Mobile Customer Engagement Pays Off

Mobile apps are all the rage, and for good reason. At MIT CISR, we have studied the impact of mobile apps and found that companies with high mobile customer engagement are among the top performers in their industries on both margin and growth. But developing compelling customer mobile apps requires focus and commitment. In this first briefing in a series, we share insights from case studies and a survey of 339 companies on generating strategic benefits from a mobile strategy. There’s plenty to be excited about, but there are also some serious challenges. 

What Is Your Mobile Strategy? 

Most companies we talked to, whether B2C or B2B businesses, have customer mobile apps. But only a few companies are putting significant dollars into their efforts. In a recent poll with 106 respondents on the MIT CISR website, only 20% of companies reported spending more than 11% of their IT development budget on mobile apps; a far greater number, 46%, spent less than 1% of their IT budget on apps. But as always with technology, success depends not just on how much you spend, but on how clearly you define your strategy and how effectively your organization executes it. 

We studied two large Australian companies with very clear mobile strategies: Westpac Bank and its Mobile First initiative, and Woolworths Limited’s omnichannel strategy. Australia is fertile ground for mobile research as it has the fourth highest smartphone penetration rate in the world—79% of the population owns a smartphone—placing Australia behind only Singapore, Hong Kong, and Sweden.[foot]https://www.businessinsider.com/us-smartphone-market-2012-9[/foot]

At Westpac, which views mobile as the front door to its organization, “mobile first” means just that. One of the four large banks in Australia, Westpac had 2013 revenues of AUD$18.8 billion (US$17.4 billion) and net profit margin of 36.7%. As part of its business strategy, Westpac declared that all new product and service offerings are to be introduced in the mobile channel first. It has delivered more than forty-five mobile and tablet apps across its four major brands (see figure 1). The result of Westpac’s focus on mobile have been impressive, with 7.5% of the company’s customers now interacting with the bank on mobile only, and with 20% of simple products—credit cards, simple loans, certificates of deposit, etc.—now sold on its mobile channel. Its customers’ delight is reflected in a mobile Net Promoter Score (NPS) of 63, compared to the average US bank NPS of 18. 

Compare this approach with Woolworths Limited, which is pursuing an omnichannel strategy. Woolworths is the largest retail company in Australia, with 3000 stores and multiple brands spanning food, liquor, gas, and general merchandise. It had 2013 revenues of AUD$58.7 billion (US$54.5 billion) and a net profit margin of 3.8%. Rather than target only online shoppers— whose purchases comprise just a fraction of its overall revenues—Woolworths launched a mobile app to enhance the shopping experience for all its customers with a smartphone (see figure 2). The feature-laden app helps build a shopping list (e.g., by scanning barcodes), reorganizes list items based on the aisle order in the store a customer is visiting, highlights specials based on customers’ past loyalty card purchases, and tracks fuel discounts. Shoppers who can’t get to the store or who would rather buy online can press a single button to purchase their shopping list, with same-day delivery in the major city areas. In a country of 22 million people, the Woolworths app has been downloaded around two million times. 

Does a Mobile Strategy Pay Off? 

The good news is that mobile apps for customers can pay off handsomely. However, companies need to focus on what mobile does best: letting them get to know their customers better and fostering increased customer engagement. In our survey, we found that the apps companies described as their “most successful mobile app to engage customers” tended to have one of three major goals: 

1. Informational (42% of companies): Provide information about the company, prices, products, services, locations, etc.; these apps cost an average of US$10,710 to launch 
2. Servicing (39% of companies): Enable customer self service; these apps cost an average of US$50,599 
3. Selling (19% of companies): Facilitate or make sales, support cross-selling, and make offers; these apps cost an average of US$515,582 

The bottom-line results are very encouraging (see figure 3). We found that 71% of the companies set high goals for mobile customer engagement. The companies that achieved their high goals (43% of the total sample) also had net margins and revenue growth 5.5 percentage points and 6.1 percentage points higher than their industry average. These top-performing companies set high goals for increasing customer engagement; decide on an engagement strategy, as Westpac and Woolworths have; and pursue that strategy to achieve their goals. We learned from our case studies that initial successes encourage more extensive use of the mobile channel to engage customers, with increasingly significant investments and organizational commitment. The result is a reinforcing positive spiral of mobile channel success. 

What Does It Take to Be Successful? 

We believe that every enterprise—yes, every enterprise—must get great at customer mobile apps. Once you clarify how you will engage your customers using mobile apps, we have identified three additional elements of success.

1. Start with small dedicated teams. For example, Westpac created a mobile application development (MAD) team, which broke the mold of how systems had historically been developed at the company. MAD was a small team of creative people with customer design and device knowledge. It was not as constrained by Westpac’s normal processes and governance, which enabled the team to work extensively with outside partners, including technology companies and design houses. Deadlines were in days, not months, and the team focused on customer delight, heavily using the native capabilities of the mobile device. 
2. Exploit success to build top management support. In all the high-performing examples we studied, the first success— which could have targeted any of the three goals described above—was used to help build top management commitment and, ultimately, to further investment in app development for customers. At Westpac, early success led to the formation of a company-wide Mobile Strategy unit, new business and IT roles, and the integration of existing customer-centric and agile development approaches. 
3. Generate regular releases, each focused on a key new feature. It's important to get a good mobile app out fast, with at least one significant wow feature. Then, release new versions regularly, each with a new wow feature. For example, Woolworths introduced its first mobile shopping app in August 2011, with the shopping list as the key feature. To ensure high engagement, Woolworths introduced four more versions over the next two years. Each release had its own anchor feature that created a wow reason for downloading the new version. This regular release strategy is typically more successful than a "big bang" strategy which offers lots of wow features deployed all at once.

Mobile apps offer an opportunity for the IT unit to thrill its business partners, while the company as a whole thrills its customers. It's time to develop your mobile app strategy.

With clear goals and a strategy to make them a reality, mobile apps will allow you to get to know your customer better than ever before. The capacity to collect feedback and observe customer behavior through mobile is a great—and underutilized—opportunity to amplify the customer voice within your company.