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Direct Response Marketing

Is it Hip to Be a 2-D Square?

1 Jan, 2012 By: Nicole Urso Reed Response

Mobile commerce code-scanning takes shape in DR marketing.

Direct response marketers tend to pioneer marketing technology, especially when it is cost-effective and measurable. QR codes, or quick response codes, are just that. The two-dimensional square image is an open-source technology that is free to use, simple to create and capable of tracking. On paper they’re great — literally. The most common place to find a QR code is on printed materials, such as magazine ads and direct mail. Consumers scan the code using a smartphone and connect to anything from a simple text message to a dedicated microsite with coupons, sweepstakes, recipes, product upsells, or other programmed content.

“QR codes are a direct link from print to a consumer interaction,” says John Gagliardi, account executive at The Ace Group, a New York-based marketing agency specializing in QR codes. “They instantly bring the consumer to the specific mobile engagement developed for the immediate call-to-action.”

These tangible URLs bridge the real world to interactive media, potentially closing the loop to a multi-channel marketing campaign. With smartphone adoption growing exponentially in the U.S. — Nielsen estimates that at least 40 percent of mobile users are smartphone users — Gagliardi believes that mobile devices are far more valuable to him than desktop computers and mailboxes.

“The mobile engagement provides previously unavailable information about what people are interested in,” he says. “We can’t track the page number of a catalog a consumer stops at before it is thrown in the trash. We can track that page number in a mobile engagement. We don’t know how long consumers sit on the couch and look at the catalogue, but we know how long they stay online.”

But the adoption rate of QR codes has not come quick enough for opponents who argue that the message, however novel, optimized or incentivized it may be, is useless if the consumers aren’t listening.

Forrester Research reported in November 2011 that consumer adoption of 2-D bar codes, including QR codes, among mobile users increased from 1 percent in 2010 to 5 percent in 2011. Among smartphone users, 15 percent used them, up from 5 percent in 2010.

How To?

Scanning a QR code requires a third-party application, such as the ScanLife Barcode Reader, available on iPhone and Android smartphones, which creates an inherent disconnect between consumers who understand the purpose of QR codes but do not know how to engage with them.

As marketers debate whether usage will pick up momentum in 2012, they are also trying to understand who is using them now. In August 2011, a study from comScore’s MobiLens found that 14 million mobile users, about 6.2 percent, scanned a QR code during the month of June. Of those users, 60.5 percent were male, and 53.4 percent were 18 to 34 years old.

“For marketers, understanding which consumer segments scan QR codes, the source and location of these scans, and the resulting information delivered, is crucial in developing and deploying campaigns that successfully utilize QR codes to further brand engagement,” Mark Donovan, comScore senior vice president of mobile, stated in the report.

Yet even young, tech-savvy college students needed help understanding how to use QR codes when Archrival, a social strategy and brand consulting agency, conducted a survey of college students at 24 campuses — from the University of Maryland to the University of California, Berkeley. It found that although 81 percent of respondents used a smartphone, only 21.5 percent knew how to scan a QR code. Nearly 75 percent said that they were not likely to scan a QR code in the future.

QR codes are very simple to create, but the experience behind them is not as easy. Offers must be interesting and accessible on various mobile devices, and marketers should not only ask who is scanning them, but why. What are the offers and rewards that they receive?

“We are very fortunate that this technology is open for anyone to use; however, this is also a problem,” says Gagliardi. “Many people assume that the QR code is the central tool to execute a functional and efficient campaign when in reality it is the mobile engagement experience. The QR code is just an onramp to an experience. What often comes from a ‘made-at-home’ QR code is the instant redirect to a non-mobile-friendly website, formatted for a desktop computer.”

Brand integration is one way to build consumer confidence that when they scan a code, they will not be disappointed. According to Gagliardi, branded QR codes are clicked 30 percent more often than unbranded QR codes.

During the 2011 holiday season, Macy’s used branded QR codes to send shoppers coupons and to direct them to special offers on products in the store, such as Martha Stewart cookware. When they reached the cookware, they could scan a different QR code to access videos of Martha Stewart recipes.

But Wait!

As QR code scanning overcomes usability hurdles, proponents of the technology believe that if the right incentives and rewards are there, the consumers will come. An increasingly popular way for direct response marketers to engage shoppers in a retail environment is by placing QR codes on product packaging. Consumers scan the codes and opt-in to download an app, for example, which connects them to related content, such as recipes and how-to videos.

“The other way direct response clients are using it, and how we’re using it with our clients, is to upsell different attachments or premium products on top of it,” says Hope Fulgham, chief marketing officer at New York-based E&M Advertising. “For example, one of our clients is Bake Pops for TELEBrands. What we do with the QR code is upsell them to additional sticks or trays that you put into the Bake Pops, or decoration directions.”

Fulgham also works with major retail brands, including Victoria’s Secret, to help integrate QR code marketing, which drives mobile as well as retail purchases. In one example, Victoria’s Secret billboards display QR codes on the derriere of models and link to the bra or panty that she is wearing in the ad.

“We can change the product line as the season changes,” says Fulgham. “Come January, we’ll be pushing the February line for Valentine’s Day.”

The billboards are strategically located near Victoria’s Secret retail shops so that consumers who scan the code can also use the geo-location capability of their smart device to find the nearest one and get directions, plus a coupon as an added incentive.

“It’s really engaging the customer either into a product they just purchased or are getting ready to purchase, pushing them coupons and discounts for either upgrades or additional enhancements to their product, and really engaging them in the store,” says Fulgham.

In both cases, consumers opt-in to the messaging, delivering a wealth of valuable metrics to the marketer.

“For TELEBrands, what we’re going to be ready to do is start tracking those QR codes and know how often that the consumer has interacted with the product, whether it is a product that they purchased, and what kind of interaction they’re doing,” says Fulgham. “The more you interact with it as a consumer, the more content I can push you that’s relevant to the activity that you’re doing.”

She says that mobile technology — especially QR codes — opens the door to a new era of peer-to-peer marketing, and engaging with consumers as they shop is the next frontier. Fulgham already has something in the works for this year but could only hint about the upcoming campaign launch. She says it involves an opt-in application that activates when a customer walks through the front door of a soon-to-be-announced grocery store chain. As customers shop, they are pushed content, such as coupons, recipes, nutritional facts and how-to advice, based on where they are in the store and which products they are browsing.

Scan to Buy

A South Korean supermarket, Tesco Home Plus, used QR codes to test the concept of a virtual grocery store in June 2011. Knowing that its target audience is one of the hardest-working cultures in the world, and grocery shopping often feels like a burden, they enabled customers to shop for groceries using their smartphones while waiting for the subway.

They plastered the subway station walls with posters that looked like grocery store aisles so that customers could scan various products using QR codes, fill their virtual shopping carts, complete the mobile purchases and have the products delivered to their homes.

Within a few months, Home Plus online sales increased 130 percent and new registrations increased by 76 percent.

QR codes originated in Japan in 1994 as a way for Denso Wave, a subsidiary of Toyota, to keep track of vehicles as they were manufactured. The codes took several years to evolve into a consumer standard for mobile commerce.

As mobile commerce evolves in the U.S., and consumers continue to share private information to gain access to mobile content, marketers should be aware of the legal limitations of advertising with QR codes.

“Most of these QR codes require that a third-party app be downloaded, so if marketers are going to use a code, they absolutely want to find out whether that app provider is going to be collecting any personal information,” says Linda Goldstein, partner at Manatt, Phelps & Phillips LLP and a member of the Response Advisory Board. “If so, they have to make sure that their privacy policy discloses.”

Any advertising with a QR-code promotion must also disclose that data charges will apply, and whatever the code links to is considered advertising.

“The FTC has described QR codes as being the equivalent of the outside envelope in direct mail,” says Goldstein. “So whatever the code links you to, it’s just like the banner ad or the envelope in direct mail. Whatever’s inside is advertising and will have to comply with the laws and regulations.”

Taking Shape

As more smartphones and smart devices come pre-installed with code-scanning capabilities, QR codes could become much more meaningful to both consumers and direct marketers. However, another code-scanning technology may dominate what QR codes have started.

One of the current challenges for QR codes is the code itself. Marketers are experimenting with ways to integrate their brands with the code, but with SnapTags, a QR code made using a circle with notches on it, a logo is placed in the center making it very clear to see.

Consumers can access a SnapTag using either a standard or smartphone camera or the SnapTag Reader app available for iPhone and Android. If they do not have a smartphone, they can send the photo to a short code and the content will be sent back to them.

According to a study by Yankee Group, QR codes overall will be trumped by near field communication (NFC) by 2015. NFC technology is used for many of the same reasons as QR codes, but it can hold more information and does not require a third-party application to scan. Plus, it’s already used for mobile payments, essentially turning mobile phones into credit cards. Gagliardi says that the Ace Group will be introducing NFC in the next two months.

Yankee Group predicts that the number of NFC-enabled phones globally will grow from 834,000 in 2010 to 151 million in 2014, and the value of NFC-based transactions will increase from $27 million in 2010 to $40 billion in 2014.

There were rumors that Apple’s iPhone 4S would include NFC, which did not come to fruition. There are new rumors that it will be on the iPhone 5. By then, everyone may be more interested in augmented reality.

The world caught a glimpse of what’s to come with augmented reality, or interactive virtual environments, when Starbucks launched its holiday application, Starbucks Cup Magic for iPhone and Android. Once the app was downloaded, a customer could hold a smart device’s camera up to the characters on the coffee cups to instantly animate them on the screen.

“With Starbucks, it’s actually just kind of fun,” says Fulgham. “The only thing you have left with their product is the container itself, so I thought it was really clever.”

There was social media functionality built in, such as Facebook sharing, but according to Alexandra Wheeler, Starbucks’ vice president of global digital marketing, the purpose was to “surprise and delight” customers for the holidays.

Marketers should expect to see much more of these types of applications throughout the year, especially in retail settings as Fulgham described. QR code technology may evolve but the types of mobile interactions and purchases that they enable are here to stay.

About the Author: Nicole Urso Reed

Nicole Urso Reed

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