Restaurants stepping up mobile investments

Sept. 10, 2013

Quick service restaurant operators were generally slow to implement social media marketing. But with mobile growing even faster as a technology, the sector may not have the luxury of waiting as long to figure out the mobile platform.

The pressure is coming largely from Millennials, digital natives who are still adopting smartphones at a high rate. Smartphone penetration among U.S. teens grew by 45 percent last year, according to Nielsen, and Millennials are using those devices not only for chatting and playing games, but also to become savvy consumers.

Restaurants have stepped up their mobile investments accordingly. Juniper Research found that retailers plan to spend $55 billion annually on mobile marketing by 2015, nearly double the $28 billion level expected this year.

And according to a recent MillennialMedia report, restaurant brands are currently using promotions as part of their advertising campaigns nearly five times as often as other industries. Brands from Domino's to Dunkin' have admitted an increased focus and budget on mobile initiatives within the coming year.

Where exactly is this money being spent?

Everywhere, basically. Mobile initiatives can include payments and promotions, loyalty and locators, and everything in between.

Targeted offers and speed of service

According to the MillennialMedia report, as more restaurants jump into the mobile marketing space, their biggest goal right now is to increase foot traffic (81 percent). Targeted marketing initiatives have been tested at numerous concepts, including Dairy Queen and McDonald's, to woo guests and get them to return.

Brands are also increasing their mobile promotion/couponing presence to drive traffic, even using mobile users' geolocations to offer them a spontaneous deal if they're nearby.

Dunkin' Donuts launched a new promotion last week, for example, offering guests free Munchkins if they use the brand's mobile app. Dunkin's My Offers tab on the app pushes exclusive, geotargeted regional discounts for its signature items.

Speed of service benefits

Once such targeted campaigns drive guests in the door, mobile is then being used to expedite service time, a major differentiator in the cutthroat restaurant space. According to James Wester, research director, Payments at IDC, mobile-enabled speed is valuable not only to customers, but also to restaurants that are built around a "fast service" promise.

"There are a lot of expected benefits to leveraging mobile as a customer channel, many of which may or may not actually come to fruition," he said. "But one benefit that is available right now is in getting rid of lines so customers don't have to stand around and wait. With mobile applications, customers can place orders or reserve tables without having to be in a merchant location. It's similar to calling ahead but it doesn't require that a restaurant or retailer dedicate a person to answering the phone. Those applications are already being deployed successfully."

For example, Dairy Queen's pilot, with partner Mozido LLC, supports payments and promotion redemption. That allows customers to order directly and avoid standing in line. Such an application not only makes ordering easier, but also strengthens the customer's relationship with the merchant, said Tim Hawley, vice president of Marketing and Communications for American Dairy Queen.

Guest interaction, loyalty

But as users know, mobile is about much more than speed and promotions. Interactive features have grown rapidly and now make up about 28 percent of mobile budgets, according to MillennialMedia.

Brands such as Rita's, which introduced a game in April, Chuck E. Cheese, with its augmented reality photo app feature, and A&W, with its burping mascot, have inspired customers to download a restaurant-specific app because of their interactive features.

Krispy Kreme's Hot Now app provides an interactive experience with its loyal customers, alerting them whenever a fresh batch of doughnuts is available at a nearby location. The app has driven more than 97 million searches for locations in two years.

Loyalty programs are also going mobile, adding another layer of interactivity. Old Chicago is in the test phase with a new text-based loyalty program.The brand could also explore other mobile features in the near future, such as payments, but is taking it slow because apps can "easily get too crowded," according to Ben Brown, vice president of Loyalty.

Rita's recently added the Punchh mobile app to mark the first day of spring. Customers receive a mobile "punch" each time they visit, en route to a free Ice.

And Pinkberry CEO Ron Graves said the brand's mobile app is now the center of its loyalty program, and provides functionality for fans.

"Launching the Pinkberry app was just the beginning of making a more primary way to interact and communicate with our customers," he said. "The key to unlocking mobile's potential is for industry players to focus on emerging expectations of our customers. This means developing mobile interactions that meet consumer demands for utility, speed and convenience."

Payments growth

While mobile couponing and interactivity are growing priorities right now, mobile payments platforms are also gaining in popularity in the restaurant space, with many of them being rolled into new apps (such as Dunkin's). The mobile payments industry is expected to jump to more than $62 billion by 2016.

A recent eMarketer report says the payment component is a major opportunity for restaurants/retailers, noting: "Mobile payments offer unique opportunities for retailers to connect with and capture information from consumers throughout the purchase funnel, (including) leveraging geo-targeting around a restaurant location, offering mobile coupons that can be saved to a mobile wallet, and capturing POS data."

Most restaurant chains have just started to scratch the surface on payments. For example, Wendy's CMO Craig Bahner said earlier this year that the chain is testing mobile payments.

"If our consumers are paying through their smartphones, we need to let them," he said.

Tim Hortons unveiled an m-payment feature last year, claiming to be the first company in Canada to do so, and McDonald's, Subway, Burger King and others have at least piloted a payments feature.

Although the dizzying pace of mobile technology may be hard to keep up with, Graves said it's necessary now to try, and that a solid mobile presence — one that adds to the guest experience — is how brands will maintain relevancy.

"Customers are developing expectations and habits on how they want to interact with brands. Our customers rely on mobile technology to make their lives easier," he said.

Read more about restaurants.

Photo provided by philcampbell.

Topics: Mobile Marketing , Mobile Payments , Restaurants

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