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In July, O2UK launched a location-based loyalty and retention scheme offering its customers discounts and deals from 30 partners from the fashion, leisure and retail sectors. The launch builds on existing loyalty and location-marketing initiatives from O2, which is among the most advanced carriers in the world in terms of location.
August 17, 2011
While location used to be viewed as the carrier asset most ripe for exploitation, the majority of mobile operators have done little to successfully harness it. Over the top players have proven themselves the more adept providers of appealing applications that have exploited data on subscriber whereabouts, while the carriers have sat back, focussed on other areas of their business.
O2UK is one of the more proactive operators in its approach to location, keen to use it to add value to its media business, which looks to create connections between brands and the carrier’s customer base. And according to O2’s director of new business development, Tim Sefton, services such as its You Are Here location-based marketing solution, launched in 2010, and a new offer called Priority Moments, can deliver benefits in terms of new revenue streams as well as customer retention and acquisition.
Priority Moments, launched in July, is an extension of the carrier’s existing Priority loyalty scheme. Over the past two years, O2 has become one of the UK’s largest vendors of tickets to popular music events, using its sponsorship of a stable of music venues—including the 23,000 capacity O2 Arena in East London—as a means of delivering discounts and exclusivity to its network customers. The firm has sold 600,000 tickets in 24 months and Priority Moments sees it moving into a number of other environments, including fashion, food and high street retail.
While Sefton, like most operator executives, stresses the superiority of network-based location solutions, the flagship, smartphone incarnation of Priority Moments harnesses handset-based GPS. (There is a WAP-based version of the service for non-smartphone users, based on geo-fencing technology from PlaceCast, as well.) When the subscriber fires up the app, they see a list of offers from O2’s partners, ranked by proximity. The offers might range from discounts on books to a free class of wine at an Italian restaurant chain. The user needs only to show the offer on the screen of their handset in order to redeem it at the partner’s outlet.
The programme hit the market with 30 partners, among them high-end department store Harvey Nichols, newsagent and bookseller WHSmith, restaurant chain Zizzi and the Odeon cinema network. Sefton says that some of the partners were existing customers of the firm’s media arm while others were approached for the first time with the new offering. “The beauty of Priority Moments is that it’s enabling us to build out the client base for our O2 Media business as well,” he says.
Sefton plays his commercial cards close to his chest, unwilling to reveal detail about the specifics of the relationship between O2 and the Priority Moments partners. One of the key questions arising from the launch was whether or not there is any cost to the partners for involvement in the scheme—outside of the discounts that they offer—or whether O2 is in any way subsidising those discounts. It’s conceivable that both may be true, as Sefton says each deal is unique.
“The commercial models are confidential but at the high level, I can tell you that the partners are investing in the offer and we’re investing in the promotion of Priority Moments and creating that channel to our customers,” he says. “We’re exchanging reach to our customer base in exchange for them investing in exclusive offers for our customers.”
It’s certainly clear that the involvement of the partners that O2 paraded at the launch event is more than an idle dalliance. Sefton says that the top tier of partners have committed to involvement in the project for a minimum period of three years. The partners have to undertake to provide offers that are exclusively available to O2 customers, and those offers have to be the best that the partners are making available across all of their marketing channels.
Exclusivity is crucial with any scheme of this nature, especially if, as O2 clearly believes, its competitors will bring similar services to market in the wake of the Priority Moments launch. And that exclusivity works both ways. O2 has committed to Odeon as the only cinema partner for the scheme “for the foreseeable future,” Sefton says.
While carriers are pursuing exclusivity, however, they are also being forced into partnership. For any brand with products, marketing messages or services to sell to the end user, reach is the most important metric. In a market with five carriers and a healthy mass market MVNO, for example, one operator partner is only going to deliver a portion of the potential subscriber base the brand is chasing.
In June this year, the leading UK operators announced a collaboration to this precise end—but does Sefton not have concerns that the necessity for collaboration might threaten the very differentiation that a project like Priority Moments is designed to enable?
“The spin-off benefits around increasing the potential client base for O2 media will be great news for the joint venture we’ve got with Vodafone and Everything Everywhere,” he says. “It’s all about building relationships between mobile operators and brands so that they’re placing more of their advertising on mobile. We’re setting up the infrastructure and the capability for brands to do that. But on top of that there’s nothing to stop any of us competing on how we can create more differentiation for our respective customer bases.”
O2 does not want to give any indication of how it expects the number of partners in the programme to grow, but Sefton describes the 30-strong stable with which the firm went to market as “a small start”. New partners can be brought aboard within a few days of expressing interest, he says, and he expects the programme to attract new partners at a decent rate. “As soon as we start advertising, as soon as the service breaks and we see the success of the various partners in the scheme, I think it’s going to be self-fulfilling, with others wanting to join. It’s going to get significantly bigger.”
If mobile operators are troubled by new players and platforms offering competitive products then it is interesting that two of O2’s Priority Moments launch partners, Odeon and WHSmith face similar issues. Both have products that are increasingly being consumed on other platforms, and provided by other players. And both had speakers at the launch event who said they really need to drive more footfall into their premises. “We need to get people coming back into cinemas,” said the gentleman from Odeon. “We’ve got to get people into these stores,” said his counterpart from WHSmith.
And footfall is probably going to be the first parameter by which the partners judge the success of their involvement in the scheme. O2 will also be supplying its partners with numbers around downloads of the Priority Moments app and levels of engagement, as a backup proof of performance.
For the operator, levels of engagement are everything. “We have a number of KPIs for this, but first and foremost it’s about engagement,” says Sefton. “It’s about the number of people that are using this app because this is about retention. The more customers using these products and services the better because that creates the relationship that we can then build on to sell them more products and services.”
So how many users does he expect to sign up? “Well we already have one million customers or more on our Priority ticketing programme and we expect to exceed that with Priority Moments. Clearly we’re talking about millions of users. We also need to understand the effects this proposition might have in enabling us to acquire customers from other networks. Because we’re seeing that the better our retention offers are, the more they attract customers from other networks that are not offering the same benefits.”
O2 claims to have the highest loyalty and the lowest churn in the UK industry. One of the metrics the firm uses to assess its appeal to potential customers is brand consideration. Customers of other networks are quizzed as to which network they would choose if they were to churn. O2 says that its existing Priority programme has increased the frequency of its selection as the first choice operator in this scenario by ten per cent over the past two years.
Whether O2 will continue to lead in this regard will depend as much on the strategies of its competitors as its own plays. And while the use of location for these kinds of schemes is still relatively restricted (although Sefton points out that it is more advanced in the USA and some Asian markets than it is in Europe) it seems likely that other carriers will follow suit; competing not only with one another but also with platform providers like Google and Apple.
“I think we’re in the vanguard of something that’s going to gather momentum,” Sefton says. “Obviously operators generally have lost some ground to the smartphone players. But I don’t think the game’s over. I think this is the beginnings of quite a significant push by the operators to reclaim some of the value in this world.”
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