We thought this was a pretty interesting article – smart phone indeed.
Written by Michael Griffen
Within the next two years, I predict a revolutionary shift—spearheaded by Google—in our ability to integrate data across online marketing efforts and offline purchasing behavior. At last, marketers will be able to bridge the gap between these two worlds, which have been disconnected largely because of technical obstacles.
The emergence of technologies like near-field communication (NFC) chips in Android-powered mobile phones, new product initiatives like Google Wallet, and startups like Shopkick, Punchd, Foursquare and Placecast suggest a path that Google might follow.
The Data Chasm
For years we knew that online research leads to some amount of offline sales. Customers use their desktop and mobile browsers to seek out product information, compare prices and read product reviews. Then some customers make their purchase online but most go to a brick-and-mortar store. No one reliably quantified how many of these retail sales were influenced by the online channel until Forrester Research released a study in December, 2010. In its “US Online Retail Forecast, 2010 To 2015” report, Forrester estimated a ratio of roughly 5:1 of Web-influenced retail sales to online sales. With online sales currently running at approximately $200 billion annually, that means roughly a trillion dollars of offline retail sales are influenced by online marketing.
This has profound implications for online marketers, as well as for Google. Forrester is suggesting that the Web is driving five times the value that we are able to measure today. If they’re right, whatever return on ad spend (ROAS) calculations marketers make today are off by 400 percent! Since ad spend is directly correlated to the value driven by that ad spend, there is an enormous upside for Google here; if the revenue side of the ROAS equation increases 4x, the spend side will, too.
The challenge is that there has not been a way to track the transitions between online and offline. Tactics like offering customers coupons online that can only be redeemed in stores provide some directionally useful tracking data but are not accurate.
Enter the Smartphones
The proliferation of smartphones—coupled with the rise of new services—is about to change everything. With robust browsers and a host of mobile-optimized shopping and loyalty card applications, consumers are increasingly integrating their smartphones into their shopping experience. According to The Mobile Movement: Understanding Smartphone Users, a study conducted by Google and Ipsos OTX MediaCT, an independent market research firm:
- 79 percent of smartphone consumers use their phones for shopping-related activities, such as comparing prices, finding more product info, or searching inventory.
- 74 percent of smartphone shoppers make a purchase, whether online, in-store, or on their phones.
- 70 percent use their smartphones while in a store. (In another recent study sponsored by Google, this figure was 82 percent.)
As the study noted, “Smartphones have become an indispensable shopping tool and are used across channels and throughout the research and decision-making process.”
Google has further strengthened its commitment to Android-powered smartphones by acquiring Motorola Mobility. It is too early to tell what Google will do with access to its own hardware platform, but one tantalizing possibility is the introduction of phones optimized for shopping purposes, with tightly integrated hardware capabilities (NFC chips, barcode scanners, etc.) and pre-loaded shopping-related applications.
Closing the Marketing Loop
Google is uniquely positioned to close the marketing loop between online and offline shopping by capitalizing on the ubiquity of smartphones. There are four key pieces to this puzzle:
- Persistent connectivity. Most consumers are logged-in to a Google product when online, whether through a computer at home or at the office, or on a mobile device. This means that Google knows what you searched for, from wherever you searched for it.
- Location-based advertising. If you’re logged-in to a Google application while mobile, Google can know when you’re in or near a store. This means Google can show you ads relevant to your location and previous search or purchase history (think “offline retargeting”). With Google Offers—a fledgling Groupon competitor—Google can also build loyalty to using Google for shopping purposes by providing incentives for visiting specific retail establishments (as Shopkick does) or purchasing specific products. With the right technology, Google could provide additional merchandising information to help offline shoppers find what they want, such as displaying top-rated products based on the aisle you’re walking down. Collectively, these perks will encourage more use of Google for shopping purposes and provide a channel for Google to sell more advertising and test customer response to various promotions. It’s worth noting that in 2009 Google was awarded a fairly broad patent for location-based advertising, and acquired a host of additional mobile-related patents through its acquisition of Motorola Mobility.
- Ad tracking. If your online product research involved clicking an ad, Google knows what ads were effective at capturing your attention. Even if you see but don’t click any ads, Google can count your impressions and can correlate that later with what you ultimately bought, and where.
- Purchase data. If you pay for your purchase online using Google Checkout or in a store using Google Wallet, Google can correlate your purchase data with what you searched for earlier and where you were when searching. Mobile payment options have taken off in almost every country where they are widely available. Google will undoubtedly spur adoption by giving first-time users $10 off their purchase (as they did with Google Checkout) and by offering other perks, such as the ability to electronically store all of your receipts and warranty information, and to integrate with loyalty cards. Retailers will opt in because Google is footing the bill for a multi-million dollar promotion.
The combination of knowing what you searched for, where you were when you searched for it, what ads you were shown or clicked, what promotions you responded to, where you are now, and what you ultimately bought will allow Google to connect the dots for marketers between customers’ offline and online behavior.
We’re Not Quite There Yet
It will take a few years for this level of integration between online and offline shopping to become viable. The technology exists today, but adoption lags far behind. American consumers and merchants have still not fully embraced mobile payments, and services like Google Wallet and Google Offers are still in their infancy. U.S. smartphone penetration is still below 40 percent, and Google will understandably first focus on Android-based smartphones.
I believe the pieces will ultimately come together. In the meantime, I have three suggestions for retailers to adapt to this new environment:
- Prepare for new metrics. It’s not too early to begin thinking about the ideal metrics your business could use to reflect online/offline integration and attribution. These might include online-to-offline return on ad spend (ROAS), online cost per retail store visit, and online-to-offline conversion rate. We all have an opportunity to reach out to Google to advocate for new metrics we believe will be the most useful.
- Get your feet wet with vendors like Foursquare and Punchd. It’s a good idea to begin engaging with vendors that are bridging the gap between online and offline. More vendors like these will surely appear, and consumer uptake of these services is growing fast.
- Make sure your website is mobile-friendly. Customers won’t browse or purchase from your store using their smartphones if your website is unreadable on their device.
The pieces to complete this loop already exist. What needs to happen now is for a company to commit the R&D to deliver a continuous experience from information gathering and decision-making to commitment and purchasing, while allowing merchants and brands to incent consumers along the way. Google needs to hurry if they want to dominate this market. Payment processors like Visa want this market, too, albeit for different reasons. Google should recognize that mastering the online-offline connection is about more than securing a slice of the payments business—it’s critical to the success of their entire business.
- US DATA: ICSC sales for Sep 3 wk: “September got off. (forexlive.com)
- Google Wallet Could be the Future of Consumer Payment Methods (techie-buzz.com)
- Offline Usage of Gmail, Google Calendar and Google Docs is Possible (Again) (googletutor.com)
- Google Apps Boast Offline Access (pcworld.com)
- Shopkick Uses the Sound of Rewards to Bring Smartphone Owners into Bricks-and-Mortar Stores (xconomy.com)
- Retail Stocks That Could Make You Rich (dailyfinance.com)
- Featured App: Kwantify QR Campaign Manager (shopify.com)