Mobile Marketing: Betting on Smartphones

The headquarters of HappyShop – a start-up that bills itself as the first mobile shopping application that can be downloaded for free in Chile – has commanding views of the Andes from its perch on the 22nd floor of an office building in Santiago’s well-to-do Las Condes neighborhood.

A dozen employees sit at workstations that line the floor-to-ceiling windows, but this wasn’t by design; there was literally nowhere else to put them in an office where young programmers, graphic designers and sales executives are crammed into alcoves, a conference room and even the hallway.

Call it growing pains. Since beginning operations in February 2011 and going live last November – after securing US$1.5 million in financing from the Chilean venture capital fund Aurus – the company has teamed up with nearly 2,000 local businesses, including Falabella, Sodimac and Salcobrand. These allow HappyShop to place its QR codes in their stores so customers can scan them with their smartphones to unlock coupons, discounts, and product information and reviews, while also racking up LANPASS kilometers. 

The app has been downloaded nearly 100,000 times in the iTunes store and the Android market, according to vice-president of product development and co-founder, María Paz Gillet.

“When I imagined this company I thought of people in stores as web clicks. The user is having a digitally interactive experience while shopping,” says Gillet, who quit her job at retailer Cencosud to start the business.

“HappyShop offers brands a way to do smart marketing by influencing consumers while they’re in-store,” she explains.

The company has recently secured its second round of financing and is readying for full expansion – evidenced by the fact that its staff has grown from three to 57 employees and is in dire need of larger offices, which Gillet is actively seeking.

Broadband on the go

HappyShop’s growth speaks gigabytes about the current state of mobile commerce and marketing in Chile.

For starters, more Chileans now connect to the Internet through a smartphone, tablet or laptop rather than a desktop computer. Last year, according to the Transport and Telecommunications Ministry, 2.9 million people had mobile broadband access, up from 638,787 in 2009.

As a result, mobile traffic is surging. According to Cisco’s Visual Networking Index (VNI), mobile data traffic in Chile was 3,408 terabytes per month in 2011, up 73% from 2010 and equivalent to 1 million DVDs each month or 9 million text messages each second.

The growth has been fueled by the arrival of smartphones such as the iPhone and Android-enabled devices and by the long-awaited implementation of mobile number portability this year, which lets users own their numbers, thereby taking away most of the risk of signing a service contract.

And those contracts may get cheaper as new carriers Falabella Móvil and Virgin Mobile compete with Movistar, Entel and Claro for mobile users.

To keep improving coverage in a market that boasts one of the highest penetrations of 3G (third generation mobile communications) in Latin America, the Chilean government plans to auction 4G services – with faster mobile ultra-broadband – next year in the hopes of having the technology ready for consumers by 2014.

Winning the Zero Moment

Cheaper and faster broadband means that local shoppers will soon have more power at their fingertips to research a product in-store before making a purchase.

A new book by Google’s Managing Director for US Sales and Service, Jim Lecinski, describes the moment when you open your laptop or switch on your phone to find out about something you might buy as the Zero Moment of Truth (ZMOT).

Understanding how to “win” this moment is now crucial to any marketing campaign, especially considering that 62% of Latin American consumers carry out research online before shopping, including taking into account feedback posted by others.

One of Lecinski’s tips for winning the ZMOT is to upgrade your company’s website to make sure it is optimized for mobile devices. “If your site has Flash, an iPhone won’t be able to see it,” says Javier Yranzo, digital marketing director at the Santiago agency Mayo Digital. 

“When you build a site for a PC or a Mac, you’re thinking big monitors, but a smartphone has a small screen so the content stays the same, but you change the design so people can read it on their phones,” he says.

Someone from the marketer’s team should also be on social networking sites like Twitter and Facebook to answer questions and respond to comments from consumers about the brand.

But mobile marketing can also be proactive in generating buzz for a product. Like HappyShop, other firms are taking advantage of the possibilities offered by QR codes placed in strategic locations.

One example is Mayo Digital’s campaign to promote Americanino jeans. A board with a QR code was placed in college campuses around Santiago, and when students scanned it with their mobile devices they received a text with a phone number. Upon calling, they were urged to strip off most of their clothes. Those who did were rewarded with free outfits from the brand by nearby staff.

The campaign video went viral and had around 25,000 views on YouTube by the end of April. “I tend to see the Chilean consumer as shy about taking out their phone and scanning a QR code, but to young people it’s the most natural thing in the world,” says Yranzo.

Mobile commerce

When Facebook announced it had bought the mobile photo app Instagram for US$1 billion in early April, the New York Times called the deal a “turning point” that consolidates the tech world’s shift from computers to mobile devices and the migration of content from websites to the self-contained world of apps.

Many smartphone users prefer using apps to browsing on the mobile web because they incorporate the phone’s hardware like the GPS and camera, while also allowing for content storage and higher browsing speeds.

Apps are also essential for any company looking to mobile commerce to increase sales. That is one of the reasons why the state-owned lottery company Polla Chilena signed a contract with local company 3G Motion to roll out a mobile gambling application by the end of the year.

Polla expects its app to generate 120,000 additional transactions annually and connect it to a younger demographic. With a target audience of lower middle-class players over 40 years old, Polla previously relied on in-store terminals and traditional advertising. 

However, to bridge the generation gap the company has gone digital during the last decade, creating a new website and even trying, unsuccessfully, to facilitate betting through SMS messaging. Finally, a couple of factors have convinced Polla’s management that mobile devices are the way of the future.

“When we saw the number of clients and mobile phone transactions that banks achieved through their smartphone applications, we were astonished,” says Polla CEO Edmundo Dupré.

Mobile phone penetration is already over 100% in Chile, with 17 million devices in operation. Now with cheaper smartphones and growing competition among carriers pushing down prices, mobile commerce will become more accessible to lower income segments, says Dupré.

The Polla app will send lucky players a QR code that they can then take to an agency to collect their winnings. In exchange for a commission, 3G Motion will create the app, handle the relationship with the carrier, and collect the fees charged either to the player’s credit card or phone bill.

But selling lottery tickets or other products to customers on their smartphones depends on unrestricted access to the Internet at all times, which has not always been the case in Chile. On January 4, Entel’s network went down, leaving 1.3 million Chilean users with no mobile service. Movistar users also experienced an outage this year, and who can forget the service interruptions suffered by BlackBerry users throughout the region.

If having no service can be frustrating for users, imagine how it affects a company that relies on mobile commerce.

“You enter a lot of stores where you don’t get a phone signal,” says Gillet. “In the U.S., retail businesses realized how big a problem this was and installed WiFi or broadband repeaters inside their stores. The same thing will happen here because customers will demand it.”

Relating to the customer

There are also less tangible challenges ahead for the mobile marketing sector in Chile, ones that hinge on culture and habit, according to Sebastian Goldsack, president of the Direct Marketing Association and dean of the School of Communications at Pacífico University. 

While most US companies are talking about building relationships with customers, many businesses in Chile are still hung up on traditional marketing to promote their products or services, says Goldsack. 

“With relationship-building, it’s about the dialogue and it doesn’t matter what platform you use – tomorrow it could be a hologram. As technology improves, the most important thing is how you relate to the customer,” he says.

If you try to grab the customer’s attention through every means possible, you risk becoming irrelevant, he warns.

Felipe Huete, CEO of MZZO, a Chilean mobile content producer, agrees with Goldsack’s assessment. “There is zero value in sending an SMS saying ‘Drink Coca-Cola’. The platform begs for a more intelligent use: a coupon, or a quiz with prizes.”

As for treating the customer with respect, Huete still remembers how a couple of years ago mobile phone users would be bombarded by SMS spam with virtually no way of opting out. But today what frustrates him more than anything is that the mobile marketing budgets of a lot of companies are controlled by traditional advertising agencies that may not be a right fit for the budding sector.

“These agencies don’t have any idea about technology – they prefer traditional media such as television and radio because they know how to measure it,” he says.

Then there is the misconception that people in remote areas are disconnected. Even though a partnership between the Undersecretary for Telecommunications, Entel and Ericsson has provided broadband coverage to 90% of Chile’s rural and remote populations, Goldsack believes that Chilean users are still underestimated.

“People in Arica and Punta Arenas use smartphones as much as the rest of us,” he says. 

The older demographic is also more mobile than marketers give them credit for. “It takes a dim-witted person to think that a 40-year-old woman can’t do her banking online, or that a 60-year-old can’t read a text message,” he says.

The smartphone has the potential to be used for advertising and broadcasting, to receive feedback, and facilitate online transactions. It is a game-changer that gives marketers more ways than ever to connect with consumers.

“There are two types of clients: the ones that are slowly trying to do something  with this, and the ones that know that smartphones are a medium of high-consumption and an integral part of any digital campaign,” says Yranzo.

Even businesses without a mobile strategy will realize that their customers are increasingly mobile, says Gillet. “Then they’ll realize that this is the perfect platform to link customers’ online and offline activities.” 

Once you reach the audience, however, how do you get them to pay attention? In the end, just like with other forms of marketing, what will make or break a campaign are great deals and the virtues of the product itself.

“If the offer is relevant, it’ll work,” says Goldsack. “The medium should not be more important than the relationship. Form should not triumph over content.”

Sebastián Pérez-Ferreiro is a freelance journalist based in Santiago