Wednesday, August 5, 2009

Are SMS alerts an opportunity or an expense?

Just now there are two major factors that shake the ground under the (postal) logistics business; first is the economic downturn and second is the almighty internet. The combination of these two means that the volumes in their business have fallen significantly and will continue to do so. As an example, volumes for Finnish Post have decreased between 9% to 16%, depending on the product category.

Someday the economic situation will improve, but internet and electronic communication are here to stay.

There is a major trend to move away from paper invoicing to electronic invoicing because of the huge cost savings. Deutsche Bank estimates there is a potential of €54 billion savings if invoicing process is improved, and that’s just in Germany! It is safe to assume that volumes of paper invoice are going to drop dramatically in favor of electronic invoicing.

Let’s leave business-to-business invoicing aside and concentrate on business-to-consumer invoices. In the B2C world the problem is how to send the electronic invoice to the customer, the scene is very fragmented and solutions are many. The selected media should be reliable, fast, common and cheap.

Assume that someday electronic B2C invoicing is working flawlessly and you will in some digital way receive the minimum information that’s needed to accept the invoice. What’s missing from the business’ point of view? Today paper invoices come with customer newsletters, marketing material, offers and so on - invoice has become an “advoice” that carries much more information than just the invoice. At its best advoice concept is so powerful that customers are delighted to receive the invoice, because of the attached content. When everything is electronic, what will happen to advoices and this media? The progress reminds me of the banking business in the 90’s - banks created products that allowed customers to do self-service instead of visiting the offices. Later banks understood that maybe they succeeded too well in allowing self-service as they had lost contact to customers. Now banks and insurance companies try to get customers sometimes visit the office, but results haven’t been good. How to sell new complicated products to people without personal contact?

Ok, what’s my point? Finnish Post has a service that allows companies and organizations securely send messages (e.g. invoices) to customers; it’s like an email system that allows only pre-approved senders to send messages. When new message arrives, user will get an alert to his email inbox and he can login to see the message.

This summer system was upgraded with an option to send also SMS alerts when new messages arrives to inbox, end-user price is €0.25 message. This is a mistake, messages should be free and here is the reason why.

I can easily understand why there is a price tag in the alert message, it’s just the easiest way to secure the decision maker’s background in the current economic situation. "Customers want SMS, let’s put it there and charge for every message" goes the easy rationale. Last year there were total 2.1M messages sent through the system. Just taking list price from an SMS-aggregator shows that if they had sent alert for every message, the cost would’ve been about €72.000. I don’t think that is much if compared to other media that they use for marketing: with that sum Finnish Post can’t even get two front page ads in a major newspaper - and that's just the printing cost. Comparing a print media ad to a highly engaging SMS message with a call to action and immediate return channel is like comparing a steam train to a sports car. Studies have shown that Blyk’s answer rate for SMS’s has been around 25%! If Finnish Post were able to do the same, they (or their customers) would have received 500.000 replies from end users. (Yes, this is not a fair comparison because Blyk’s model depends on having a very homogenous user base with information about personal preferences, but that’s still an evidence how SMS marketing works at its best.) Can you see the business here: trend towards electronic invoicing suddenly becomes an opportunity instead of a threat, but that needs some new thinking.

In short: it’s is just wrong to punish users who want SMS alerts. If that channel is used well, Finnish Post could in fact reward users who accept SMS alerts with information about new message and a short ad with a clear call to action.


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