Near field communication (NFC) isn't a new technology. But for most marketers, it may as well be.
"A lot of marketers -- like most consumers -- still have no clue what NFC really is or what it is capable of," says Marcelo Eduardo, associate design director at Huge. "While a reasonable number of marketers have heard about NFC, the context for most is probably as the technology for supporting contactless payment. Others know they can use it for object hyperlinking, like QR Codes. And maybe a very small number of people know about two-way communications mode. So marketers may know NFC can do one or two of these things, but most don't know that NFC can do all of these things."
What is it?
Don't worry. This won't get too technical. If you want to go for a deep dive into NFC, you can visit resources like The NFC Forum or NFC World. If those resources are a little too geeky for you, ArsTechnica has a nice primer on NFC.
But from a 10,000-foot view, it's important to know a few basics.
- NFC technology is a short-range tool that operates on wireless frequencies. It works by connecting a user's mobile device, equipped with an NFC antenna or specially programmed SIM or SD data card, to a receiver, usually a few feet away.
- Right now, a lot of the activity around NFC is in the mobile payment space. But while NFC is most commonly associated with mobile payments, it's really just a way of connecting the customer's digital handset to the face-to-face experience of a store visit. Viewed in that context, marketers can use NFC to better connect with users in real space, via their mobile devices.
- Not all smartphones are NFC-enabled. As new models come on line, this is changing, but right now it's important to ask whether you have enough customers with the right handset to make NFC a viable part of your marketing.
- NFC devices don't have to be setup in advance to connect with each other. That means that a customer with an NFC-enabled smartphone and a store with a receiver can connect with a single touch or tap, provided both devices are within range (usually a few feet).
What does this mean for marketers?
While there are a lot of possible ways that marketers may eventually use NFC technology, the key insight right now resolves around mobile payments, according to Darus Zahm, VP and account director at TargetCast.
"The big potential win for marketers in the NFC space is the prospective gold mine of consumer information that could be gleaned from a mobile digital wallet," Zahm says. "A database of consumer purchase behavior could be effectively leveraged by marketers to deliver relevant, engaging messaging and, perhaps most importantly, compelling offers and promotions to consumers."
But using NFC isn't the only way to get to a mobile wallet, and marketers should keep that in mind as they roll out their own experiments.
"In the coming years, mobile handsets will replace cash, credit cards, and loyalty cards for mainstream consumers," says David Berkowitz, VP of emerging media at 360i. "NFC may well win out as the technology that accelerates and empowers this change, but NFC is just one bet to make among many."
According to Berkowitz, marketers should also keep an eye on apps that allow customers to make a payment directly through their phone. And while it may not seem cutting edge, Berkowitz says there are also text-based mobile payment systems that have the advantage of being able to operate -- today -- on all mobile phones. There are also startups that achieve the same mobile wallet experience through QR codes. And, says Berkowitz, "I'm sure we'll see other models arise in the coming years that haven't been anticipated."
In the meantime, Berkowitz says it's important for any potential user to remember that some of these technologies already have a head start on NFC.
Who's using NFC today?
"When people leave the house these days, they don't do so without their keys, their wallet, and their phone," says Zahm. "With NFC on the immediate horizon, it's possible that the prospect of a more convenient way to pay will motivate the masses to rely more heavily on their smartphones as a personal finance tool in the near future. Today's shopping spree just might be tomorrow's tapping spree."
With those kinds of stakes, it's easy to see why so many different contenders are vying for a chunk of the mobile wallet. Today, banks and credit card companies are busily working on their NFC options. Similarly, mobile phone providers like Sprint, AT&T, and Verizon are also keen to see if they can expand their connection with consumers by shaving off a function traditionally reserved for financial services companies. Likewise, technology companies are also taking a crack at the market, with Google's Wallet product the most visible offering so far.
But while brand marketers may not want to go to the trouble of providing a consumer with a mobile wallet, they'll want to make sure it's a go-to tool for any purchases the consumer may wish to make. And they'll also want to use it as a tool for connecting consumers to loyalty reward programs.
"NFC holds the most promise for retention marketing," says Berkowitz. "Tying reward and loyalty programs into the payment process can trigger incentives that encourage customers to return. NFC could also be used to incentivize sharing purchase activity or rewards, and thus serve as a customer acquisition vehicle as well, but that will be a secondary value proposition, especially in these early stages."
Do consumers really want a mobile wallet?
Ever since we've had money, people have been finding ways to make it more portable and accessible. So in theory, a mobile wallet should be quite appealing for consumers. And in fact, there's a strong case study that points in that direction.
Using QR codes and a smartphone app, Starbucks has rolled out one of the largest nationwide mobile payment networks.
Here's a quick video from Starbucks demonstrating the product.
In December, VentureBeat posted some rather strong data on the success of the Starbucks mobile payment program.
"Of the $2.4 billion loaded on to Starbucks cards in fiscal year 2011, $110 million was loaded onto cards via Starbucks mobile apps," VentureBeat reported. "The mobile figure equates to just under 5 percent of all reloads, but does highlight a shift in how customers engage with Starbucks cards."
In 2011, Starbucks processed a whopping 26 million mobile payments, and the figure grew significantly in the last few months of the year, indicating that the program was gaining some serious traction with Starbucks customers.
But while Starbucks didn't use NFC technology to do this, Zahm still thinks it's an experiment worth watching because it sheds light on how consumers might respond to NFC-enabled payment systems as other retailers roll them out in the future.
"While taking out your phone and tapping to pay at checkout is not discernibly quicker or easier than paying with a debit card, there's presumably a certain amount of badge appeal associated with users of new technology as being perceived as tech-savvy and cool," says Zahm. "[Starbucks mobile payment] illustrates that when employed in the right way, namely adding convenience and value to the consumer (and perhaps adding a bit of badge credibility along the way), people are open to a mobile-payment enabled future."
They just have to remember to bring their phone, password protect it, and keep it charged. And brands will need to remember that a mobile wallet will likely amplify consumer privacy concerns.
"Mobile payments will provide a tremendous amount of consumer data to marketers who will, in turn, utilize that data to deliver targeted messaging and offers," says Zahm. "That degree of personalized messaging, directly informed by purchase behavior and media consumption, has the ability to creep out consumers. As we've seen in the online space, the key to minimizing that creepy-factor is being completely transparent and providing consumers with control over their data and what they elect to share."
Tap some Angry Birds
For a good example of what's possible beyond the mobile wallet, Eduardo says marketers should take a look at the NFC-enabled version of the popular mobile game Angry Birds, which he adds caught his eye, despite the fact that it was more of a technology showcase than a true marketing initiative.
Dubbed "Angry Birds Magic," this particular version of the game rewards players who meet their opponents in real space. Using NFC technology, the game's designers essentially unlock levels for those who are able to "tap" their phone with their opponent. But while this video highlights the obvious cool factor associated with NFC, it also underscores the present limitations of a technology that isn't yet in widespread use.
As brands begin rolling out NFC experiments, a key ingredient to their success will be the extent to which they educate consumers.
"At this juncture, it's critical for marketers in the NFC space to include elements of education in their messaging," says Zahm. "Educating consumers as to what NFC technology is, how it works, and, most importantly, that it is secure, that it can make their lives more convenient, and that it can gain them access to values and deals they otherwise wouldn't be able to realize are the key steps towards driving consumer adoption."
Fair enough. But consumer education can also go too far when it comes to NFC.
"Like any new technology, marketers need to give users very clear instructions on how to use it," says Eduardo. "But, that said, NFC is simpler than previous technologies. For example, compare NFC to QR codes. There's no need to download any software. There's no need to open a camera app and snap and scan the code. The simple act of explaining or showing what to do is enough: tap your phone."
So what could you use it for in the future?
At this point, there are a number of potential applications for brands looking to take advantage of NFC technology. But since we're still pretty much in the development stages, those applications are more theoretical than practical. That said, they aren't all that far off. Here are a few ideas from Rachel Pasqua, executive director for mobile at Organic.
- Retail: You go into Macy's and see a jacket you love -- but it's not in your size! A swipe of your phone on the sales tag reveals that the same jacket is available in your size at another branch a few miles away.
- Loyalty: You're a harried mom -- or dad -- of two, stocking up on groceries and household essentials at your local big-box store. A swipe of your phone at the register negates the need to pull out coupons or even open the app on your phone. All of your incentives and loyalty data, and even payment credentials, are embedded via the chip on your device and linked to your account. Simply wave your device and stroll out the door.
- Social: You're in front of a new restaurant and wondering whether it's as good as the posted Zagat's review says. A simple swipe of your device over it tells you whether people in your social network have eaten there and what they have to say.
Michael Estrin is a freelance writer.
"Google wallet" image via Flickr.