Barriers Remain for Wireless Commerce, Marketing

The hype surrounding wireless advertising and marketing far exceeds the reality, according to a report by Frost & Sullivan, largely because the technology is not developed and the brands are not embracing it.

Those on the wireless marketing bandwagon have made the potential benefits clear. Wireless offers direct, personalized, location-based ads and campaigns. It is also envisioned to be more interactive, emotionalizing, valuable, measurable and traceable than traditional marketing mediums. The value of wireless marketing on 3G networks lies in the real-time monitoring and exchange capabilities, and the seamless convergence between marketing, CRM and m-commerce.

But the development of wireless marketing is still at an experimental stage. The majority of advertisements and alerts that are being sent are SMS based. Much of the promise of wireless marketing rests with the 2.5G and 3G networks that boast greater bandwidth and will enable advertisers to create rich and integrated video, text and audio campaigns that can be great brand communicators.

The Frost & Sullivan study found that wireless marketing does have the ability to enhance customer loyalty and reduce churn, and expects it to become a popular and sustainable revenue-generating medium. Network operators, advertisers, technology and solutions providers, service providers and consumers all stand to benefit from wireless marketing, the report found.

“However, before wireless will be used as a mainstream marketing channel, a number of issues must be resolved,” said Allison Webb, research analyst at Frost & Sullivan. “These include complementary technologies, next generation mobile networks, new wireless devices, privacy and data protection legislation, consumer acceptance, forms of wireless ads and pricing structures.”

Frost & Sullivan estimates that by 2006, there is the potential for 37 billion wireless advertisements and alerts to be sent in Western Europe. Revenues generated in the Western European wireless banner ads sector will rise from $51.5 million in 2001 to $464.7 million in 2006. During the same period, wireless interactive alerts will jumping from $102.9 million to $7.4 billion.

Frost & Sullivan also forecasts that by 2006, 65 percent of wireless subscribers will be willing to accept marketing alerts and promotions. This will be largely dependent on 3G networks being in place and the types of marketing campaigns that are run being relevant and valuable.

“Complementary technologies such as Bluetooth and voice recognition will help enable network operators and advertisers to deliver more interactive, compelling and emotionalizing campaigns and alerts to subscribers when, where and how is most convenient,” Webb said. “3G network technology and devices will have to be reliable, with a critical mass of subscribers for advertisers and big brands to devote a significant amount of their budgets to the wireless channel.”

Mobile commerce, on the other hand, has its own roadblocks that have stunted its growth. A study by Telephia, Inc. found that consumer satisfaction with wireless data and Internet services is steadily increasing, but quality of service problems are nevertheless hindering the growth of wireless m-commerce.

According to Telephia, if consumers encounter a quality of service problem when making a purchase wirelessly, 22 percent would give up on the purchase and register a complaint with either the retailer site in question or their wireless carrier.

“Quality of service improvements are critical for the continued development of wireless commerce, a business model in which wireless carriers, retailers and device manufacturers have much at stake,” said Alan Brune, vice president of marketing at Telephia. “Understanding consumer perception around service quality and monitoring actual service delivery quality is essential for developing industry growth.”

The quality of service study was conducted in April 2001 through an Internet-based survey of the Telephia Wireless Data User Panel of more than 5,000 owners of data-enabled wireless phones, PDAs, wireless laptops and two-way pagers.

When asked what they would do if they encountered quality of service problems (problems relating to site access and/or download speed) while trying to make a wireless purchase, most consumers (65 percent) said they would complete their purchase via a nonwireless medium. Nearly one-quarter (22 percent) said they would give up on their purchase altogether. However, a considerable number (17 percent) also said they would try the site again later. (More than one response was allowed.)

Among consumers who said they would give up on the purchase, Telephia asked whom they would contact to register a complaint (again, more than one response was permitted). Responses indicate that consumers would complain to multiple parties, but hold most accountable the company or retailer whose site they tried to access (67 percent), followed by the carrier or service provider (58 percent) and the device manufacturer (17 percent).

Despite potential quality of service issues relating to m-commerce, consumer satisfaction with data services has continued to climb throughout the year. Telephia’s surveys of wireless data users in June 2000, December 2000 and April 2001, asked them to rate their overall satisfaction with their wireless data services (using a 10-point scale, with 10 being the most satisfied). Over that time period, average satisfaction increased from 6.4 to 6.5 to 6.9. In April 2001, 43 percent of users rated their satisfaction as 8.0 or higher.

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