As the rain clouds rolled in one evening in June, Jeff Leach swung into action.
Leach, cofounder of New Orleans-based World's Healthiest Pizza, knows what happens when it rains in the Big Easy. The streets flood, people park their cars on high ground and hardly anyone goes out for dinner.
So that particular night, Leach typed out a message on his computer which read, "It's about to rain. Let us bring you a pizza for dinner."
Within minutes, the message, which also included a 2-for-1 pizza offer, was sent to the cell phones of the 400 or so people who had signed up for WHP's text-message coupon service. A few minutes after that, the calls started to come in.
"We got about a 20 percent draw on that offer," Leach said.
World's Healthiest Pizza is one of a number of businesses experimenting with delivering coupons to cell phones as an alternative to direct mail. Although WHP has only been offering mobile coupons for about a month, Leach is happy with the results.
"I'm not sure long term how effective it is going to be, but overall it is a positive," he said. "We just haven't figured out the best way to use it yet."
Proof in the numbers
Leach's customers are far from unique. According to a March 2008 study by New York-based research firm The Nielsen Company, 23 percent - 58 million - of all U.S. mobile subscribers say they've been exposed to advertising on their phones in the past 30 days. Half of those subscribers, or 28 million, who recalled seeing mobile advertising in the previous 30 days said they responded to a mobile ad in some way.
Mobile coupons are well-suited to the restaurant industry because offers can be delivered to potential customers right about the time they make a dining decision. Leach, for example, sends out text offers at around 4:40 p.m., just when people are thinking about what to have for dinner, he said. The coupon is only good for that day.
"It is just a reminder to provoke them that night to come in and get a pizza," he said.
Currently, mobile coupons operate in a number of different ways. While the service Leach uses, San Antonio-based Crosslink Media, sends text-message offers directly to customers in his database, other services, such as San Jose, Calif.-based Cellfire, use an application that customers download to their cell phone.
Customers can then choose from a variety of coupons from different merchants. Cellfire provides users with a unique code that is shown at the time of a transaction. Users simply click on the coupon they want to use and show it to the sales cashier to receive the discount.
Cellfire offers coupons for dozens of pizzeria operators, including Cincinnati-based La Rosa's and a number of franchisees of chains such as Domino's and Papa John's.
"The benefit of having an application such as Cellfire is that people can go to it when they want, they aren't getting charged additional fees for text messages," said Dwight Moore, vice president of corporate marketing with Cellfire. "Also, they are presented with multiple offers simultaneously."
Nielsen's Mobile Advertising Report showed that:
The number of data users who recalled seeing mobile advertising between the second and fourth quarters of 2007 increased 38 percent (from 42 to 58 million subscribers)
Teen data users (ages 13–17) were the most likely age segment to recall seeing mobile advertising (46 percent recalled seeing some type of mobile advertisement, compared to 29 percent of all data users)
14 percent said they are already open to mobile advertising so long as it is relevant to their interests.
And e-mail marketers are getting into the act as well. Earlier this year, Alexandria, Va.-based e-mail marketer Fishbowl launched its own mobile coupon service in April with a campaign for New Orleans-based Smoothie King. The campaign encouraged customers to send a text message to Smoothie King for a chance to win prizes.
"Mobile is a natural extension for Fishbowl," said Per Huge-Jensen, product director for mobile and Web solutions at Fishbowl. "We can give our clients the same effective, targeted and turnkey marketing we have always offered through e-mail now through mobile, helping companies to maximize their customer reach and drive sales."
Not so fast
For Leach, time will tell if mobile coupons will remain a part of his marketing strategy. While redemption rates for his coupons approach or even surpass those of paper direct-mail coupons, the cost doesn't always justify WHP going mobile, he said.
Leach pays 10 cents per impression for each text offer he sends, so sending a text coupon to 400 customers costs $40.
"What I've learned is that if you don't give people a really good deal, it's just not worth the trouble," he said. "We need a 15 to 20 percent redemption rate to break even. It really has to be tied to a special event or special pricing."
Mobile coupons aren't going to replace direct mail, newspaper inserts or e-mail marketing efforts, according to Mark Friedman, chief marketing officer at Boston-based SoundBite Communications. Instead, mobile coupons are likely to be just one weapon in an operator's marketing arsenal.
"Early results from our merchants show that when they communicate to customers using more than one channel, they get better results," Friedman said. "Merchants need to keep up with consumers' changing communication preferences, and once they do, touching those consumers via multiple channels will optimize results."