What Challenges And Opportunities Lie Ahead For Mobile Solution Providers?
March 1, 2013 1 Comment
This article is based on my recent work in helping a mobile solutions technology start-up firm with market research, strategic planning, industry and competitive analysis. While doing research on service based firms, I have identified numerous challenges that can affect a start-up firm’s growth while it scrambles to find a successful pattern to gain a foothold in the market. In looking through the lens of an analyst, one can easily spot several differences and challenges in how a firm fundamentally delivers its services to its customers from a product based firm. Further, this article also attempts to compare and contrast how firms develop their marketing strategy and implementation of marketing mix associated with both services and products. Finally, I will also share my perspective about what opportunities mobile solution providers have and where to focus in building a successful mobile solutions strategy.
With the recent and current economic upheavals, the service based firms are increasingly facing both market as well as operational challenges. As a result of the dynamic nature of economic system, structural shifts are imminent if not already happening across the service industry that forces firms to be more nimble, efficient and responsive. The customers are becoming more price sensitive and they demand low price and high precision and quality services with short turn around times. The complex business needs also exacerbate the overwhelming challenges in delivering a quality service at a low price. In addition, the service based firms may also find it difficult to develop scale and expertise in smaller growth markets. While there are market challenges, it also presents an opportunity for service based firms to innovate and create differentiation in the market. In a world of knowledge based economy, the service firms that deliver faster services with quality, manage clients, manage talent, manage time and provide operational excellence will prevail and create competitive advantage while developing insight into the actual cost of the service that can yield accurate and profitable pricing. Additionally, the service based firms must consider reorganize their delivery business unit across a wider geographic area for market access. I cannot emphasize enough the importance of continuously analyzing your competitors strategy to deal with the dynamics of a competitive market environment. The companies that constantly monitors their competitor’s strategy will help them craft a unique configuration of competitive tactics that can ultimately become a competitive advantage for them. The aforementioned challenges and operational efficiency strategies are applicable to mobile solution providers as well.
In comparing both products and services, virtually all marketing concepts and strategies used to market tangible products are also relevant to the marketing of services. There are several characteristics that make services different from products. A product is considered anything that is offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want. A service on the other hand is a form of product that consists of activities, benefits or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything. Since the need is a lot less tangible in services sector, the people (customers) have to admit that they are in need of help. In the eyes of customers, the concept of a service is often based on just the reputation of a single person as opposed to a corporation. In a product centered firm, the reputation is often built based on the quality of a number of products whereas in a service centered firm, the reputation is built around how well a particular person delivers a service.
The intangible nature of a service limits the customer from physically feeling about it, thus increasing customer uncertainty and cannot be evaluated prior to a purchase. Therefore, the quality is ultimately determined by the customer and the firm would not know about the quality that the customer value unless the firm establishes some kind of a feedback mechanism through which it can collect and analyze customer feedback. The perishable nature of a service makes it unable to store it for future use (e.g. when a client misses an appointment with his/her marketing consultant, the lost time cannot be recaptured). Further, the service’s quality and consistency are subject to great variability because they are delivered by people, and human behavior is difficult to control. Therefore, the customers cannot evaluate quality prior to the purchase of a service like they can compare the quality of different tangible products.
In a service world, the knowledge is the fundamental source of competitive advantage. It is this knowledge about customer needs that maximizes value and contribution to firm’s profits. It is the intelligence about customer that drives firm’s efforts to improve customer value chain, which in turn improve customer acquisition and retention. The cornerstone of the service-dominant logic is customer-centered firm. Therefore, the key resource to competition is knowledge about customers’ needs. So the role of marketing in service centered firm is then, to maximize the profitability of such relationship, interpersonal trust and value.
There are a host of challenges in selling services as they are intangible which means the marketer has to work very hard to make an intangible service appear tangible to customers. It is the people who separate one professional service firm from another. But what makes one firm’s people better than others in the eyes of a customer is the firm’s brand that makes that distinction. In the case of product brands, the tangible include the product itself, price, packaging etc. While in the case of service brands, it is about customer’s experience and satisfaction. Further, the intangible elements include customer’s emotional connections with the product and service. In both product and service based categories, branding is assembling of various marketing mix medium into a whole so as to give the firm an identity. The principles of brand management all remain the same whether a firm is marketing a service or marketing a product. However, the organization of marketing mix will be different but the brand and what it can mean to the customer will remain the same. The aim of branding is to convey brand message, create customer loyalty, persuade customers for the product/service and establish an emotional connectivity with customers. Strong brands alleviate customer’s perceived monetary, social and safety risks in buying products and services. The brand affords customers an opportunity to experience the firm and get a sense of its core values and expertise. The brand is created through advertising, personal experience, word of mouth, list of clients, client endorsements and referrals. The three key aspects of developing a service oriented firm’s brand are:
Value Proposition: It is about clearly articulating what the firm does and the value chain it creates for customers as a result of its service offerings.
Buying Experience: This will provide buyers the opportunity to experience the firm’s core values and expertise.
Differentiation: This is about creating a differing image from others in the minds of customers so they can compare and contrast their options based on firm’s unique approach, offerings and expertise.
From the strategic brand management perspective, measuring brand equity is an important component that can be achieved using qualitative and quantitative research methods. Another popular method is to find out how much customers are willing to pay for a firm’s brand. The traditional marketing mix (4Ps model) is primarily useful for tangible products whereas the extended marketing mix (7Ps model according to Booms and Bitner) is more ideal for service oriented firms. The marketing mix is a tool to assist in defining marketing strategy. The same can be calibrated on a frequent basis to the changing needs and other dynamics of the marketing environment.
Marketing Mix Comparison for both Service and Product Categories
Price – It is the amount the customer must exchange to receive the product or service offering. While reducing the costs through improving manufacturing and efficiency, the marketer needs to increase the perceived value of the benefits of the product or service to the customer. It is the only marketing mix element that generates revenue and everything else represents a cost. The price helps a firm to position in the marketplace. Further, this gives an indication to potential and existing customer as to where to place the firm in relation to its competitors. Existing customers are generally less sensitive about price than new customers, which is a good reason to look after them well.
There are a number of pricing policies which a firm may adopt and the choice of policy depends on:
- The type of product/service being marketed
- The competition in the market
- The price which people would be willing to pay
- The cost of production being covered
Pricing Policies
- Market-led Pricing – This policy is based on the prices charged by competitors
- Destruction Pricing – This policy tries to put other firms out of business
- Cost-based Pricing – This policy is based on the costs incurred in making and selling the goods
- Penetration Pricing – This policy sets a low price at the beginning and increases it later
- Price Skimming – This policy charges a high price at the beginning and reduces it later
- Price Wars – This policy cuts prices very low in order to take sales away from competitors
Inc.com published an article in 2009 by Elizabeth Wasserman on How to Price Business Services which covers the nuts and bolts of pricing strategy for service oriented firms.
Place – It is through which products and/or services flow from the manufacturer/ service provider to the user or consumer. In other words, it is the place from which the customer buys a product or service and means of distributing the product to that location and so the location information is important and must be appropriate and convenient for the customer. In the service centered industry, the distribution is mostly perceived as direct or personal.
Product – For some, a product is simply the tangible, physical item that we buy or sell. For many others, the product is considered as intangible service. There is no point in developing a product or service that no one wants to buy. In order for a firm to be successful, it is important that it must invest in finding out the unmet needs in the market and then develop the right product or service with the right level of quality to meet those needs now and in the future.
Promotion – It has become very important element of the marketing mix to create a unique marketing proposition for the product or service. If the customers do not know about product or service, they will not buy them even if they are the best product or service. Good promotion is a two-way communication and it paves a way to communicate with customers. Promotion includes activities like branding, advertising, public relations, corporate identity, sales management, special offers and trade shows. It must gain attention, be appealing and convey a consistent message that will give customers a reason to choose a particular firm’s products/services over its competitors. Further, promotion is important not only at the onset of a new product launch, but as an ongoing process throughout its life to let customers reminded about it if sales levels are to be maintained.
People – It is an essential marketing mix element for both product and service industries. It is important to engage the right people who are properly trained with the customers so they can create the benefits of customer value chain activities. The marketer should periodically examine to make sure the product or service that account for the highest percentage of sales should have adequate after sales customer service support.
The next two P’s are traditionally would be applicable in service based industry and in B2B business.
Process – The process with which the service being delivered to the customer and the behavior of those who deliver are very crucial to customer satisfaction. The marketers must periodically examine to reduce wait time particularly after sales support which is a vital source of income and returning value. It is one of the P’s that is very vital and a great source of competitive advantage, if used wisely.
Physical Evidence – Since a service cannot be experienced before it is delivered, customers can perceive the use of service as a risky affair because they are buying something intangible. This uncertainty can be alleviated by helping customers see what they are buying. This is often possible by using case studies, a list of clients served, past performance, client endorsements or testimonials that can provide evidence that the firm keeps its promises. New customers can see these testimonials and are more likely to make a purchase with confidence. Some firms ask their customers for their feedback so that they can develop reference materials. The physical evidence must satisfy the customer expectations. For example, a financial services product will need to be delivered in a formal setting.
Each ingredient of the marketing mix is very important for success and no one element is considered in isolation. All this requires a sound marketing strategy that is well-coordinated that makes the most effective use of resources and budgets available. These days, we are seeing increased trend in transition between an economy based on tangible goods to an economy driven by information and services. This movement, enabled by developments in information technology, permeates all sectors, from labor intensive, goods-based industries to information products. Since progress in information technology is not likely to cease, the firms’ service orientation will only increase in the future.
Market Opportunities for Mobile Solution Providers
The use of smartphone and tablets in the enterprise is accelerating the mobile solution market. The market penetration is high in the mobile world mostly driven by customer experience. Furthermore, the opportunity presents new and innovative ways to interact with both internal and external stakeholders of a firm. The developing market offers a host of opportunities for mature mobile applications customized for local needs that were already established in developed markets (e.g., Mobile Pay and Mobile Banking). According to CNET News , ABI Research reported that Mobile app revenue will soar to $46 billion in 2016 which includes pay-per-download, in-app purchases, subscriptions, and advertising.
The main drivers and obstacles for mobile solutions are identified from both internal and external stakeholders. In 2012, a leading industry research, analysis and consulting firm SMB group published a mobile study overview. This study identifies the following major drivers and obstacles for mobile adoption in the enterprise. A more detailed view of drivers, obstacles and market size are available in SMG group’s study on the mobile market. Additionally, SMB group also published a presentation on helping mid-market businesses build a successful mobile solutions strategy. Further, SMB predicts 19% of businesses are planning to use mobile services to support business functions in the next 12 months.
According to SMB, the major drivers for mobile adoption are:
- Quicker access to people and information that helps in making better and faster decisions (59%).
- Boosts productivity (59%)
- Work more easily from a remote field, home, and in other locations (57%)
- Increasing employee demand for mobile devices and services
- Customer/partner/supplier pressure to use mobile devices and services
- Perform specific business functions remotely (25%)
- Improve customer service (28%)
- Grow sales (23%)
According to SMB, the major barriers for mobile adoption are:
- Security Concerns (49%)
- Concerns about storing sensitive data(42%)
- Lack of resources to develop and support mobile solutions (29%)
- Concerns that employees will use them for personal use (31%)
- Uncertain about Return on Investment (33%)
- Poor Performance
- Cost of developing mobile solutions (44%)
According to an IBM white paper on Enterprise Marketing Management, the four prominent challenges that concerns Chief Marketing Officers (CMO’s) today are data explosion, social media, proliferation of channels and devices and shifting consumer demographics. These complexities make marketing more complicated today. However, this also opens up opportunities for mobile solution providers to alleviate the CMO’s complexity gap by providing marketers with an integrated mobile platform that can enhance the user experience for marketers in collecting data that augments customer profile, analyze data for actionable insights, decide appropriate marketing action, deliver engaging messages and capture reactions and manage marketing processes and measure results.
According to SMG groups market research, most untapped opportunity for mobile solution providers is in developing mobile applications for very small businesses. Among them the notable opportunities are:
- Customer Management
- Social Media Marketing
- Delivery and Shipment Tracking
- Time Management & Time Capture
- Field Service Applications
- Payment Processing
- Business Analytics
- Employee Payroll
- Mobile Marketing and Advertising
- Sales force Automation
- Supply Chain Integration
- Fleet Asset Tracking
- ERP System Integration
- Bring Your Own Device (BYOD) Opportunities
- Language Translation Services
- Businesses that provide only web based services now
Market Segmentation
The key element of an effective market segmentation is to identifying a smaller group of users from a larger market who share specific needs and who look to one another as a trusted reference. There are multiple benefits in segmentation. First, it helps in word of mouth publicity and works best among those who share a need and a means to communicate a solution. Second, access to each other means the marketer can use common resources to reach those segments. Third, testimonials, references, feedback from trusted people buying services are a powerful influence. Fourth, it will help you learn faster about your mobile solutions market fit. Fifth, it will help you identify unoccupied market segment that will lead you to become a market leader. For firms that are in nascent stage, it is important to allocate your limited marketing resources in the areas where you are certain to gain a competitive advantage. Further, market segmentation enable firms to maximize capital efficiency by using existing resources.
Most mobile solution providers enter the existing market claiming to offer unique solutions. With a unique configuration targeted at a specific user community, it will not only help the new entrants to capture the market share from incumbents, but expands the size of the market by selling to new customers brought to the market by the unique service offerings. This approach offers customers an opportunity to use your service offerings in lieu of your competitor’s solutions because your solution better matches their needs or you will acquire new customers because existing service offerings never matches their needs. This approach is particularly helpful if you plan to offer low-cost and niche mobile solutions to the existing market. While this approach is helpful, it is important to keep in mind that you require a lot of financial resources to keep your competitors at bay.
Evolving HTML5 Mobile Market
In addition to the native mobile app market, there is also a growing trend in the use of HTML5 technology in developing responsive web designs that will provide optimal viewing experience on a range of devices from desktop computers to mobile devices. Building native app may not be suitable for all businesses because of the inherent costs associated with building apps for various platforms. In my research, I found most companies charge premium price for their solutions which means there is a premium market for mobile application development services. However, it is important for mobile solution companies to do their own due diligence and competitive research on pricing before deciding their pricing strategy. A premier market research company sourcingline.com published a list of top mobile application development companies on their website. Please click here to see their published list.
HTML5 technology offers multiple benefits over developing a native mobile app. First off all, businesses may be able to leverage their existing skill set in developing and supporting a custom mobile application using various popular mobile application tool kits that are available in the open source world without having to go through different vendor’s app store approvals. Second, businesses can leverage their existing infrastructure or an outsourced cloud solution to host their mobile business applications. In my opinion, the businesses that do not have internal IT functions or whose core expertise is not IT, may find it economical in establishing a strategic alliance with a suitable mobile solutions provider to help them in building both employee focused productivity apps or enterprise mobile business apps that might need integration with external stakeholder systems. However, HTML5 is an evolving technology standard and a wide adoption in the industry is a couple of years away from now.
The average cost of developing native mobile applications for the most popular platforms are given below. However, the price and the time varies depends on the complexity of the business need.
source: Developer Economics 2012 | www.DeveloperEconomics.com
Vigil Bose (Vigil) 