landline for their mobile phones.  In Finland, for example, nearly 35% of the population is reported to be accessible only via their mobile, while in the U.S. the number is 9% and growing (Preferring to Go 2005). 

The importance of the mobile channel and its influence on technological, economic, and social change should not be minimized.  There is a limited but growing base of published literature and on-going research around the world (Click on PEAR Research Project  graphic above to learn about a global mobile marketing effectiveness study and how to contribute your opinion) that supports the claim that mobile marketing is an effective medium to reach out to customers.  These studies are showing that companies can readily expect and directly measure increased response rate, improved brand loyalty, rise in message virility, and growth of sales from their mobile or mobile enhanced marketing campaigns.  With a pure mobile program, the marketing campaign is promoted directly through the mobile channel, while with a mobile enhanced campaign the traditional media program is augmented with a mobile call-to-action or traditional channel is boosted with a complimentary mobile service.  For example, a recent study by Merisavo showed how mobile advertising for mobile services increased daily average expenditures for heavy mobile entertainment and information services users by 35%, while proportional gains for light users increased 99% (Merisavo et al. 2005), while Nysveen, in a Finish study looking at mobile channel additions by a newspaper, a commercial broadcasting station, and a leading TV brand, found that brands could expect increased main channel use, e.g. mobile users will watched more TV, spend more time on the brand’s Internet site, and would read more newspapers, from those customers that partook of the brand’s mobile services and promotions (Nysveen et al. 2005).  In addition, other studies also state compelling findings. A Greek study by Kavassalis reports increased effectiveness of mobile marketing over traditional media, with text messaging campaign response rates in the range of 10~20% being common, as opposed to email (5%), direct mail (1~2%) and print advertising (0.15~0.60%) (Kavassalis et al. 2003, Rettie et al.).  Kavassalis also reports that brand recall is high (46~64%) and redemption of in store coupons can reach 80% with mobile marketing campaigns (Kavassalis et al. 2003).  Another study, by Rettie, cites mobile marketing’s positive effect on reach.  Rettie’s study asserts that 89% of all text messages are read and that 85.7% of respondents “who felt more positively towards the brand claimed they were more likely to make a purchase” (Rettie et al., p5).  Rettie and the Mobile Marketing Association also note the viral nature of mobile campaigns in that messages are forwarded to others at a rate of 5~32% (Rettie et al., CTIA 2005), thus demonstrating that word-of-mouth (another important measures) is a key byproduct of mobile marketing.

Mobile marketing helps create brand awareness, customer loyalty, and most importantly generate sales (Bragge et al. 2005, Sutinen & Tirri 2005, Sultan & Rohm), but marketers need to better understand and identify all the salient variables that influence the outcome of a consumer’s response to a mobile marketing campaign or they will not be able to generate consistent results or set managerial expectation properly.  While current measure like response rate, ad recognition and retention, impressions, brand recognition, click-throughs, or traffic figures are important measures, they are not fully capturing the essence of mobile marketing (Stewart & Pavlou 2002); as asserted above, some key influential variables are missing in the conceptual model of mobile marketing. 

In order to develop effective programs marketers need to not only identify and understand the key variables and their antecedents, but also understand their linkages.  The latest conceptual models of mobile marketing have not accounted for or integrated the unique personal, interactive, time and location independent nature of mobile into a holistic model for understanding mobile marketing. To capture what is behind the outcome of their mobile marketing campaigns and a consumer’s response, marketers must consider interactivity, message relevance, the messaging medium, the device and network, a consumer’s previous experience with the brand and its product or service,  permissions, and a number of other influential variables listed in the figure below (Stewart & Pavlou 2002, McLuhan 1964, Dickinger et al. 2004, Barnes 2002, Tähtinen & Salo; Bezjian-Avery et al. 1998, Liu 2003, Tsang et al. 2004, Kramar et al., Rowley 2004, Kramar et al., Paavilainen 2002, Sultan & Rohm, Mort & Drenan 2002). In addition to these independent variables that influence the dependent variables of response and campaign outcome, the Internet and mobile marketing research literature points out a number of control variables (consumer psychographic profile, costs, experience with spam, gender, age, education, user’s experience with medium, and others) that need to be accounted for to isolate the influences on consumer response and campaign outcome (Stewart & Pavlou 2002, Tähtinen & Salo; Bezjian-Avery et al. 1998).  As noted, the intention here is to simply identify the variables; future papers will define each of the key variables and validate their level of influence and significance to the model.  The figure below depicts a proposed conceptual model showing the variables that influence outcome and consumer mobile, online, and offline response to mobile marketing.  Moreover, the model shows the key linkages between these variables and their antecedents.

Figure 1: Holistic Mobile Marketing Conceptual Model, including Antecedents
 to Interactivity and Influencers on Consumer Response and Campaign Outcome

Special attention needs to be paid to interactivity relevance, and rate variables.  Most empirical research into interactivity has been done by studying the Internet, however, only a handful of studies have looked into mobile interactivity.  Interactivity is based on the need to generate mutual value in such a way where the customer becomes a co-creator in the relationship, but not so much so that the interaction becomes burdensome (Rowley 2004).  As depicted above, interactivity is comprised of a number of variables, including velocity of communication, consumer’s perceived control, alignment of actor’s goals and intentions, brand trust, time of response, presence of complimentary and substitute services, and the history of the interaction (Liu 2003, Stewart & Pavlou 2002, Tsang et al. 2004, Kramar et al., Rowley 2004).  The on-going management of customer interaction is the key to the success of mobile marketing programs, not merely one-time event but the on-going longitudinal interaction.

To sustain interaction, the interaction must be relevant to the customer, permissions based, and inline with customer cost expectations. Relevance has a significant impact on consumer response and mobile marketing campaign outcome (Paavilainen 2002, Sultan & Rohm, Mort & Drenan 2002).  The more relevant the interaction, and the nature of the medium, the greater the control and power the consumer has over the commerce relationship.  Relevance and a user’s experience is influenced by the message medium, device, network, time of message receipt or call-to-action response, location of user, and the level of campaign personalization and alignment to a user’s goals. 

In addition, the permission variable must be controlled for, regardless of whether or not the campaign is relying on a push or a pull marketing model.  The mobile channel is applicable for both push and pull marketing.  Pull mobile marketing refers to the process of an individual (or respondent) replying to a call-to-action in traditional media or mobile channel via their mobile phone.  Push refers to the marketer sending unsolicited, but expected, messages to a respondent (Dickinger et al. 2004, Barnes 2002).  In both cases, industry best practices and regulation require that permission (an opt-in) be received from the respondent prior to any message being sent to an individual (MMA Code 2003, Congress 2003).  For instance, in a pull program, such as in a traditional media mobile enhanced program, the respondent gives permission for the discrete interaction by responding to the call-to-action in real-time, while in the push model, such as in an alert or subscription service, the respondent gives prior approval for the interaction.  Many marketers may find the effort of obtaining permission cumbersome; however, rather than looking at the permissions gathering task as a burdensome requirement marketers should view it as an opportunity to pre-qualify interested parties in the brand, its product and services.  By pre-qualifying the brands interested prospects in this way, marketers can ensure that they’re only spending their effort and resources with interested parties.  Finally, the campaign participation costs absorbed by the customer, i.e. is the campaign free or pay to play, will have some influence on the interaction and customer response. 

The mobile channel and its use for distribution and marketing is still in its infancy. While there are numerous case studies and academic papers from around the world that explore how consumers are responding to mobile marketing, very little is understood about the influential variables of this response. By identifying and learning to control and isolate all the key variables and their interactions, marketers can optimize their activities rather than “waste” precious marketing dollars. Indeed, by paying close attention to the complex and often hidden interaction happening behind the mobile scene, marketers can take full advantage of all that mobile marketing and the mobile channel has to offer.  Everyone in the mobile ecosystem, not just the marketing professionals, needs to put in the effort to understand mobile marketing and help contribute to the industry’s growing body of knowledge so that marketing is not just justified but truly enhances business reach and sell through.

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