Emerging Payments

Is Value Most Important for Mobile Wallets? Not Always

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Card issuers are increasingly using social networks, coupons and rewards to boost mobile payments, but it’s a plan that can backfire if the initiatives get the wrong mix of marketing, demographics and delivery channels.

“If you’re an issuer that wants to improve service to your customers, you have to know which customers to go after and how to reach them,” says Teresa Epperson,  a managing director in the financial services practice at AlixPartners, a company that advises banks, payments companies and other financial institutions on mobile payments strategy.

AlixPartners just finished a study of 6,000 mobile payment consumers detailing how social media and entertainment tools such as “gamification” drive mobile engagement—and how people are looking for more than price relief when shopping.

“There’s a difference between people who are interested in mobile engagement, social interaction and entertainment, and people who aren’t interested in all of those things while shopping, and the special offers have to reflect that. It can’t be just about delivering value if you want to get folks fully engaged,” says Epperson.

The challenge to properly combine entertainment, social networking and value is highest when targeting young and affluent groups via special mobile payment offers, according to the research.

Younger age groups receive more mobile offers and coupons—49% of consumers aged 18-25 received mobile coupons in the second quarter of 2012, up from 47% in the fourth quarter of 2011; and 53% of consumers aged 26-34 received mobile offers and coupons, up from 52%. That compares to 39% of consumers aged 35-44 who received mobile offers and coupons, which was actually down from 44% in the fourth quarter of 2011; and 36% of consumers aged 45-54, which was up from 29%.Consumers aged 55-64 were steady at about 20%, and 29% of consumers aged 65 and above received mobile offers and coupons, up from 13%.

Marketwide, 35% of mobile offers or coupons are redeemed, with the 26-34 age bracket coming in highest at 50%, and the 65 and older segment coming in lowest at 10%. Across all demographics, coupons and related features have an impact—25% of consumers said they purchased an item they hadn’t planned to because they received the coupon or discount; and 30% said they purchased an item they hadn’t planned to buy because of a coupon or deal/aggregator feature. 

The choice that issuers face between giving prominence to financial discounts in a rewards program, or providing a venue to share experiences with peers should be driven by an understanding of why a consumer is using social networks in the first place, Epperson says. 

“If there’re driven by value, the consumer will engage with apps and use the things that give them the bigger bang for the buck, for example. If they are socially driven, they will want to share with other people,” Epperson says.

Young, high net worth shoppers want the most from mobile shopping and payment offers—51% of consumers aged 26-34 want value, entertainment and social benefits, compared to 21% of consumers aged 35-44 and 12% aged 18-25. Social benefits become less important based on age and income—consumers with average household incomes of $104,000 and above desired social, value and entertainment benefits, and have average investible assets of nearly $700,000. Nearly half of consumers aged 35-54 were primarily interested in value only and have an average household income of about $80,000, with investible assets of between $215,000 and $261,000.

Different types of offers also dictate different appetites for entertainment vs. straight value. For example, 91% of users of coupon and discount features across all demographics wanted value, entertainment and social benefits, with 68% wanting value only.

For rewards and loyalty features, only 24% of users were solely interested in value; 77% also wanted social benefits and entertainment. These findings in particular blend well with programs that use elements of gaming, as well as initiatives that allow consumers to build toward a goal.

“If they’re into gaming, they’ll want to to be the ‘mayor’ of Starbucks, so you’ll want to use those kinds of programs,” Epperson says.  [The “mayor” of Starbucks is the person who has checked into the location on Foursquare the most often—and is eligible for extra discounts].

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