UNC Kenan-Flagler Business School

Shaping Leaders, Driving Results

UNC Kenan-Flagler Business School

ROI: RESEARCH INSIGHTS FROM KENAN-FLAGLER


Give the People What They Want

4/1/2010

Driving adoption of wireless Web services in the United States

Cell phones are ubiquitous but could be more useful to consumers — and more profitable for wireless service providers.

UNC Kenan-Flagler professors, a husband-and-wife team from different business disciplines, point to the business opportunities for wireless Web services.

Arvind Malhotra, associate professor of strategy and entrepreneurship, and Claudia Kubowicz Malhotra, adjunct assistant professor of marketing, examine how relevancy-based services could drive the use of wireless Web services.

They explored how three factors related to the use of mobile (wireless) Web services: perceived utility, ease of use with mobile devices and pricing. They collected data from in-field interviews with users of wireless Web services in Finland, Sweden and Poland; surveyed executives and students to reach the 25-plus and 18-24 age groups; and conducted a focus group interview with potential U.S. users. They focused on the category of wireless Web services that most appealed to customers and their pricing preferences.

Sushi

Wireless Web technology could become as central to consumers’ everyday lives as PCs and cell phones. Yet even as the worldwide subscriber base is increasing rapidly, the average revenue per user is decreasing. To turn that trend around, wireless carriers need to drive consumers toward wireless data services that produce a recurring revenue stream rather than software applications that are a one-time revenue source.

For example, buying an application that gives Starbucks locations in your area and another that tells you the daily specials are both one-time revenue sources. Paying a monthly fee for a service that tells you, based on where you are at that very moment, the location of the closest Starbucks and prints out a $1-off coupon for a newdrink is a recurring revenue stream. If you give Starbucks permission, the firm could even send you an alert with a coupon that encourages you to try a new menu item based on what you have liked at Starbucks in the past — and when you are within the vicinity of one of its stores.

“The average revenue per user needs to substantially increase over time, but it hasn’t,” Arvind Malhotra said. “In this business, recurring revenue streams, rather than one-time revenue, are important to support the investment in infrastructure.”

For consumers to pay for a data service, it must be relevant, which means it satisfies:

  • Consumers' anticipated needs
  • In real-time
  • Based on their location

The technology exists to provide individualized marketing valued by consumers. But the business model to make individualized marketing successful is different from traditional competitive models. It must be collaborative. Technology service providers and customer service providers, such as restaurants and retailers, must work together to develop relevant services by anticipating consumers’ needs based on their location and past consumption patterns.

Another challenge is that businesses run the risk of alienating customers by crossing the line between providing helpful services and intruding.

“For advertising and service companies, the best part of mobile wireless is that it is a very addressable device — each person has a unique cell phone number,” Malhotra said. “At the same time, it is a very personal device. You feel violated if you are walking along and suddenly you get an instant message on your phone that says, ‘Arv, come in and have a coffee.’ That’s a pure violation of privacy, unless you have asked for it and the advertiser has trained you to expect it. It’s a greater violation than when I am browsing the Web on my computer and get a pop-up ad. That is a nuisance, but I don’t feel intruded on. It’s not personal.”

Companies must get consumers to reveal their preferences without intruding on their privacy, he said. “The only way they’ll reveal their preferences is if you prove informational value to them.”

Malhotra expects the technology and business model to crystallize in the next few years. And in a tight economy, a $1 coupon means a lot to the consumer, perhaps enough to entice the consumer in to buy. Even with losing $1 from the coupon, the business might make $2 if the consumer comes into the store and makes a purchase. In a good economy, though, $1 off is unlikely to motivate anyone to make an impulse buy. “If we don’t do this in a tough economy, we’ll never do it,” he said.

What mobile device managers need to do

Service providers could capitalize on anticipating consumer needs through relevancy-based services. For instance, frequent business travelers might want to receive information about hotels and restaurants in the cities where they’re headed. They could make reservations and have money deducted from their digital wallets.“We can get to the point where, instead of thinking of mass markets, we think of many such niche markets,” Malhotra said. “And there are a lot of those, so serving the specific needs of such markets can increase the revenue of service providers. The potential can be realized only by thinking beyond location-based services to a relevancy-based approach to services.”

The researchers have recommendations for mobile service managers

  • “When providers offer service in real time at a specific location based on anticipated consumer needs — relevancy-based services — mobile utility will be much higher for consumers,” said Kubowicz Malhotra
  • Driving adoption requires a pull-based push approach. Consumers need to be educated and encouraged to express their tastes/preferences/needs to services providers. In turn, service providers will deliver information to consumers at the right time (need time vs. real time) and right location.
  • The delivery of relevancy-based services requires gaining consumers’ trust. Service providers must be the trusted party holders of consumer information.
  • Service providers could bundle several services together. They could offer the basic services (ones that are already a commodity) as a bundle for a lower flat fee. Simultaneously, they could offer services that are perceived as most useful at a higher flat-fee bundle.
  • “As part of a dual-revenue strategy — consumer subscription and advertising — mobile service providers can provide mobile advertising, such as trial coupons, as a relevancy based service,” said Kubowicz Malhotra, “so that advertising is based on consumers’ location and expressed preference.”
  • Service providers must invest in advanced analytics systems to process consumer preference information. These systems will digest consumers’ previous locations and consumption patterns to anticipate their needs and drive the design and delivery of services that are relevant to customers.

Arvind Malhotra is the Thomas V. and Janet R. Lewis Scholar and Associate Professor of Strategy and Entrepreneurship.

Claudia Kubowicz Malhotra is an Adjunct Assistant Professor of Marketing.