Got the message?

• Article 2 of 6
• Database Marketing, December 2002
• View a PDF of the original article ~ 1.2MB

Page 1 | Page 2 | Page 3 | All 3 Pages

SMS messaging was the surprise hit among consumers of the first generation of digital mobile phones. No one expected the ability to send short messages of 160 characters would become almost more popular with phone users than making calls, with 186 billion messages being sent each year and 90% penetration of the market. Marketers were not slow to notice this trend and began integrating SMS messaging with traditional channels as part of their campaigns, both as relationship tools and for prospecting. As the next generation of phones with always-on Internet access and multimedia messaging emerges, has SMS yet found its niche and what is its future?

For marketers using the technology, the benefits of SMS are clear. “We've been working on SMS marketing for three years,” says John Farmer, director of SMS marketing specialist Carbon Partners. “SMS brings interactivity to a lot of other elements and provides a target audience with an instant response mechanism.”

Pamir Gelenbe, co-founder and director of corporate business development of mobile marketing firm Flytxt, argues that messaging is a lot more effective than direct mail since messages do get read when they are received and it costs one-sixth to one-seventh the price.

No wonder it is so popular now. As many as 83% of media companies are using SMS are part of their brand awareness and marketing campaigns, according to a survey by Benchmark Research, a UK-based market research firm. Many have used it as a relationship tool, with more than 40% having tried to run SMS quizzes; sports updates and voting have proven popular in 30% and 23% of cases.

Broadcasters GMTV and Channel 5 are two such users. Nog Sawdon, head of interactive services at GMTV, says that the company is increasingly moving towards SMS as a replacement for paper-based services, including competitions. “It's a good brand enhancement and I have more belief in it than interactive TV.” In contrast, 5 News invites viewers to comment on stories by text message, the results of which it includes in the programme. The company then asks contributors if they want to receive offers and further information via SMS so it can build up an opt-in database of mobile users.

“SMS provides us with a cost-effective, highly-targeted method of communicating with our audience in new ways,” says Adrian Monck, managing editor at 5 News. “Over the next 12 months, we’re looking to develop our mobile marketing strategy since we believe there are excellent opportunities for one-to-one interaction with our viewers using mobile technology. In comparison to personal email addresses, which are changed on average once a year, mobile phone numbers are currently retained for at least three years.” He is very confident that SMS will prove to be a valuable marketing tool for 5 news that will allow it to increase the strength of its brand and extend its relationship with its audience.

Apart from the huge market penetration of SMS and its ability to provide prospects with a way to reply instantly to a campaign, the high response rates from SMS campaigns are making it popular with marketers. Gary Corbett, managing director of Opera Telecom, says that the response rate is usually five times greater than that of a direct mail campaign, while Carbon Partners' Farmer says that a typical campaign will get a double-digit response rate, as long as the offer and data are good. And the chances of that are lot better than they were even just a year ago, with both lists and in-house data far better tailored to the SMS market.

“Access to good data is definitely improving a lot,” he argues. “Going back a year, you couldn't get information for all the right demographic slots and it was pretty poor. A lot of it was opt-in by default – the prospects had opted in for information from other sources but no mobile data was collected. Now you can get quality data that's been acquired in the right way and checked off by a third party.”

Corbett agrees that data has improved, particularly as companies have improved their own data acquisition. “There's been a big change in the last year and a half as people have realised the value of SMS as a medium. Getting mobile phone numbers has become a part of data collecting.”

What is important with all these lists is that they are all opt-in. Sending broadcast messages to people who have not opted for them is almost universally looked down upon by other marketers. Icstis (Independent Committee for the Supervision of Standards of Telephone Information Services), an independent watchdog that supervises premium rate telephone information and entertainment services, fined marketer MobyMonkey £50,000 in August after receiving 200 complaints over a message for a premium rate phone line that some people had received 40 times in one day or whose children had received them. Icstis director George Kidd said the fine reflected the “serious consumer harm caused by the service and its promotion, and will act as a warning to the industry.”

Flytxt’s Pamir Gelenbe says that return and loyalty are the areas where SMS is being used most powerfully. “It should be much more for retention than creating contacts. Mobile is fairly personal and not the best medium for acquisition.”

What many users have learnt from experience is that applying strategies from other channels to an SMS campaign almost always backfires. Farmer says that SMS campaigns should be thought of as “like the start of a relationship with a new boyfriend or girlfriend. You don't rush headlong into things. You want something that is going to be of long term value and you have to decide if that's something you want to do.” A mobile phone is something very personal to its user and should be treated with respect by marketers, he argues.

Ben Johnson, managing director of Satsuma Solutions, a technology company that provides consultancy services for mobile and Internet campaigns, says that SMS needs to be used cleverly and needs to be targeted accurately to work. “The quality of lists is key. If you are going to target cold, it’s far more preferable to do it with an opt-in list where people have chosen to receive messages. Most [rental] lists are still variable though so most of our clients are working with their own data still.”

“At the moment, it’s consumer pull rather than push,” believes Will Brown, CTO of Telecom One, which provides the infrastructure for mobile services and marketing campaigns. Rather than initiating contact with a prospect via SMS, most successful campaigns use other channels to advertise the SMS channel so that the prospects initiate contact themselves.

This tactic has gained more ground with the advent of “shortcodes” - special four-, five- or six-digit numbers. Each mobile network operator controls its own shortcodes, and only relatively recently have operators realised that it makes sense to co-operate and offer shortcodes that work across all networks. The availability of such common shortcodes was a breakthrough, says the CEO of Flytxt Lars Becker, since shortcodes are far easier to remember when flashed up on the screen, displayed on billboards and printed in magazines.

The operators' decision to co-operate in order to expand the market is part of a broader trend, observes Katrina Bond of Analysys, a telecoms consultancy. Faced with a choice between protecting their margins and allowing a new medium to emerge, operators have always chosen the first, she claims. WAP failed in part because operators were reluctant to share revenue with content providers. But having learnt their lesson, operators are changing their tune. In France, Orange has even gone so far as to publish a rate card for text-message revenue-sharing, a degree of transparency that would once have been unthinkable. As a result, an SMS campaign can pay for itself or even generate revenue through the use of premium rate response numbers.

SMS is not the only mobile messaging technology available now. Multimedia Messaging Service (MMS) and Extended Messaging Service (EMS) are both competitors to supersede SMS as the messaging system of choice. Both offer graphics capabilities, with EMS providing basic logos and pictures and MMS providing photo support. The latter can also carry sound and potentially video on faster GPRS (and in the future 3G) connections, although the handsets to send and receive messages are not yet available. Mobile network operators are currently pushing the photo messaging aspects of MMS strongly, providing it on many entry-level phones and setting up special tariffs for MMS messages.

Analysis firm Frost & Sullivan predicts the eventual triumph of MMS over both EMS and SMS. It foresees continued growth of SMS into 2004, after which it will level off, with revenues declining as MMS rises in popularity approximately 900% between 2004 and 2007.

But so far, network operators have failed to have the epiphany they had with SMS. Benchmark Research’s survey showed that while SMS is popular with marketers, 31% believe the costs associated with MMS are prohibitive and will stunt the growth of the market. The networks have also used slightly incompatible versions of MMS, and have not yet implemented gateways between their networks - as they did with SMS - to enable messages to cross network boundaries. It will be Spring 2003 at least before there are such gateways.

“There are a lot of problems for the widespread adoption of MMS,” observes Opera Telecom’s Corbett. “Because of the pricing, lack of handset and operator interoperability, the difficulty for user setup on the handset, it will be at least a year before it is a mass market and three years before there is a 30% penetration of MMS-capable phones.”

Corbett argues that since it was the youth market that made SMS a success, network operators need to make concessions to that market again to get it to take off. “If the network and the handset manufacturers are serious about introducing MMS as a useable technology, they need to adopt a two-pronged mass-market approach to get MMS-enabled handsets out into the youth market along with an affordable pricing structure that encourages the use of MMS.”

Ben Johnson of Satsuma also points out the main issue that MMS faces that SMS does not: the recipient pays for the download as well as the sender. In the US, where recipients as well as potentially callers have to pay for mobile phone calls, take-up of handsets has been notoriously weak compared to other countries’. The same could happen to MMS and for the same reasons.

“Operators planning MMS deployments are facing a big question,” agrees Ian Wood, CTO of Empower Interactive. “Should they bill per message or should they bill by volume? Following that, there will be other questions to answer: How will they make their billing work for content providers? How will they accommodate the value-added services that are going to drive mobile messaging? How will they bill prepaid and post-paid customers for premium and reverse-billed services? How will they settle premium rate services with other operators?” While it is important for operators to establish MMS services quickly, adds Wood, the services will take some time to mature and become useful, stable and user-friendly enough for the majority of people – and marketers - to enjoy.

Satsuma’s Johnson advises trialling MMS services with a small target market now, “just to learn the lessons”. The data cleansing involved in creating an SMS opt-in database will have to be repeated again for an MMS database with even greater rigour – the incompatibilities of networks, the differences between handsets plus the fact that unlike SMS messages, not all handsets will be able to understand MMS messages, mean that without an opt-in with details of network provider and handset, an MMS campaign will not even be technically possible.

While the extra capabilities of MMS will look tempting to many, the infancy of the market and its as-yet unknown popularity mean it is too early for any except the truly cutting edge with highly targeted lists to be able to implement an MMS campaign. However, by learning the necessary lessons now and by building on the knowledge acquired in using SMS as a marketing tool, companies will be ready for MMS, if and when it ever takes off.

Page 1 | Page 2 | Page 3 | All 3 Pages