For now, mobile payment is more neat-o than necessary

 
Feb. 5, 2013 | by Jitendra Gupta

For the past couple of years, retailers have talked incessantly about mobile payment technology and made untold investments to allow their customers to pay for goods and services with their phones. These businesses are convinced mobile payment is convenient for customers—not to mention very cool as well—and that they will scramble to adopt the technology.

Sounds sensible, enough, right? I mean, who wouldn’t want to leave their purses and wallets behind and carry only a smartphone?

For now, it appears, few do. Despite mobile payment availability at retail giants such as Target, Wal-Mart and Starbucks, customers aren’t responding to the call for smartphone payment.

Why not? Chief among the many reasons is they see mobile payment as more neat-o than necessary. Cards and cash still work fine, and seeing as they can’t buy everything with just their smartphones, they still have to carry wallets and pocketbooks anyway. So why add a new layer of technology?

In a CNET.com story titled, “Mobile payments: A solution in search of a problem,” Marguerite Reardon writes that the digital wallet must replace the physical leather wallet before people see it as a benefit, and until that happens on a large scale, consumer response is generally, “Meh.”

Smartphone payment will likely catch on slowly in the restaurant space. For example, a MediaPost.com story stated that only “half of media-savvy mobile users now have at least one restaurant-specific app on their phones.” Among those, Yelp is the most popular, followed by Urbanspoon and Zagat—apps that are general mobile restaurant directories, not restaurant specific at all.

Starbucks, however, does have a specific app, a snazzy tool that helped it win the 2012 Mobile Marketer of the Year award from MobileMarketing.com. Still, its use by customers is modest compared to cash, credit and gift card transactions.

In its January 2013 earnings call, Starbucks CEO Howard Schultz said that 2.1 million transactions per week are made on mobile phones. Sounds like a lot until you acknowledge the chain’s average customer volume is 60 million customers a week. That means mobile payment usage is only about 3.5 percent of all transactions. By comparison, 25 percent of the java giant’s transactions come from gift cards.

So what are restaurateurs to do? Ignore the rush to develop mobile payment options and do nothing? Certainly for large chains, the technology will be in use sooner than later.

But perhaps the best plan is acknowledge what customers actually want in terms of direct electronic engagement with restaurant brands, and then continue developing those options. Online ordering is the most mature platform and growing steadily because it’s incredibly convenient.

Loyalty programs are players as well because customers get something in return for their patronage. And where smartphone-based programs are used it’s all the better, because there’s no card to swipe. According to a recent survey, 64 percent of smart phone users said loyalty points gained through their phones will make them more likely to place an order.

In such cases, customers and restaurateurs win because customers get rewards for patronage and operators get valuable customer purchasing data. They know what their customers like, what they’ll pay for it and how often they want buy it. Quite simply, that’s marketing gold mined affordably.

Mobile payment is coming, no doubt about it, just not as fast creators of those programs would have you believe. Until then, perhaps it’s wise to work with proven technologies and what we know consumers like.


Topics: Online / Mobile / Social , Operations Management


Jitendra Gupta / Jitendra Gupta is CEO of Punchh, a mobile CRM suite that includes branded mobile apps for campaigns, games, loyalty, online ordering, payments, referrals, reviews, gift cards, surveys, and integrates with social networks and operators’ POS systems to gather 360° customer insights. Punchh helps restaurants increase same store sales and profitability by driving repeat visits, word of mouth, new customer referrals, and higher returns from marketing campaigns.
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