What Can Mobile Payment Marketers Learn from Coffee Machines?

Five Lessons for Launching Mobile Payment Products

MOBILE PAYMENTS AS A NEW CATEGORY REPRESENTS QUITE A CONUNDRUM.

Blending financial services with software and technology that enable consumers to send funds on-the-spot, marketers and consumers alike are not sure how to move forward with the capability.

While mobile payment solutions are not expensive, there are several barriers to adoption that differ by maturity of market:

• Entrenched behaviors regarding payment methods - whether it is cash, check, or credit card - that would need to change. Existing solutions are "good enough."
• Concerns about security - which may or may not be rational.
• Mobile devices haven't been enabled widely until recently.
• Merchants who are wary to invest in the needed changes without a stronger promise of ROI.
• Perhaps most importantly, a lot of very big companies stand to lose or gain a lot, depending on how well they can predict the future.

It is also worth mentioning that despite the high level of technology behind mobile payments, it lends to becoming a commodity category very quickly.

It is very possible that there will be lots of brands which consumers will not see much differently, struggling to find a unique selling point that makes their way of exchanging money better than competitors' and better than the status quo.

Mobile payments is one of the biggest pan-sector movements in history, and as such, there are many dynamics that come into play as marketers try to make sense of how to drive innovations forward. The Vantis specialism of Ipsos InnoQuest, which studies business models and disruptive innovation across a wide array of industry sectors, has experience that sits in the center of this combination:

Looking at some past categories in which we have worked (see box below), there are some lessons that can be exported from other changing categories in their nascence.

For the purposes of illustrating the importance of cross-category learning for driving breakthrough innovations, we looked at just one of many categories on which we have worked in the past that has some interesting transference: single-serve coffee makers. Single serve has experienced meteoric growth in the past 7 years in several markets - after 5-10 years of struggling at growth.

On the surface this may seem an odd comparison but this emerging sub-category faced many of the same dilemmas as mobile payments, the main one being all parties figuring bets on if and when this will become the primary way it works in the future, while waiting for consumers to engage. A side-by-side comparison of the single-serve coffee maker innovation to mobile payments revealed some startling similarities - and some great lessons on what marketers should - and should not do - when promoting this emerging category.

FIVE LESSONS FOR LAUNCHING MOBILE PAYMENT PRODUCTS.

#1: HABITUATE AT WORK

The prevalence of single-serve coffee makers in the work place helped drive the changes in attitude and behavior that was needed for consumers to adopt this new technology.

With regular usage of the coffee makers at work, consumers became accustomed to how they worked and recognized the ease and convenience they offered. Purchases of the coffee machines for in-home use soon followed. Marketers of mobile payment systems could use the same business model - for example, integrate mobile payment systems into corporations that enable employees to process business expenses or exchange petty cash. Establishing the benefits of mobile payments in the workplace has good potential for driving adoption for personal use.

#2: BEWARE OF BETTING AGAINST CONTENT

A turning point for Keurig, makers of the successful Keurig Brewers and K-Cups in the US, was its acquisition by Green Mountain Coffee Roasters.

Green Mountain was and is an established provider of high-quality coffee that offers many varietals of coffee. Green Mountain was able to give the Keurig system a critical mass of content in terms of the types and brands of coffee it could offer.

In the case of mobile payments content is money, and it is already accumulated in one place, at least in developed markets. Because banks have the money, or critical mass, it's tough to bet against them. This has implications for branded vs. white-branded strategies for non-bank players - decisions about which strategy to follow will impact all the other players in the ecosystem.

#3: THE `NEW NORMAL WAY' MAY STILL BE A LONG TIME AWAY

Given the significant growth in single-serve coffee makers in the consumer market, marketers might expect it to become the "new normal" for in-home coffee preparation.

It's possible - but it is not yet the norm today and if it does become the norm it will certainly take some time. The same expectation is true for mobile payments, especially given barriers it might encounter in terms of consumer learning curves, trust concerns, merchant adoption, and sometimes conflicting interests of the industries that stand to gain or lose.

Adding value to payment methods is more difficult to achieve than adding value to the coffee brewing category. For any given marketer, change and product ROI is probably only possible in "pockets" for mobile payments: a particular type of purchase occasion or financial exchange, a particular type of consumer, a particular merchant, etc. In an investment strategy sense, the winners will have diversified their efforts against the right pockets over time. There likely won't be one (or two or three) killer apps that drive a new normal.

#4: DESIGN WILL MATTER MORE THAN EXPECTED

Asking consumers why they purchased a single-serve coffee brewing machine, a primary reason is "it looks great in my kitchen."

Sometimes making a device or solution that does something different is not enough. To a surprising degree in single serve, it had to look good, feel good, and have some badge value.

The mobile payments solutions that excel will look and feel different from anything that existed before them and will be noteworthy for their sheer aesthetic and/or experiential value.

The Starbucks experience with Square (where Starbucks partnered with the Square Wallet to enable their customers to pay for their coffee with Square's mobile payment app) and some of the geo-location elements (and simplicity) of PayPal's solutions are exemplars of this.

They are fundamentally different commercial exchanges and emphasize the primacy of improving the interface between spender and merchant.

#5: DON'T OVER-PROMOTE TOO EARLY

Early entrants into the single-serve coffee space were launched by big brands with lots of marketing resources.

They spent very aggressively on promotion in the early days, and it really did not pay back. The reason is that the other lessons above were not fully comprehended at the time, compounded by the difficulty in asking consumers to change an entrenched behavior. It is hard to induce behavior change via promotion. Being the first to spend a lot in these situations is very risky. In the formative years of the mobile payments industry, it will likely be the big banks that will have an edge in achieving ROI against large marketing expenditures, because they hold the `content'. But even banks need to beware of spending ahead of the curve. Is there a chance all this Coin buzz is just helping better solutions that are down the road? Coin is probably over promoting its ROI. (Which will be great if they get bought!)

SUMMING UP...

Accelerating growth in mobile payments

In industries in transformative change, so well exemplified by mobile payments' impact on a variety of sectors, Ipsos InnoQuest finds it useful to change the industry metaphor to look for transferable learnings that can accelerate growth. We are pleased to offer our clients a variety of ways to do this given our experience watching innovation in a very diverse array of sectors.