The Impulse Economy: Understanding Mobile Shoppers and What Makes Them Buy
US: Oct 2011
In recent years, the mobile phone has emerged as an increasingly ubiquitous presence, extending its reach into nearly every aspect of our daily lives. With the development of smart phone technology, the lines dividing the physical and digital realms of experience are blurring as our phones become extensions of our public and private identities. Through social media, micro-blogging, location based technologies, and one-click purchasing the smart phone enables a perpetually connected, impulse driven intersection of communication and commerce. The age of augmented reality is upon us, as we move closer and closer everyday to Steve Jobs’ vision of the perfect, borderless screen.
To some this merging of humans and technology may sound like the dawn of a dystopian era in which all human interactions are reduced to the realm of data — traceable and quantifiable, with the potential for surveillance, invasions of privacy and previously unthought of systems of control. To others, such as Gary Schwartz, author of The Impulse Economy: Understanding Mobile Shoppers and What Makes them Buy, it makes another sound altogether, that of the “mobile ka-ching”.
Mobile technology currently has three times more data traffic than the entire global internet of 2000, opening up unprecedented business and marketing opportunities as consumers use their phones to research, purchase products on-the-go and enhance their physical shopping experiences. Schwartz’ book provides a thorough examination of these emerging opportunities, advising marketers, retailers and business owners as to the most effective strategies of winning the coveted “mind share” of the mobile consumer. He sees mobile shopping as a bridge between the physical store with its limited aisles and the limitless aisle of the internet: “In many ways, the store… is bringing the cloud inside its walls… Mobile is making this possible. Perhaps this is the happy medium for the future store. Providing the social setting for the shopper to navigate and touch tangible goods in the aisle but allowing for the control and convenience of the digital click (172).”
Whereas the internet provides the shopper with unlimited access to product research and price comparison, facilitating what Schwartz describes as a thoughtful approach to consumption, the physical store thrives on its ability to engage with two distinct types of shoppers: those who go to stores to buy specific items and those who go to stores to shop. Mobile technology provides strategic advantages for engaging with both types of shoppers, but where it really thrives is in the realm of impulse shopping: “Online thoughtful commerce is to mobile impulse commerce what slow dining is to fast food. Mobile commerce is ‘pizza commerce,’ stripped of option paralysis and optimized for one-click decision making.”
According to Schwartz, the key to mitigating this condition of “option paralysis” which results from the infinite aisle of the internet, and ensuring the immediate gratification of mobile’s one-click shopping lies in effectively targeted marketing strategies that speak directly to the tastes of individual consumers. These targeting strategies rely on the ability to mine individual consumer data so that offers and advertisements are curtailed specifically to their particular recipients, resulting in the kinds of impulse purchases which Schwartz conceives as the engine of the mobile economy. He cites the success of the company Adgregate Markets in marketing DVD sales directly to consumers through targeted ads: “Want it! Need it! Works only if the messaging has bulls-eye targeting. Adgregate worked with the Jumptap ad network which can pull detailed consumer records (anonymously) directly from certain carrier’s records. Targeting drives clicks. Targeting drives conversion.”
Whereas these kinds of targeted marketing strategies may work to drive impulse purchases by eliminating the option paralysis of the internet’s infinite aisle, they raise the question of how to facilitate the kinds of instant, frictionless payment that are necessary for closing mobile sales. In response to this challenge, Schwartz describes three different types of mobile payment solutions that are distinctly suited to different types of shopping: the carrier wallet which works via the wireless carrier bill, the proximity wallet which works via contactless mobile payment, and the quick check out wallet which works as traditional payment optimized for the mobile phone. While the carrier wallet has proven to be an effective approach for small, in phone purchases such as ringtones and APPS, and the quick checkout wallet offers little advantages to the consumer over existing payment methods, the proximity wallet provides the potential for instant, frictionless physical purchasing that could revolutionize the banking, credit card and media communications industries.
Proximity wallets work by tethering an individual phone to an existing payment method such as a credit card or a bank account. In store payments would then occur via a two way communication channel activated by an RFID chip embedded in the phone. Schwartz describes the enthusiasm of Google’s CEO, Eric Schmidt, with regard to to the revolutionary potential of these emerging near field communication (NFC) consumer technologies as he recently “proclaimed the end of plastic payment. According to Mr. Schmidt, NFC-enabled phones with a digital wallet (or more specifically, a Google Wallet) will allow for universal payment and a host of other exhilarating actions.” By combining universal, instantaneous payment methods with targeted sales strategies that speak directly to consumers the mobile economy will present marketers and retailers with unprecedented opportunities to guide and influence the kinds of on-the-go, impulse purchases that will define this new era of commerce.
While these aspects of the mobile economy may signal a wealth of opportunity for business, marketing and retail interests they raise many legitimate questions for consumers with regards to privacy, security and personal liberty. Schwartz recognizes the potential for these concerns with regard to the emergence of the m-wallet: “Mobile wallets are unnaturally personal places, tied to our social personality, our social identity, and, more important, our communication channel. However challenging, successfully establishing an m-wallet relationship is worth any effort. Pairing mobile commerce with a customer relationship is the coveted goal of any retailer or brand.” Rather than seriously considering the invasive potential of these types of mobile technologies, Schwartz views consumers’ reservations as obstacles that must be overcome at the expense of any effort.
For the business community, the rewards vastly outweigh the risks when it comes to security and privacy in the mobile economy. Later, when addressing similar fears about the prospect of being tracked and targeted by brands and marketers, both in the digital realm and in the physical world through location based technologies, he is once again dismissive: “There is a consumer paranoia about being found, tracked, measured, recorded and profiled.” He goes on to assert that “anonymous contextual advertising is good for consumers: relevant advertising is better than scattershot advertising.” While this may be the case for some consumers, there are many, like myself, who would prefer to formulate their own opinions and desires free from the constant surveillance and solicitations of brands, marketers and business interests.
From the websites that we visit to words that we write in our emails and Facebook posts, to the places we go and the products that we buy, everything is fair game for the data miners and marketing departments in this dawning age of the mobile economy. By framing security and privacy concerns as “paranoia” on the part of the consumer, Schwartz and the business community that he represents risk alienating the very consumers that will ultimately shape the contours of these emerging markets.
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