The Future of Commerce Starts With a Tap
January 19, 2013 Editor 0
Over 100 million phones will ship with NFC this year. Google has built NFC into the Android operating system. Nintendo uses NFC in the new Wii U gaming console. At the recent Consumer Electronics Show, Samsung, LG, and Sony unveiled NFC-enabled smartphones, televisions, and appliances.
So what’s NFC? It technically stands for Near Field Communications, and it enables mobile devices like smartphones to communicate with nearby devices and objects with a simple tap. It works like this: A chip in your phone sends out a radio wave that is picked up by another NFC device or any object with an RFID tag. The tag is small, about the size of a dime, and can be embedded in or attached with a sticker to a product or advertisement. When tapped by a device, the tag tells the device what to do, such as open a web site, transmit a file, download an app, or make a payment.
Most of the buzz around NFC has been around payments. Companies like Google and Verizon are hoping people will pay by tapping their phone instead of swiping a card. But the real potential for NFC goes far beyond payments. It has the potential to, as no technology before, bridge the gap between virtual and real.
Consider a recent pilot for Kraft Foods. In select grocery stories, small signs were placed on shelves in front of Kraft cheese and Nabisco cookie brands. The signs invited consumers to get recipes, download a mobile app, or share with friends. Consumers could either tap with an NFC-enabled device or snap a QR code — up to now the main technology for linking mobile devices to physical displays. The results were quite remarkable. People were 12 times more likely to tap than snap. Considering that the ratio of QR to NFC-enabled phones is currently about 10 to 1, this means tapping was 120 times more engaging than snapping.
You might think this was just a novelty effect of new NFC users trying it out. But the data suggests otherwise. More than 36% of shoppers who tapped the sign went on to save a recipe, download the Kraft app, or share with friends. Typically, a consumer spends between five and ten seconds at the shelf choosing a product. But consumers who tapped the sign spent 48 seconds engaged with the brand experience.
In other uses, Activision has utilized NFC technology in its Skylanders video game. The game is unusual in having characters that are both virtual avatars and physical figurines. When you place a Skylanders figurine on a special “portal” attached to the game console, the portal reads the RFID tag in the figurine, and activates that character in the video game. The unique experience plus the added revenue from selling the figurines has made Skylanders a billion-dollar franchise.
These examples reveal three key advantages of NFC over existing technology:
(1) NFC removes friction.
NFC saves time. On the Web, people abandon a site if it takes more than a couple seconds to respond. The same effect holds true on mobile devices. QR codes take about ten seconds by the time you load the app, scan the code, and load the page. NFC is always available. Just a simple tap and you have your connection. In my own experience, I was recently walking in New York, talking on the phone with my headset. I saw an NFC-enabled advertisement on a bus stop. The ad offered a free Cee Lo Green song. Without interrupting my call, and barely breaking my stride, I tapped the ad and downloaded the song. Try that with a QR code.
(2) NFC connects the online and offline.
The Skylanders game illustrates the ability of NFC to connect the physical and virtual. Even for a grownup, there is something a bit magical about placing the figurine onto the portal and watching the character appear in the game. NFC will bring the same effect to shopping. Tesco already achieved dramatic results with its virtual grocery store in Korean subways, enabling people to shop while they wait for a train. And beyond shopping, leading manufacturers are already exploring how to embed tags into everyday products that can be activated with a tap of a phone and enable a new kind of engagement and loyalty.
(3) NFC connects the dots.
On the web, we are accustomed to having sites remember things about us and create a seamless experience from one page or visit to the next. With a few clicks, we create wish lists, get recommendations, use loyalty points, or build shopping carts for future purchases. The physical world is far less seamless. Wish lists require a registry process usually reserved for babies and weddings. Recommendations require a knowledge salesperson or personal shopper. Loyalty rewards require keycards or pin numbers. Shopping carts saved for a future purchase require layaway programs. What has retailers so excited about NFC is the ability to bring the seamless connectivity of the offline world to the online world.
The potential for a new model of mobile marketing is welcome news for brands struggling to find effective ways to engage consumers on mobile devices. Current approaches to mobile marketing focus on geo-targeting — delivering ads to people when they are in a particular location. But geo-targeting can be annoying, intrusive, or even creepy, as depicted by Tom Cruise in the movie Minority Report.
Tap-based marketing solves these problems. Each tap expresses a consumer’s intent and grants the brand permission to serve a relevant experience. This is a fundamental shift from Push to Pull. When there is intent and permission, Big Data no longer becomes Big Brother. Instead, it enables a personal relationship with the brand. With greater permission comes a greater ability to measure the effect of engagement on purchase decisions. We would all like to be able to measure ROI offline with the same rigor we do online.
Marshall McLuhan famously said that media are “extensions of man.” The telephone extended our voice. The computer extended our brain. In some ways, NFC holds the potential to extend our hands. What a computer mouse does for the virtual world, an NFC-enabled device does for the physical world. With a simple tap we can signal an object as something we want to explore, share, remember, or buy. Just as we now click on links and buttons on our screens, we will soon click on ads, objects and products with a tap of our mobile device. This will become increasingly common as more mobile devices are enabled with NFC and more objects are tagged with RFID.
NFC won’t conquer the world overnight, but the ability to make the real world clickable holds great promise. An age of No-Friction Commerce may be dawning. Taps are the new clicks.
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