Consumer Behaviour

In the race to drive O2O innovations, it is as important to join the racetrack as it is to be ready to embrace failures

By: Nishtha Mehta
Agency: Executive Consultant/ Trainer/ Head of Mobile Capability, PHD China

So I was at Carrefour Shanghai just yesterday (oh, yes! I still shop at hypermarkets and supermarkets despite being an avid online/mobile user and shopper). And while I was at the payment counter, I saw the couple ahead of me excitedly holding a smartphone against a Wrigley’s package, scanning the printed bar code. I bought the next one and in less than ‘five clicks’ (yes only clicks, with no effort to download an app or type anything) received a free wifi data-plan reward from the brand, plus a special price for my next online purchase.

The built in QR code scanner in WeChat read the offline code on the pack and connected me to the brand Online. While it’s not an invention, it’s definitely a marketing innovation on the part of the brand and Tencent’s WeChat. There isn’t an existing ROI model to measure this and I am guessing the brand jumped on the idea fully aware that it could win or fail. Time will tell which way that goes.

Untitled-1_02

From my perspective, the brand gained seven important things in less than five minutes and just as few clicks.

  1. Instant connection of its real consumer offline to online (QR code/bar code)
  2. Easy simple effortless access (just a few clicks)
  3. Awareness of and access to its mobile/online shopping options (mCommerce)
  4. Happy excited consumer (reward and word-of-mouth referral to friends)
  5. User data in the database (mobile number/ future CRM options)
  6. Retail POS system integration (value to trade partners)
  7. Test and learn (ability to optimize and scale up)

Online to Offline or Offline to Online (O2O) has indeed come a long way from simply being a buzzword to an important strategic marketing approach. O2O is no longer about searching online and purchasing offline, or buying online and picking up in-store, or getting an online/mobile coupon to redeem in-store. It’s now about buying offline, going online and then buying again.

O2O is a way to employ mobile devices, web and related technologies to make buying stuff more convenient, efficient and fun (with rewards and content).

O2O a top innovation for China marketers

According to a ComScore research report, close to 50 per cent of China marketers want to use mobile for O2O marketing.  On further investigation, a recent PHD China study, done in partnership with the world federation of advertisers (WFA), asked 21 leading China marketers about the most commonly used Mobile technology/platform. The result: 84 percent pointed to QR/2D codes on packaging, OOH and print. The development indicates a priority to make offline media work harder via O2O connections.

Untitled-1_06

In China, the biggest internet firms — Alibaba, Tencent, and Baidu (BAT) — are leading in the O2O space. With China having a super fragmented bricks-and-mortar market lacking the well-established track records of massive retail chains like Walmart, Best Buy or Macy’s in the US (which drive their own O2O initiatives), it became much easier for the three giants to build technologies and platforms and offer O2O opportunities to brands and consumers alike.

August 29th 2014 saw one of the biggest developments in China’s O2O space. Real estate development giant Dalian Wanda Group, Tencent and Baidu partnered to form a new, as-yet-unnamed, joint venture focusing on O2O retail.

At the same time, Tencent is rolling out WeChat features that not only let users pay for restaurant meals, hotels, or pharmacy prescriptions, but also enhance those services. For instance, users can page waiters or open their hotel-room doors through the app.

Meanwhile, Baidu just invested in a Finnish startup whose technology could let businesses guide customers through their physical stores, alerting them to discounts along the way.

So what’s driving this shift in how we shop and how can we move faster on this O2O innovation racetrack? And what are some of the learnings for brands and agency partners? Three of my industry colleagues joined me in this discussion and shared their views.

 

Untitled-1_09William Bao Bean, Investment Partner, Asia at SOS Ventures and Managing Director, China Accelerator

 

How do you view the innovation opportunities in China’s O2O space?

The physical retail environment in China does not have the coverage of western markets and so online is playing a much greater role in retail in China compared to the west. In China, O2O is not just a shiny new trend but an established mainstream model, and this has laid the groundwork for the development of innovative products and services. As the largest “mobile first” or “mobile only” market in the world, the innovations coming out of China are likely to become the standard for how online and offline commerce develops in other emerging markets. I’m investing in taking innovation coming out of China and delivering it to “the next five billion” consumers in SouthEast Asia, Eastern Europe and Central and South America.

Where are your investments or China accelerator initiatives focused?

We have been very active in O2O investment. For example Giftpass.cn enables users to send a virtual product like a beer to a friend over WeChat that can then be redeemed for the actual product in a restaurant or store. A simple but powerful way to drive mobile sales and offline consumption.

What’s the biggest challenge you see coming from brands/ marketers/agency partners in adopting innovation?

Innovation is all the rage now in Asia marketing circles because brands, agencies and most importantly the consumers are tired of the same old campaigns. Unfortunately, frankly speaking, most brands and agencies are not equipped to embrace innovation because they cannot accept the failure that, by its very nature, accompanies innovation.

To solve the problem we have developed the Chinaccelerator Innovation Day program: half-day events that bring startups together with the entire marketing department of a brand and their agency account team to create and launch specific solutions to brand needs.

How can brands and lead agencies get involved with startups and accelerator programs to explore solutions and innovative ideas?

Brands and their agency must:

  1. Commit a small budget outside of their normal annual budget — sort of an innovation fund where failure is an option
  2. Require the attendance of the entire marketing team both senior and junior – if the entire team cannot make the event, reschedule it
  3. Follow up meetings between brand account teams and specific startups that might be able to solve a brands’ particular challenge.

The best way to leverage innovation is to try, fail and try again. On our part, Chinaccelerator endeavors to help the brands and agencies manage the risks traditionally associated with working with startups including:

  1. Making sure the startups’ product, service or platform is ready to take to market
  2. Managing communication between all parties as most startups cannot speak the language of marketing
  3. Creating a timeline where projects are up and launched quickly ie 1-3 months as opposed to 1-3 years and finally
  4. Negotiating commercial terms as brands are used to trying everything for free first and startups think brands are made of money. What works best for all parties are small paid trials.

Your one, most important tip?

Fail fast, fail smart!

 

Untitled-1_11Sophia Ong, GM Planning & Implementation Dept, Tencent Online Media Group

 

How does Tencent view O2O today versus a year or two back?

A couple of years back our vision of O2O was still in its infancy. It was to take an offline event and simply broadcast it online with no interaction. Today, the line between online and offline is blurring, and O2O marketing has evolved from a one-way to a multifaceted communication. For example, for the Unilever Clear supersonic offline music festival in partnership with PHD, the show was broadcast live on our platform, but we added a WeChat interaction, whereby festival attendees could become the ‘reporters’ in real time for the broader online world, send in their comments and experiences, which was also broadcast offline live onto the digital screen.

Clearly the strategy is evolving to be a cross-media connection. So in Tencen’t O2O strategy, what role does mobile play?

Netizens are becoming more and more connected to the internet through smart devices, especially mobile. The opportunity is in the way we engage, and that has to be different to satisfy the real-time user context. My team’s responsibility is to partner with businesses and brands to find “new ways to connect”.

Having done quite a few O2O innovation cases now, with brands like Mercedes Benz Smart Car, Coca Cola and Burberry, what are some of the biggest learnings that you’d like to share?

Some best practices and learnings so far: Longer lead time, so time doesn’t limit our ability to innovate or try new things. Getting visibility to annual marketing calendar. Agencies and marketers need to understand the challenges that innovation or first-time ideas bring to be able to forecast precise or proven KPIs. In our view, this is catch 22 play. Make the user experience fun and interactive.

Your one, most important tip?

Provide value-added service to users with intuitive mechanics.

 

Untitled-1_14Christian Devillers, CEO and Founder, Walkin, a China mobile retail O2O startup company

 

First off, what is Walkin?

Walkin is an application for iPhone and Android which incentives people in the form of loyalty point rewards to go to a store or pick up a product. Our typical user, let’s say Wen — visits an apparel store. If the Walkin app is pre-installed, she will first get a push notification when she is 30 meters from a partner store. She opens the app to discover what product is featured, then visits the store and scans said product (not the barcode but the product itself) and is granted 30 to 100 points. She can then exchange points against a variety of gifts, including samples of the product she just scanned.

What made you establish Walkin?

To solve a critical problem in stores in China: Increase footfalls and drive conversion in the store, leveraging mobile O2O technologies.

What are some of the O2O technologies Walkin is utilizing?

Image recognition is one technology the Walkin app uses as an O2O interface that can recognize anything in less than 1/25 of a second, without using the internet. We were also among the first to introduce iBeacons in stores. This is a very interesting retail innovation — though it’s still in infancy. iBeacons are small chiplike devices that one can put in store, in product aisles and when one gets closer in the vicinity of the chip, the Walkin app automatically recommends relevant branded content without any clicks.

What are some of the learnings from your retail brand cases?

Our case jointly with Sephora and Biotherm has successfully leveraged the Walkin features to drive in-store traffic and conversion. Ten Shanghai Sephora stores were activated via Walkin, allowing users to win points and free Biotherm samples (with a mechanism that allowed us to track who they were distributed to). In addition, Biotherm OOH was made interactive, pushing people to visit the nearest Sephora store.

Key learnings: You need agility from client and agency partners: O2O success highly depends on a cross-functional team coming from client, agency and retail side and committed to a common goal. Sometimes this leads to a super slow decision process or project cancellations.

Brands and retailers should start experimenting with technology, new ways to build cross-channel capabilities, and draw synergies that help increase sales (like making in-store posters and packs mobile interactive using iBeacons or image-recognition technology).

Make shopping more fun with value-added rewards or content, thereby increasing conversion.

Your one, most important tip?

‘The store is dead. Long live the store’