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Mobile Technology Lets Consumer Companies Follow Their Customers Wherever They Go

TCS Digital Mobile Consumer StudyWith each passing day, consumer companies have a greater ability to do business around the clock with more and more of their consumers in every way because of the huge uptake in mobile devices. Companies whose consumers have feature phones, smartphones, tablets and other mobile devices can continuously market and sell to consumers, serve them after the sale, help them research their purchases before they buy, and renew their purchases.

In other words, if they can reshape the way they do business in the ways that digital mobile consumers want to do business with them, companies will have unprecedented opportunities to attract and keep them as customers. The breathtaking adoption of mobile devices is making this opportunity real. Consider how rapidly consumers are becoming wedded to smartphones. In March 2012, about half of U.S. consumers (50.4%) had smartphones, up a remarkable 10 percentage points from the previous 12 months, according to consumer market researcher Nielsen Co. The average consumer downloaded 41 mobile apps (vs. 32 in 2011), and spent 39 minutes a day using the phone.19 And about half of American smartphone owners (47%) – 45 million people in all — were shopping on shopping apps by June 2012.

In many Asia-Pacific countries, the majority of online adults in April 2012 had smartphones: China (66%), Australia (65%), and South Korea (67%), to name a few countries.20 Smartphone adoption in Japan and India has lagged. In Japan, 26% of mobile phones are smartphones (vs. 74% for feature phones); in India, the percentages are 10% smartphones to 90% feature phones, according to Nielsen data.21 But that doesn’t mean that consumers in these countries are shunning the Internet from their mobile devices. In fact, 86% of Japanese consumers accessed the Internet from their mobile device in June. In China, the number of people who access the Internet from a mobile device – 388 million in August 2012 – for the first time surpassed the number who had accessed the Web from a desktop computer.22

The result today is that some companies now have millions of consumers who are tracking them through mobile devices. 

So what’s been the impact for these companies? What kinds of returns are they getting, given the average company that we surveyed ($10 billion in annual revenue) will spend $17 million this year to respond to the digital mobile consumer? For some companies, the results have been eye-opening:

  • Increasing revenue by pricing more accurately: Auto insurer Progressive Insurance predicts it could generate a $100 million increase in lifetime premiums per annum through an initiative called Snapshot, which places a mobile device in customers’ cars and tracks their driving habits. (Those who are better drivers than Progressive had predicted can save money on their policies. Usage of the device is totally at the customer’s discretion.).23
  • Pleasing impatient consumers by speeding their purchases. Starbucks, which has grown into an $11 billion company over 41 years due to delivering what it refers to as “The Starbucks Experience” at its 17,000+ coffee houses, has been a retail pioneer of mobile payments. In the 14 months that ended in May 2012, the company had 45 million payment transactions that were scanned through its customers’ mobile devices.24 That no doubt helped the company boost same-store sales in 2011 by 8%.
  • Helping consumers research their purchases. A growing number of entertainment companies provide mobile users with lots of information to help them decide what to purchase.
  • Marketing and selling more effectively by reminding busy consumers of time-sensitive purchases. Geisinger Health System will soon remind patients with high cholesterol to refill their prescriptions.
  • Providing a highly differentiated consumer experience in the usage of a product. Mobile apps help health insurers such as Humana give consumers a tool to improve their health and in emergencies quickly find the medical specialists they may need. Starbucks’ offers store visitors free wi-fi and free news and music content through its Starbucks Digital Network. That helps the company stay current on the interests of its customers. As Adam Brotman, Starbucks’ chief digital officer, told one reporter, “Digital has to help our store partners and help [us] tell our story, build our brand, and have a relationship with our customers.”25
  • Providing superior assistance when the customer needs help. The mobile apps and websites of auto insurance companies such as State Farm and Progressive enable consumers to deal with accidents quickly and effectively – from being able to photograph the damage from their smartphones to calling a tow truck and booking a replacement vehicle.

19 Nielsen.
20 Nielsen data.
21 Nielsen data on smartphone usage in Asia-Pacific.
22 According to data from CNNIC.
23 Progressive estimated this $100 million increase in lifetime premiums per annum in a June 12, 2012 shareholder/analyst call, based on a full rollout of the service in all the U.S. states in which it does business. As of the time of the call, the service had been available in only a handful of states. Read the transcript.
24 Forbes.com interview with Starbucks chief marketing officer, Adam BrotmanMay 24, 2012.
25 Venture Beat, June 12, 2012.

 

Implications and Recommendations
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Who’s Taking the Lead in Mobile Strategy?

On the surface, it might seem that the responsibility for determining how to respond to consumers who use mobile devices such as smartphones and tablet computers to do business should fall squarely on the IT function. For sure, consumers are going to want to check a company’s prices, whether a certain product is in inventory, and perhaps where its closest locations are. And pricing, inventory and location information are typically housed in corporate systems that the IT function manages.

However, in the majority of companies in all four regions of the world, business functions are taking the lead in mobile strategy. (See Exhibit II-2). In North America, about two-thirds of the respondents said non-IT functions were assuming leadership for mobile strategy with consumers. Of that 65%, the marketing function was dominant, cited by 29%, with sales (10%) and customer service (9%) far behind. Some 8% of North American companies had actually created a new unit that they dedicated to determining their strategy for addressing the digital mobile consumer.

One such company is Starbucks, the $11.7 billion operator of coffee houses in 60 countries. In 2009, the company launched a new internal unit called Digital Ventures to focus on new mobile device-enabled services for Starbucks customers. The unit has been instrumental in the company’s pioneering initiatives in digital payments. In the 14 months ending in May 2012, the company reported scanning 45 million payment transactions in its North America stores around the world.8

Importantly, however, in about one third of the companies (33%), the IT function had assumed responsibility for helping the organization figure out its mobile consumer strategy. All to say that the IT department doesn’t at all appear to be a silent partner in this endeavor.

In fact, when we compared the answers of survey respondents who said they were ahead or behind their competitors in responding to the digital mobile consumer, one of the biggest differences was the importance they attached to cross-functional collaboration. Companies that indicated they were ahead (a group we refer to as “the leaders”) gave an average rating of 4.17 (scale of 1-5) to the success factor of “getting departments that work with consumers to work together in a unified way.” They rated only two other factors as more important. In contrast, the “laggards” gave this an average rating of only 3.43, and it was fourth on their list of key success factors.


Exhibit II-2: Q6/Global: Which Department Takes the Lead in
Determining How the Firm Addresses the Digital Mobile Consumer?

Exhibit II-2: Q6/Global: Which Department Takes the Lead in Determining How the Firm Addresses the Digital Mobile Consumer?


In Europe, we found a similar pattern: In 62% of the companies, a business function was leading the way on mobile consumer strategy; the IT function led in 38% of the organizations. The business function that was more likely than others to steer the ship in this area again was marketing (20% said marketing led the way). Much smaller proportions of participants said sales (13%), service (10%) or a product/service business unit (8%) were driving mobile strategy. And another 8% of respondents said they established a separate department to determine how to respond to mobile consumers. In this region, IT was calling the shots in consumer mobile strategy in 35% of the companies.

In our Asia-Pacific countries of India and Japan, 51% of respondents said non-IT functions were leading the way – most often marketing (16%) and sales (12%). And in Latin America, 69% said consumer mobile strategy came from a non-IT function, with 26% of them coming from marketing and 19% from sales. Some 31% were from IT.

What that says is that customer-facing functions, more often than not, are driving the strategies of large companies in understanding how to respond to digital mobile consumers. Still, the IT group appears to be playing a highly influential role in every region that we surveyed.

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Chief Digital Officer for Starbucks on Technology, Change and Community, Forbes, May 24, 2012.

 

Findings: All Regions
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