If comparing the mobile marketing universe to high school, millennials are the “cool kids”—a group whose attention is highly sought after, whose preferences and behaviors are closely observed, and whose approval can mark the difference between popularity and obscurity. As millennial spending power grows, Quick Service Restaurants (QSRs) and retailers alike are scrambling to make their marketing strategies relevant to this demographic.
And rightfully so--the Restaurant Marketing Labs reports that millennials spend more money on eating out than any other generation. Plus, Accenture predicts that millennial retail spending will grow to $1.4 trillion annually to account for 30 percent of total retail sales by 2020. It’s no secret that surviving in today’s market requires appealing to the millennial consumer, 86 percent of whom own smartphones.
And looking specifically at mobile behavior, Mobile Marketer found that 37 percent of total digital traffic and 28 percent of commerce revenues now come from smartphones, and that number is expected to surpass 50 percent by the end of next year. And yet, according to a global survey conducted by Adobe in July 2016, less than a quarter of companies have a clear mobile marketing strategy that extends into the next year.
QSRs and retail companies must evolve their mobile marketing tactics to keep up with the preferences and behaviors of millennial consumers. This generation is well informed and closely follows brands and products through digital networks, with five out of six millennials connecting with companies through social media. Because millennials want more personalized ad experiences, QSRs and retailers need to focus on “story selling,” in which every product adds something significant to the experience of the customer.
Let’s take a look at what strategies work best for QSRs and retailers, and what each industry could do to improve. While it’s important to keep in mind millennial influence, these strategies apply to all demographics.
The 2016 Mobile First Insights report from Opera Mediaworks revealed that food delivery and QSR captured 23.4 percent of annual mobile ad spend and was the strongest vertical for the first half of 2016. It’s safe to say millennial consumers are clearly drawn to modern, mobile-enabled dining experiences.
There are a number of effective mobile advertising strategies that work best for QSRs. First, it’s important to target mobile users via location--it’s critical that QSRs raise awareness around their physical locations and reach consumers who are nearby, and possibly searching for dining options. Another strategy is to target audiences based on specific demographics (age, ethnicity, income, etc.) to deliver only the most relevant content.
Past behavior is also a valuable targeting parameter. For example, people who have previously visited similar or competitive QSR dining locations are more likely to visit again, so a restaurant could focus its targeting efforts on location segments like “Repeat QSR Diners.” Targeting mobile users who have downloaded restaurant apps is also effective, since again, those users have demonstrated an interest in related establishments. Finally, QSRs can connect with other relevant segments, such as college students (who often work from coffee shops), nightlife enthusiasts, sports fans, or discount shoppers who may be interested in their business based upon interests.
Beyond targeting, evidence has shown that loyalty programs through mobile apps are the key to QSR success. Starbucks is a prime example of how mobile loyalty programs work. 17 million people use the Starbucks mobile app, and 21 percent of in-store transactions were paid via the mobile app in 2015--that’s millions of dollars in revenue from the mobile app alone. Furthermore, it’s proven that loyalty members spend up to three times as much as non-members.
QSR loyalty programs are more effective than retailer loyalty programs because customers can earn rewards faster and more efficiently through the former. This is due to the fact that QSRs offer products that people need to buy every day and products are generally less expensive than those from major retailers. A person is more likely to spend $3 on a coffee every morning from Starbucks, rather than purchasing a $30 shirt from Macy’s every day.
Personalization is also a core component of mobile marketing success, especially among millennials. In fact, USC reports that 85% of millennials are more likely to make a purchase if it is personalized to their interests, both in-store and with digital displays.
QSRs are amplifying engagement by creating apps that personalize the user experience. The Wendy’s mobile app is a great example which uses geofencing to target customers in certain locations with specific deals, lets customers find nearby locations, allows customers to customize their orders and save their preferences, and lets them pay easily through their phones.
QSRs’ personalization efforts can be more effective than retailer’s because people are more likely to disclose information about their location and purchase histories for food than they are for retail. Why? Because of convenience—disclosing this information facilitates delivery and ease-of-ordering in the future. However, because many QSRs only serve a particular subset of products (for example, Taco Bell only serves Mexican food), they can’t learn as much about customers as retailers that sell a wider variety of products. This enables retailers to learn more extensively about the demographics of their customers, whereas QSRs may have a harder time obtaining that information.
According to the 2016 Mobile First Insights report from Opera Mediaworks, retail and e-commerce companies have shown the most consistent growth in mobile ad spending since 2015. Mobile ad strategies that work for retail include targeting audiences based on location and demographics, because a well-timed, relevant promotion can help drive customers into stores. Like QSRs, targeting consumers based on past behavior is a useful strategy, although in this case, it means targeting those who have previously visited the brand and/or its competitors. Additionally, retailers can target consumers with app ownership data--those who have downloaded shopping, fashion or brand apps on their phones. And of course, retailers can target other relevant segments like fashionistas, high-end shoppers and beauty shoppers.
Loyalty programs are also an important component of retailer mobile marketing campaigns. For example, Macy’s offers a loyalty program on its mobile app that helps customers find the best deals, purchase via the app and pick up in-store, organize personal preferences, and receive frequent SMS alerts about new products (before non-loyalty members find out), along with discounts. Higher-level members can also get birthday offers, priority customer service, and exclusive online shipping offers. The app does a wonderful job connecting members to the brand to make them feel valued, which in turn is an effective marketing strategy.
Other retailers commonly offer programs that offer points for every dollar spent, both in-store and on mobile apps, which can then be applied to other purchases. According to Access Development, 77 percent of smartphone users said mobile offers—such as surprise points or rewards, exclusive content and special birthday messaging—have a positive or very positive impact on their brand loyalty.
We’ve seen retailers use this tactic effectively, whereas QSRs tend to offer deals based on the number of purchases (not the amount of dollars spent). Retail customers may feel more fulfilled when making purchases via mobile because they earn more points based on every dollar spent and are therefore incentivized to spend more. Often the amount of money spent on an order does not matter for QSRs (just the number of orders), which could encourage users to spend less and make more individual purchases.
As with QSR apps, personalizing the user experience is key. Cisco’s 5th Annual Retail Survey found that 55 percent of shoppers will use a retailer’s app either for or while shopping in-store. The Target mobile app “Cartwheel” offers mobile-specific coupons and discounts based on personal preferences, and claims to have saved users almost $22 million to date.
What’s more, a study by Digiday examined Target, Macy’s, Nordstrom, Walmart, Costco, Sears and Kohl’s and found that consumers with mobile apps visit stores more frequently than those without. However, purchases made in-app can be extremely valuable--when retailers can see the purchasing histories of customers, they can make inferences about particular demographics and use those to drive more specialized ad campaigns and suggest products that those customers are more likely to purchase.
A Horse Race
The biggest difference between QSR and retail mobile marketing strategies is that QSRs aim to expedite the mobile shopping process while retailers primarily aim to save customers money. QSRs might have a leg up since they offer products that can be consumed daily, but retailers have the ability to learn more in-depth information about their customers and create more personalized shopping experiences across a wide range of categories. Ultimately, neither industry is “winning,” but each could improve from learning from the other and must target millennials to increase profits.