Friday, December 22, 2006

Why Smartphones Matter

It may seem that I’m obsessed with smartphones, but I’m truly not. I was about to drop the topic when my wife came home yesterday from meeting a new client who turned out to be—you guessed it—developing smartphone content.

So now I’m thinking about it again. Just what makes me feel smartphones are so important? In part, it’s the “third screen” notion I wrote about yesterday: the idea that the smartphone really has the potential to be as important a device as a TV or personal computer. This means there are still opportunities to develop applications that will make some people a lot of money and enrich the lives of many others. Naturally, this gets my attention.

But there’s more to it. When I really think about it, what I find intriguing about smartphones is their potential to break down the barriers that have traditionally separated marketers from their prey…er, I mean, their customers. In conventional consumer marketing, companies knew basically nothing about individual customers. Even in traditional database marketing, the only information readily available about individuals was what you sent them and what they had purchased from you. This gives a very narrow, episodic view of the customer’s life. (Yes you could enhance a file with various demographic and some financial information, but it was all still pretty general and often unreliable.) On the Web, you might know something about browsing behavior but typically just within your own Web site. A search engine or ISP might have a frighteningly complete view of personal behavior, but privacy rules and business interests have so far prevented that information from being shared with marketers.

The smartphone has three characteristics that mark a radical change in the data available to marketers: real-time location, interaction capabilities, and always-on.

- Always-on is critical because it means the customer is always accessible (unless they choose not to be) so it’s possible to initiate interactions without waiting for that initial customer contact. Obviously this has to be done in a non-intrusive manner; I’ll get to that in a minute.

- Location provides what we at Client X Client refer to as “context”: an understanding of where the customer is physically, which tells a great deal about her likely situation at that moment: shopping or working or driving or home; in-town or on a business trip or on vacation; weather and traffic conditions; advertisements she’s likely to have seen recently; out partying or working late. As that last example suggests, time of day and day of week in combination with location provide even more insight.

- Interaction capabilities add more than the obvious advantage of giving you a way to reach the customer or for her to reach out to you. They enable other types of data capture such as reading a bar code by capturing it in the phone’s camera, displaying information on the camera’s screen for someone else to capture, or exchanging codes via SMS messages. Plus of course there are all kinds of creative activities, such as coordination of group events and viewing downloaded content, that smartphone communication makes possible.

I hope right now you’re saying to yourself, “Hang on there, cowboy—you’re not planning to track every movement of every customer at every moment, are you? Even if the phone companies would share that with you, it would be one heck of a privacy invasion.” Indeed it would, and no I’m not.

But there are plenty of situations where the customer would welcome your involvement, or even be happy to have you lurking in the background ready to help. The obvious example is automotive telematics services like General Motors OnStar, which call your car’s built-in cell phone when an airbag deploys to ask if you need help. There are many other, less dire, situations where consumers might also like to hear from businesses or simply have the business be aware of their location.

Yes, these could be Starbucks coupons as you're walking down the street. I'm as sick of that example as you are, but am required by law to mention it. More creatively, imagine a restaurant location service that automatically lists the restaurants nearest to your current location when you call. That won’t always be the question you want answered, but it will often reduce typing on those tiny little keys. Location awareness would also simplify finding radio stations, gas stations and public restrooms. Maybe a cab-calling service could automatically connect you with whichever company can reach your current location the soonest, or let you balance speed against price. How about simplifying airline check-in by doing it via phone—the boarding pass could be displayed on the screen instead of printed, which might actually be more secure than the current system. Could you check into a hotel by smartphone and have the phone act as your room key?

I’m not so sure about that last one. Hotels might want human contact during check-in to cement relationships with their customers. Such considerations are important when deciding which services to deploy. But I’m already seeing self-service check-in at hotels, so apparently some have already decided the human contact is expendable.

The applications I've suggested are technically possible today and may already exist. So much the better. The point is, there are many situations where a smartphone could provide real value to customers, either by speeding access to useful information or by streamlining an operational business process. These are not intrusions that people will find annoying, but benefits that they might actually pay for—even though in many cases businesses would gladly bear the cost. The key to all this, of course, is informed consent.

What it all comes down to is the customer experience. (You saw that coming, didn’t you?) Smartphones are intriguing because they open up new types of customer experiences, including some significant improvements over existing models. In that sense, they represent a huge opportunitiy.

OK, maybe I am a little bit obsessed.

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