Sunday, February 13, 2011

Just how much do you trust your telco?

Although not one of my favourites, I confess to owning the film ‘Minority Report’. Set a few decades in the future, there is a section of the film in which Tom Cruise walks through a shopping centre and is inundated with targeted offers to buy products and services sold in adjacent retail stores. Is this futuristic scenario really that distant? Of course in the film there are sinister eye scanners and creepy robot spiders to identify the individual instead of a near field device such as a smart phone (iPhone or Android), but the principal is the same (and lets ignore the issue of stolen identity for another discussion :)

Many Android handsets now have near field communications (NFC) technology. According to some reputable sources (http://www.bloomberg.com/news/2011-01-25/apple-plans-service-that-lets-iphone-users-pay-with-handsets.html) the 5th generation of iPhone will also include near field communications (NFC) technology, which amongst other things can allow users to pay for goods and services just like they currently do with their credit card.

Many iPhone users already buy songs and applications from iTunes, which has made it become a significant global billing platform, and provides a notable proportion of revenue for Apple (4.1% of its total quarterly earnings for Q1, see http://www.fiercemobilecontent.com/story/apples-itunes-revenues-top-11-billion-q1/2011-01-19)

If iPhone, iPad and iPod users adopt widespread use of NFC for purchase of everyday groceries and general retail goods, then iTunes could quickly curve a huge slice out of the VISA and Mastercard revenue stream.

The use of smart phone applications for communication (such as Facebook and Twitter) have already taken significant chunks out of telco’s revenues from traditional voice communication. As smart devices and apps further empower users, telcos face the greater danger of becoming a dumb pipe. In my opinion there is the opportunity for NFC to enable telco’s to develop a closer relationship with customers and act as the information conduit (rather than Google or Apple).

With varying degrees of success, telco’s currently perform a lot of data mining to understand usage patterns, household demographics, forecasting of network demand etc. Much of this analysis is marketing focused, with an objective to gain new customers, retain a customer, and/or spend more. Most importantly for data miners these marketing activities usually involve intelligently processing very large amounts of data. There are a lot of parallels with data mining performed by VISA and Mastercard, so you would think that telco’s might have the infrastructure and experience to play in the area of credit cards.

Some telcos are able to provide single billing, whereby the entire household has a single bill for multiple mobile services, wireless broadband, fixed/land telephony, cable TV etc. If a telco already has the rating system to charge for usage of high transaction telephony services, and also provide a single unified household billing platform, then incorporating the purchase of retail goods and a NFC system should not be a challenge for a telco. From my experience I’ve not seen VISA or many retail banks offer a single bill for your household purchases, across multiple individuals and products. This capability places telco’s head and shoulders above banks and credit card companies in the customer experience stakes.

Most developed countries have 3G or better mobile networks, and when combined with smart phones can easily pin-point the location of a customer. If telco’s used NFC to process and learn each customers (or household’s) purchase habits and preferences, then there is no reason why they couldn’t recommend products and offers for shopping centres or stores in your immediate vicinity in real-time. The additional revenue opportunities might even be able to cover the cost of moderate telephony usage, so customers could get a mobile plan subsidised by advertising and purchase revenue. For example, the telco would develop the trusted relationship with the customer, and many retailers could pay a commission to target specific customer segments, or individuals in the vicinity that buy similar products. Retailers wouldn’t need to implement their own loyalty cards to identify customers, they could simply get summarised information about who shops at their stores, how often, share of wallet etc from the telco company that manages the relationship with the customer. I would relish the opportunity to analysis *that* kind of data!

Granted there are a lot of challenges, but the fantasy of Minority Report might not be that unrealistic…

4 comments:

zyxo said...

Whether this will be possible I don't think there is any doubt.
But what about privacy legislation ? There is a lot of work to do by governments. In some european countries you need an opt-in before you are allowed to use customer information for direct marketing purposes, which is a good thing. It's the customer who decides.

Tim Manns said...

Hi Zyxo,

I completely agree, which is why I'm thinking it will require a single point of contact that maintains the relationship and 'approval' of the customer. The consent or 'opt-in' could be given to be Google, Apple, or a telco (whomever wins the race to use NFC for general goods), who then submits adverts and messages on behalf of retailers (for a fee of course:). I'd like to see the telco's take this on, but in all honesty I suspect Google will have the best chances. The Android OS is free, so I think it will eventually dominate the market for smart devices. I'm an iPhone fan, but I think being proprietary will work against them in the end.

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cheers
tim