Posts Tagged ‘Apps’

Revelations about the Facebook – Cambridge Analytica affair last month (March 2018) invoked a heated public discussion about data privacy and users’ control over their personal information in social media networks, particularly in the domain of Facebook. The central allegation in this affair is that personal data in social media was misused for the winning political presidential campaign of Donald Trump. It offers ‘juicy’ material for all those interested in American politics. But the importance of the affair goes much beyond that, because impact of the concerns it has raised radiates to the daily lives of millions of users-consumers socially active via the social media platform of Facebook; it could touch potentially a multitude of commercial marketing contexts (i.e., products and services) in addition to political marketing.

Having a user account as member of the social media network of Facebook is pay free, a boon hard to resist. Facebook surpassed in Q2 of 2017 the mark of two billion active monthly users, double a former record of one billion reached five years earlier (Statista). No monetary price requirement is explicitly submitted to users. Yet, users are subject to alternative prices, embedded in the activity on Facebook, implicit and less noticeable as a cost to bear.

Some users may realise that advertisements they receive and see is the ‘price’ they have to tolerate for not having to pay ‘in cash’ for socialising on Facebook. It is less of a burden if the content is informative and relevant to the user. What users are much less likely to realise is how personally related data (e.g., profile, posts and photos, other activity) is used to produce personally targeted advertising, and possibly in creating other forms of direct offerings or persuasive appeals to take action (e.g., a user receives an invitation from a brand, based on a post of his or her friend, about a product purchased or  photographed). The recent affair led to exposing — in news reports and a testimony of CEO Mark Zuckerberg before Congress — not only the direct involvement of Facebook in advertising on its platform but furthermore how permissive it has been in allowing third-party apps to ‘borrow’ users’ information from Facebook.

According to reports on this affair, Psychologist Aleksandr Kogan developed with colleagues, as part of academic research, a model to deduce personality traits from behaviour of users on Facebook. Aside from his position at Cambridge University, Kogan started a company named Global Science Research (GSR) to advance commercial and political applications of the model. In 2013 he launched an app in Facebook, ‘this-is-your-digital-life’, in which Facebook users would answer a self-administered questionnaire on personality traits and some personal background. In addition, the GSR app prompted respondents to give consent to pull personal and behavioural data related to them from Facebook. Furthermore, at that time the app could get access to limited information on friends of respondents — a capability Facebook removed at least since 2015 (The Guardian [1], BBC News: Technology, 17 March 2018).

Cambridge Analytica (CA) contracted with GSR to use its model and data it collected. The app was able, according to initial estimates, to harvest data on as many as 50 million Facebook users; by April 2018 the estimate was updated by Facebook to reach 87 millions. It is unclear how many of these users were involved in the project of Trump’s campaign because CA was specifically interested for this project in eligible voters in the US; it is said that CA applied the model with data in other projects (e.g., pro-Brexit in the UK), and GSR made its own commercial applications with the app and model.

In simple terms, as can be learned from a more technical article in The Guardian [2], the model is constructed around three linkages:

(1) Personality traits (collected with the app) —> data on user behaviour in Facebook platform, mainly ‘likes’ given by each user (possibly additional background information was collected via the app and from the users’ profiles);

(2) Personality traits —> behaviour in the target area of interest — in the case of Trump’s campaign, past voting behaviour (CA associated geographical data on users with statistics from the US electoral registry).

Since model calibration was based on data from a subset of users who responded to the personality questionnaire, the final stage of prediction applied a linkage:

(3) Data on Facebook user behaviour ( —> predicted personality ) —>  predicted voting intention or inclination (applied to the greater dataset of Facebook users-voters)

The Guardian [2] suggests that ‘just’ 32,000 American users responded to the personality-political questionnaire for Trump’s campaign (while at least two million users from 11 states were initially cross-referenced with voting behaviour). The BBC gives an estimate of as many as 265,000 users who responded to the questionnaire in the app, which corresponds to the larger pool of 87 million users-friends whose data was harvested.

A key advantage credited to the model is that it requires only data on ‘likes’ by users and does not have to use other detailed data from posts, personal messages, status updates, photos etc. (The Guardian [2]). However, the modelling concept raises some critical questions: (1) How many repeated ‘likes’ of a particular theme are required to infer a personality trait? (i.e., it should account for a stable pattern of behaviour in response to a theme or condition in different situations or contexts); (2) ‘Liking’ is frequently spurious and casual — ‘likes’ do not necessarily reflect thought-out agreement or strong identification with content or another person or group (e.g., ‘liking’ content on a page may not imply it personally applies to the user who likes it); (3) Since the app was allowed to collect only limited information on a user’s ‘friends’, how much of it could be truly relevant and sufficient for inferring the personality traits? On the other hand, for whatever traits that could be deduced, data analyst and whistleblower Christopher Wylie, who brought the affair out to the public, suggested that the project for Trump had picked-up on various sensitivities and weaknesses (‘demons’ in his words). Personalised messages were respectively devised to persuade or lure voters-users likely to favour Trump to vote for him. This is probably not the way users would want sensitive and private information about them to be utilised.

  • Consider users in need for help who follow and ‘like’ content of pages of support groups for bereaved families (e.g., of soldiers killed in service), combatting illnesses, or facing other types of hardship (e.g., economic or social distress): making use of such behaviour for commercial or political gain would be unethical and disrespectful.

Although the app of GSR may have properly received the consent of users to draw information about them from Facebook, it is argued that deception was committed on three counts: (a) The consent was awarded for academic use of data — users were not giving consent to participate in a political or commercial advertising campaign; (b) Data on associated ‘friends’, according to Facebook, has been allowed at the time only for the purpose of learning how to improve users’ experiences on the platform; and (c) GSR was not permitted at any time to sell and transfer such data to third-party partners. We are in the midst of a ‘blame game’ among Facebook, GSR and CA on the transfer of data between the parties and how it has been used in practice (e.g., to what extent the model of Kogan was actually used in the Trump’s campaign). It is a magnificent mess, but this is not the space to delve into its small details. The greater question is what lessons will be learned and what corrections will be made following the revelations.

Mark Zuckerberg, founder and CEO of Facebook, gave testimony at the US Congress in two sessions: a joint session of the Senate Commerce and Judiciary Committees (10 April 2018) and before the House of Representatives Commerce and Energy Committee (11 April 2018). [Zuckerberg declined a call to appear in person before a parliamentary committee of the British House of Commons.] Key issues about the use of personal data on Facebook are reviewed henceforth in light of the opening statements and replies given by Zuckerberg to explain the policy and conduct of the company.

Most pointedly, Facebook is charged that despite receiving reports concerning GSR’s app and CA’s use of data in 2015, it failed to ensure in time that personal data in the hands of CA is deleted from their repositories and that users are warned about the infringement (before the 2016 US elections), and that it took at least two years for the social media company to confront GSR and CA more decisively. Zuckerberg answered in his defence that Cambridge Analytica had told them “they were not using the data and deleted it, we considered it a closed case”; he immediately added: “In retrospect, that was clearly a mistake. We shouldn’t have taken their word for it”. This line of defence is acceptable when coming from an individual person acting privately. But Zuckerberg is not in that position: he is the head of a network of two billion users. Despite his candid admission of a mistake, this conduct is not becoming a company the size and influence of Facebook.

At the start of both hearing sessions Zuckerberg voluntarily and clearly took personal responsibility and apologized for mistakes made by Facebook while committing to take measures (some already done) to avoid such mistakes from being repeated. A very significant realization made by Zuckerberg in the House is him conceding: “We didn’t take a broad view of our responsibility, and that was a big mistake” — it goes right to the heart of the problem in the approach of Facebook to personal data of its users-members. Privacy of personal data may not seem to be worth money to the company (i.e., vis-à-vis revenue coming from business clients or partners) but the whole network business apparatus of the company depends on its user base. Zuckerberg committed that Facebook under his leadership will never give priority to advertisers and developers over the protection of personal information of users. He will surely be followed on these words.

Zuckerberg argued that the advertising model of Facebook is misunderstood: “We do not sell data to advertisers”. According to his explanation, advertisers are asked to describe to Facebook the target groups they want to reach, Facebook traces them and then does the placement of advertising items. It is less clear who composes and designs the advertising items, which also needs to be based on knowledge of the target consumers-users. However, there seems to be even greater ambiguity and confusion in distinguishing between use of personal data in advertising by Facebook itself and access and use of such data by third-party apps hosted on Facebook, as well as distinguishing between types of data about users (e.g., profile, content posted, response to others’ content) that may be used for marketing actions.

Zuckerberg noted that the ideal of Facebook is to offer people around the world free access to the social network, which means it has to feature targeted advertising. He suggested in Senate there will always be a pay-free version of Facebook, yet refrained from saying when if ever there will be a paid advertising-clear version. It remained unclear from his testimony what information is exchanged with advertisers and how. Zuckerberg insisted that users have full control over their own information and how it is being used. He added that Facebook will not pass personal information to advertisers or other business partners, to avoid obvious breach of trust, but it will continue to use such information to the benefit of advertisers because that is how its business model works (NYTimes,com, 10 April 2018). It should be noted that whereas users can choose who is allowed to see information like posts and photos they upload for display, that does not seem to cover other types of information about their activity on the platform (e.g., ‘likes’, ‘shares’, ‘follow’ and ‘friend’ relations) and how it is used behind the scenes.

Many users would probably want to continue to benefit from being exempt of paying a monetary membership fee, but they can still be entitled to have some control over what adverts they value and which they reject. The smart systems used for targeted advertising could be less intelligent than they purport to be. Hence more feedback from users may help to assign them well-selected adverts that are of real interest, relevance and use to them, and thereof increase efficiency for advertisers.

At the same time, while Facebook may not sell information directly, the greater problem appears to be with the information it allows apps of third-party developers to collect about users without their awareness (or rather their attention). In a late wake-up call at the Senate, Zuckerberg said that the company is reviewing app owners who obtain a large amount of user data or use it improperly, and will act against them. Following Zuckerberg’s effort to go into details of the terms of service and to explain how advertising and apps work on Facebook, and especially how they differ, Issie Lapowsky reflects in the ‘Wired’: “As the Cambridge Analytica scandal shows, the public seems never to have realized just how much information they gave up to Facebook”. Zuckerberg emphasised that an app can get access to raw user data from Facebook only by permission, yet this standard, according to Lapowsky, is “potentially revelatory for most Facebook users” (“If Congress Doesn’t Understand Facebook, What Hope Do Its Users Have”, Wired, 10 April 2018).

There can be great importance to how an app asks for permission or consent of users to pull their personal data from Facebook, how clear and explicit it is presented so that users understand what they agree to. The new General Data Protection Regulation (GDPR) of the European Union, coming into effect within a month (May 2018), is specific on this matter: it requires explicit ‘opt-in’ consent for sensitive data and unambiguous consent for other data types. The request must be clear and intelligible, in plain language, separated from other matters, and include a statement of the purpose of data processing attached to consent. It is yet to be seen how well this ideal standard is implemented, and extended beyond the EU. Users are of course advised to read carefully such requests for permission to use their data in whatever platform or app they encounter them before they proceed. However, even if no information is concealed from users, they may not be adequately attentive to comprehend the request correctly. Consumers engaged in shopping often attend to only some prices, remember them inaccurately, and rely on a more general ‘feeling’ about the acceptable price range or its distribution. If applying the data of users for personalised marketing is a form of price expected from them to pay, a company taking this route should approach the data fairly just as with setting monetary prices, regardless of how well its customers are aware of the price.

  • The GDPR specifies personal data related to an individual to be protected if “that can be used to directly or indirectly identify the person”. This leaves room for interpretation of what types of data about a Facebook user are ‘personal’. If data is used and even transferred at an aggregate level of segments there is little risk of identifying individuals, but for personally targeted advertising or marketing one needs data at the individual level.

Zuckerberg agreed that some form of regulation over social media will be “inevitable ” but conditioned that “We need to be careful about the regulation we put in place” (Fortune.com, 11 April 2018). Democrat House Representative Gene Green posed a question about the GDPR which “gives EU citizens the right to opt out of the processing of their personal data for marketing purposes”. When Zuckerberg was asked “Will the same right be available to Facebook users in the United States?”, he replied “Let me follow-up with you on that” (The Guardian, 13 April 2018).

The willingness of Mark Zuckerberg to take responsibility for mistakes and apologise for them is commendable. It is regrettable, nevertheless, that Facebook under his leadership has not acted a few years earlier to correct those mistakes in its approach and conduct. Facebook should be ready to act in time on its responsibility to protect its users from harmful use of data personally related to them. It can be optimistic and trusting yet realistic and vigilant. Facebook will need to care more for the rights and interests of its users as it does for its other stakeholders in order to gain the continued trust of all.

Ron Ventura, Ph.D. (Marketing)






Read Full Post »

In late February the annual Mobile World Congress (MWC) 2016 took place in Barcelona, including a large festive exhibition and a conference next to it. The leading motto of the MWC declared that “Mobile Is Everything“. This motto, directed primarily at people involved in the mobile industry, on either the technology-side or the management-side, could help to increase their interest in the event, create a uniting theme, and energise them to be part of the congress and its community. But what does this ‘invitation’ tell client-companies operating mainly outside the field of mobile telecom and technology? Moreover, what does this call suggest for the lives of consumers?

A little over 100,000 people from 204 countries attended the MWC this year according to MWC official website. Some 2,200 companies were represented in the exhibition; during that time the conference hosted speeches and panel discussions by experts and business leaders. An intensive media coverage on TV, online, and in the press, made sure news from the event reach almost everyone. Everything important, it would appear, has happened that week at the MWC.

Companies were presenting in the exhibition their technological solutions, methods and products. Each company could summarily describe its areas of specialisation by classification in any of 90 different product categories (companies more frequently applied 3-5 categories). A remarkable variety of mobile-related products, applications and services were shown in the exhibition: mobile devices (i.e., latest models of smartphones and tablets); accessories and mobile-supported peripheral equipment (e.g., virtual reality [VR], 3D printing, Internet of Things [IoT]); mobile apps; equipment and services in connection with mobile communication (e.g., infrastructure, business & tech consulting, data analysis). While some companies demonstrated apps as designed to be used by consumers, most exhibitors offered  platforms for developing apps (custom or adapted) and mobile-oriented methodologies and services intended for business clients.

  • The classification appears to single out the salience of mobile apps these days. It is interesting to note that out of the ninety categories, five were dedicated to App Development: General, Film, Gaming, Music, and Shopping.

Key areas associated with digital marketing (e.g., data analysis, CRM, content management) need to be extended from online (PC-based) to smart mobile devices. Clearly, technology companies that were not originally in the mobile industry have to adapt and add digital solutions respectively for the mobile channel. Yet it is no less a challenge for companies in lines of business that only use digital technologies for improving their performance (e.g., food, cosmetics, fashion, retail) to keep pace with the latest developments — in mobile communication to this matter. Some companies may produce their solutions in-house but many others have to hire specialist companies to provide them with systems or services tailored to their needs. Those kinds of companies, offering business solutions in a mobile context, would be found most likely at the MWC.

Mobile Advertising and Marketing was one of the more crowded categories (290 companies classified). One of the issues receiving particular attention in companies’ offerings is targeted advertising on mobile devices as well as improved targeting techniques for mobile apps. This category is closely tied with data analysis (e.g., to provide input for implementing more accurate personalised targeting), and is also connected with topics of customer relationship management (e.g., loyalty clubs) and content management in the mobile environment. For example, Ingenious Technologies (Germany) is an independent provider of cloud utilities for business analytics and marketing automation (e.g., omni-channel activities, tracking customer journeys), and Jampp (UK) specialises in app marketing, offering ways to grow consumer engagement in mobile apps (e.g., combine machine learning with methods of big data and programmatic buying). Exhibitors also addressed an increasing concern of monetization, that is the ability of businesses to charge and collect payments for content or for products and services that can be ordered on mobile devices, especially via apps.

In an era that promotes digital and data-driven marketing, it becomes imperative to cover and analyse data from mobile touchpoints. The category of Data Analysis (148 companies) includes the marketing aspect, yet relates to applications in other fields as well.  Among the applications concerned: integrating predictive analytics with campaign management (e.g., Lumata [UK]); analytic database platform for IoT and processing app-based queries (e.g., Infobright [Canada]); traffic analytics for enhancing urban mobility of vehicles and people (e.g., INRIX [UK]).

In the category of Consumer Electronics (222 companies) one may find: (a) devices (e.g., Samsung Galaxy S7 smartphones); (b) accessories (e.g., SanDisk’s portable data storage solutions, fast charging [Zap-go-charger, UK] or portable power backup [CasePower, Sweden]); and (c) components (e.g., LED components by Ledmotive [Spain]). But there were also some less usual devices such as a wearable device for tracking a dog’s health and fitness, which comes with an app (Sense of Intelligence [Finland]).

  • The area of audio (music) and video playing gains special interest, and is further connected to gaming and mobile entertainment overall. A couple of examples under the heading of consumer electronics: software for audio enhancement (AM3D A/S [Denmark]; a mobile video platform, supporting live streaming and video chat (avinotech [Germany]). Video also appears in the context of content management, such as an advanced technology for accelerating display of video content in HD TV quality (Giraffic [Israel]).

This brief review would not be complete without the rising category of Location Technologies and Services (141 companies). Location technologies and their applications can be found in different areas, not just marketing or shopping. For instance, a French company (Sensineo) offers an ultra-low-GPS tracking and positioning device which may help in locating cars or dogs, but furthermore important, tracing vulnerable people who may have lost their way and need support or medical assistance — location apps and mobile alarm devices emerge as new aids to healthcare. In the context of advertising, we may refer to technologies that bridge online and offline domains (e.g., targeting by combining text analysis of consumers’  conversations in social media and intelligence on where they go in the physical world [Cluep, Canada], eliciting online-to-offline engagement in brand or retail campaigns [Beintoo, Italy]). Another technology (by Pole Star [France]) specialises in indoor location, involving analytics through precise geofencing (i.e., activation as people enter specified perimeters) and proximity detection. The last three examples have apparent relevance to consumer behaviour during shopping trips.

  • In regard specifically to development of shopping mobile apps (46 companies), there seems to be greater reference of exhibitors to technologies that may support shopping utilities but not enough examples for apps that truly connect retailers and shoppers. As an example for a more relevant app, Tiendeo Web Marketing (Spain) offers an app, working in partnership with retail chains, that informs consumers of weekly ads, deals or coupons in their area of residence.

For businesses that are client-users of technologies and associated services, the message is very clear — in order to be accessible and relevant to consumers, the business must have mobile presence. Consumer brands of products and services, and in retail, cannot afford to neglect the mobile channel. Moreover they must have a strong showing because the competition is intense and ‘mobile is everything’. The need to be present and useful via mobile devices (mobile websites and apps) is undisputed. As more consumers are engaged with their smartphones much of the time, and perform more tasks in mobile mode, companies should be there available to them. The idea, however, that this is all that matters for marketing and customer service is dubious. Companies are under endless pressure to keep to-date with continuous advances in technology. Technology and consulting companies remind their clients all the time that in order to be competitive they must apply the most advanced mobile features and tools. But companies have to be available, effective and attractive through multiple channels and the kind of pressure implied by the MWC’s motto is neither helpful nor productive.

The danger is that companies engaged in consumer marketing may neglect other important channels in attempt to develop a strong mobile presence. In fact, this kind of shift to interactions through newer technological channels has been happening for years. The latest shift advised to companies is from Web 2.0 on personal computers to mobile websites and apps. It could mean that companies would be forced to invest more in mobile compatibility of their websites, while neglecting improvement of the functionality and visual attractiveness of their usual websites. One of the implications of the shift to online and mobile touchpoints is reduction in direct human interactions (e.g., fewer brick-and-mortar service branches, fewer service hours, not enough trained and skilled personnel in call centres). But consumers continue to appeal call centres for help, and when faced with inadequate assistance they are encouraged to prefer computer-based interactions. More companies offer customers options to chat by text, audio and video, but on the other hand they also refer customers more frequently to virtual agents. The mobile facilities are not desirable for everyone, and at least not all of the time; having the most advanced technology is not always an advantage, except for tech-enthusiasts.

Companies that develop technologies and market hardware and software products and associated services are on a constant race to provide more advanced competent solutions. It starts to be a problem when too many companies are pursuing a single main course — mobile in our case. It is the kind of push induced by MWC’s organizers that should worry us. The interest of GSMA — a consortium of mobile telecom operators, joined by device manufacturers, software companies etc. (“broader mobile ecosystem”) — in putting mobile under the spotlight is clear. However, following the claim that “mobile is everything” can have negative consequences for many stakeholders in industry and also for the general public. There is a sense of rush to develop apps and all other sorts of mobile products and utilities that is concerning. It may never develop into a bubble as fifteen years ago because the conditions are different and better (i.e., stronger technological foundations, greater experience), but there are disturbing signs that should alert stakeholders.

It is hard to argue with the many conveniences that mobile phones, particularly smartphones, provide to consumers. Basically, if one is late for a meeting, wants to set a meeting point with a friend in the city, or just needs to update a colleague in the office about anything, he or she can call while being out on the way somewhere. It has become an invaluable time saver as one can settle any professional or business issues at work while travelling. Yet the elevation of mobile phones to computer-based ‘smart’ phones (and in addition tablets) has expanded greatly the number and types of tasks people can perform while being away from home or office. It is not just sending and receiving voice calls and SMS but also e-mails and various forms of updates on social media networks. Then one can check the news and stock prices, prepare shopping lists and compare products and prices while visiting shops, schedule a forgotten appointment for the doctor, order a table at a restaurant for the evening, listen to his favorite music, and far more. The point is that any minute one can find something to do with the smartphone; people cannot lose hold and sight of their smartphones. Smartphones no longer just serve consumers for their convenience but the consumers ‘serve’ the smartphones.

The motto of MWC could be right in arguing that for consumers ‘mobile is everything’, yet it is also complicit in eliciting the consumers to become even more preoccupied with their mobile devices and adopt forms of behaviour that are not honestly in their benefit. Consumers bear a responsibility to notice these effects and sanction their use of mobile devices reasonably. For instance, people not only can call others when convenient but may also be reached by others in less convenient times (e.g., by an employer). Talking and messaging while travelling on a bus, taxi or train is fine but there are stronger warnings now that people put themselves and others in greater danger if doing so while driving, because this diverts their attention from the road. Being preoccupied with their smartphones causes people in general to look less around them and be less communicative with other people. Immediately sorting every query on a website or app may get consumers hasten purchase decisions unnecessarily and also ignore other channels of resolution (e.g., consulting staff in-store). Finally, relying on mobile devices to find any information instantly online evokes people to make less effort to remember and accumulate new knowledge, to retrieve information from memory, and think (i.e., less cognitive effort).

The motto “Mobile Is Everything” sounds shallow and simplistic. Sweeping generalisations usually do no much good — they cannot be taken too seriously. Perhaps this title was meant to be provocative, so as to fuel the MWC with enthusiasm, but it can end up aggravating. The field of mobile telecom and digital technology has much to show for in achievements in recent years. There is no need to suggest that businesses and consumers cannot do without ‘mobile’ and should invest themselves even more fully into it. Using such a motto is not acting out of strength.

Mobile indeed is a great deal, yet is definitely not everything.

Ron Ventura, Ph.D. (Markting)


Read Full Post »

The advanced technology of mobile devices — smartphones and tablets — is giving consumers new powers when shopping at brick-and-mortar stores. These devices allow shoppers to obtain useful information in the right place at the right time as well as generate and share information in ways they could only dream of ten or twenty years ago. However, retailers that operate physical stores take special note of a practice of consumers to use their stores as a showroom for preliminary examination, that is, consumers visit and browse products displayed in a store but then make the purchase of the same product of interest from an online retailer, usually for a lower price — a form of behaviour that henceforth has been named ‘showrooming’.  This conduct may indeed be a cause of worry, but it is not an obstacle retailers of traditional stores cannot surmount, and it tells only part of the story of mobile-assisted shopping.

Consumers may perform multiple activities on their mobile device while in a store, like checking on additional technical information on product features and functionalities, compare prices, and consult with product reviews. These types of “market research” for learning by consumers are legitimate and actually should be encouraged — there is no justification nor excuse for retailers to try and block such activities. Especially at this time consumers will resent such action and may not forgive “a rude” shop manager who tries to interrupt their research activities (e.g., by disrupting wireless connectivity in the store’s premises). Moreover, mobile-assisted shoppers expect to be able to communicate through social networks (e.g., Facebook, Twitter) with friends and relatives but also with the store itself, when needed. The challenge of retailers is to tackle the threat of showrooming yet keeping with the new rules of the game, that is, information-rich shopping.

The Centre on Global Brand Leadership at Columbia Business School together with Aimia (a consulting firm on retail loyalty programmes) published last September a research report on “Showrooming and the Rise of the Mobile-Assited Shoppers. The research characterises different activities that mobile-assisted shoppers perform, assesses the extent of their utilisation and the business implications. At the heart of the research is a segmentation model comprising five groups of these shoppers who differ in types and levels of usage of their mobile devices during their shopping in brick-and-mortar stores.

A survey of 3,000 mobile-assisted adult shoppers in the United States, Canada and the United Kingdom was conducted online in late November 2012. A shopper qualified for the study if she or he confirmed owning a smartphone or a tablet with a data plan and using the device within the last twelve months to “aid in shopping for a product while in a store (e.g., looked up information or reviews on the product, compared prices, texted or called a friend for advice, etc.),” It is noted that smartphones receive greater emphasis than tablets throughout the report, understandably given the greater penetration of the former among consumers in 2012, but this situation is likely to change in coming years and both kinds of mobile devices are relevant.

We may already get an initial indication of the scale of using mobile devices while shopping in physical stores from the screening stage of the survey wherein it was found that the incidence rate of ‘qualified’ mobile-assisted shoppers (among Internet users!) was 21% — already a significant rate but it suggests that the phenomenon is not yet dominant and pervasive. With respect specifically to showrooming, it is estimated that as many as 70% of the mobile-assisted shoppers (M-Shoppers) showroomed at least once in the past year (i.e., “visited a store to look at a product, and purchased the product from an online retailer instead”). Not less conspicuous, as the researchers point out in their analysis, is the opposite finding that there are 30% of M-Shoppers who refrain from engaging in showrooming.

About half of M-Shoppers report comparing prices (52%) and looking up product information and reviews (50%) regularly (i.e., almost always, frequently or half-the-time) while in-store. Also, nearly 40% report texting or calling friends or family members regularly for advice from the store, an obvious course of action that the M-Shoppers can take, though it does not involve any unique advantages of smartphones’ capabilities and requires no advanced skills. The activities that are truly interesting and do matter, in addition to searching for price and product information on mobile websites, are such as (1) using a barcode or QR code of a product on the shelf (36% have ever done so); (2) posting an update on a social network (24%); (3) location-based check-in (e.g,, on Facebook, Foursquare) (22%);  or (4) mobile login to a store’s loyalty programme (17%). It is furthermore important to note that 75% of M-Shoppers report browsing websites of other enterprises vis-a-vis 70% visiting the retailer’s own website, signifying the essence of making the retailer’s website available to patrons in-store as a way of countering their browsing websites of competitors. To this we may add that 42% use the retailer’s app, another important tool that helps to increase the bond of M-Shoppers to the retailers of physical stores.

The primary driver for showrooming is the offering of a product of interest at a lower price from an online retailer (69% of M-Shoppers). But focusing on the lower price of the product item has a catch because the costs of purchase on the Internet include also delivery charges so that in the bill’s total this purchase may not be less expensive. Consumers who get attracted by lower prices online tend to neglect at least in the first moments to consider the additional costs. One of the frequent reasons for abandoning a shopping cart online occurs when e-shoppers reveal the delivery surcharges as they are about to complete their purchase order. Some M-Shoppers do take this into account and declare that they prefer to showroom when the online retailer offers shipping free of charge (42%). On the other hand, main incentives for preferring to buy at the physical store, even when M-Shoppers know it’s possible to buy the product from an online retailer at an equal or lower price, were immediacy of obtaining the product and greater convenience of buying in store; aspects such as customer service and trust are secondary motives.

The five segments can be distinguished, according to the report, as (a) those that pose greater problem or threat to brick-and-mortar retailers (three segments accounting for 38% of M-Shoppers); and (b) those that are less troublesome and even offer more opportunities (two segments accounting for 62%).

The greatest threat arises from M-Shoppers who are Exploiters — they are pre-determined to buy from an online retailer and intentionally enter the brick-and-mortar store only to examine the product closely first hand before making the order online. They truly use the store just as a ‘showroom’. Attention however: this segment constitutes just 6%(!) of M-Shoppers. They are not distinctively driven to purchase online by a lower product price but by free shipping by the e-tailer — free delivery home from a local store to the customer’s home can mitigate the Exploiter’s intention to buy online.

Two segments may be described as “swinging”: they are inclined to purchase online but are not fixed on it. The Savvys (13%) are “calculating but persuadable” — they deliberately search for information and study their possibilities when about to purchase a product, and decide on their findings. The Savvys are especially “digitally-attuned”, referring to various online sources (e.g., 60% researched product information vs. 49% of all M-Shoppers) and applying digital tools more than other M-Shoppers (e.g., 47% searched for online coupons vs. 34%, also 18% paid at checkout through smartphone vs. 10% of all M-Shoppers). The key to reach and persuade them is through helpful information and attractive offers and experiences in the mobile space. The researchers see them as a currently yet small segment of shoppers but strategically important for the future. The Price-Sensitives (19%), on the other hand, tend to be more opportunistic in their shopping behaviour. They do not plan to showroom but will do so once a lower price offer comes around. They are deal-prone and price discounts is the main way to attract them. The researchers suggest that a good tactic for the store owner regarding this segment would be to give them good reasons not to pull their smartphone out of their pocket or handbag.

The most promising segment appears to be one of Experience Seekers (32%) because they are most open and appreciative of retail initiatives, special offers and events that can increase their enjoyment and enhance their shopping experience. Price is just one of the considerations, and not the most influential one. Thus, if a brick-and-mortar retailer organises special merchandise displays and events with celebrity guests, provides personal treatment and better offers to loyal customers, as well as ways of interacting with the store on their mobile device, they have good chances of winning the Experience-Seekers over the e-tailers.

Last, the Traditionalists (30%) are basically more conservative M-Shoppers who prefer to shop and buy in physical traditional stores and who make less use of technologies of their mobile devices: they prefer shopping locally (34% vs. 19% of all M-Shoppers), trust physical stores more (27% vs. 14%), expect a better store return policy (23% vs. 15%), search less for product and price information (32%-34% vs. 50%-52%), and did not showroom in the past year. They are relatively less likely to have a tablet with a data plan; their more likely usage of the smartphone is apparently for consulting with friends and family members. As the report indicates, they are the least threatening segment to retailers of physical stores.

The segment of Exploiters is relatively a little larger in the UK (9%) where they may present somewhat more trouble to retailers; overall the three more problematic segments in the UK account for 46% of M-Shoppers compared with 35% in the US and 32% in Canada. The Experience-Seekers are the more prevalent in the US (36%) while Canada is distinctive by its high share of Traditionalists (43%!).

  • There is no mention in the report of the proportion of ‘showroomers’ in each segment nor of their frequency of doing so. Thus it is not known how segments differ in their extent of showrooming except for the fact that there are no showroomers among ‘traditionalists’ while in other segments M-Shoppers showroomed. This is a peculiar shortcoming of the report.

Competition between retailers that operate brick-and-mortar stores has always existed, and in fact shoppers may visit the website of another competing traditional retailer just as they visit the website of an e-tailer operating only an online shop to check on products available and their prices. Visiting the website of a competing traditional retailer would not change essentially the competition compared to visiting the physical stores. The particular concern of retailers about exclusively online e-tailers arises because the latter do not invest in constructing physical store environments and in setting-up appealing displays of merchandise, primarily for familiar and leading brands. It looks as if e-tailers rely on shoppers to scrutinize products closely at a physical store without making an effort of their own. It is widely agreed already that medium and large retailers need to have a website (regular and mobile-supported) to accompany their physical stores, but there are issues at question hanging over selling also online — how and to what extent it should be done, for instance:

  • Allowing M-Shoppers to access the online shop of a retailer while in his store and complete their transaction there may not matter to the retail business as long as revenue is generated. However, it could upset store managers that do not get this store-associated revenue attributed to them (e.g., for their prestige as well as bonuses). It may also cause sub-employment of their staff in-store.
  • Offering products in the online shop at lower prices than at their physical stores may draw M-Shoppers from referring to an e-tailer but it would discourage them from buying in the store even further.

Therefore, retailers need to work-out carefully the relationships between their physical stores and their regular, as well as mobile, website. Patrons of the brick-and-mortar stores should be served separate special offers not available to those who buy online; they may also be offered physical gifts, rather than price discounts, that only the patrons can enjoy immediately in-store. The report mentions that Walmart launched in recent months a geo-location mobile app that can identify and suit offers specific to the store a customer visits. Geo-location apps and mobile websites accessible if and only if customers are in-store may aid in two important ways: (1) Allow purchases made through an app be assigned to the relevant store where the app was used; and (2) The app or website admits a customer-patron to a loyalty programme where she receives deals and other benefits exclusively when in-store, whether she buys through the app/website or at the store’s cashier.

There are many possible avenues of action for retailers to overcome the threat, or rather the challenge, of showrooming. They can capitalise on advantages particular to the constructed environment of a brick-and-mortar store along with interacting through various forms of behaviour assisted by mobile-devices to attract and persuade M-Shoppers to complete their purchases with them, in-store.

Ron Ventura, Ph.D. (Marketing)

Read Full Post »