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Business model V: Private pull approach II

- Expected ad perception: affinity;
- Mobile network operator-centric;
- User owner: retailer;
-Incentives for the user: guaranteed minimum discount and coupons from retailer;
- Source of payment: user;
- Target group: shoppers;
- Revenue stream: user - retailer - mobile network operator - content supplier;

The user is a customer of the retailer and as such he is subscribed to a service which is liable to pay, e.g. through quarterly payments to the retailer. The users’ benefit is a guaranteed minimum discount on all or at least selected items of the retailer, thus the subscription fee has to equal some sort of monetary compensation if the users should be convinced. Additionally, the users may get coupons on special products as well.
Although the user is subscribed to a mobile network operator, his relationship in respect to LBA is solely referred to the retailer.

The actual LBA service, however, is provided by the mobile network operator. Thus, the retailer has to pay the operator for the usage of its service. This will most likely be based on the number of the retailer’s subscribers, the number of messages sent or simply through a fixed basic fee. The costs for this pull service is fully covered by the retailer, i.e. the users do not have to pay anything but the subscription fee (flat rate).

Application developers, middleware providers and location technology vendors receive one-off payments from the mobile operator whereas the content supplier participates in the persistent revenue stream. In the case that the mobile operator might not be able to handle all tasks itself, an alternative approach could consist of the outsourcing of subtasks to a mobile advertising agency, e.g. the creative work. It is also possible to consult the mobile advertising agency as an expert due to their experienced gained within this field. The provision of know-how by the agencies is already a quite often encountered approach nowadays. This scenario describes a case typically for big shopping chains with a well-known label and a high customer base, e.g. Karstadt in Germany, Galeries Lafayette in France or Sears in the USA. Otherwise the costs for the implementation of LBA would be to high and hence not reasonable for small stores. Besides, a small shop on its own is just not able to make offers which are appealing enough to convince the users. It can however increase its attractiveness by establishing a partnership with other shops.

The big disadvantage of this business model consists in its operator-centric construction. The most dominant actor can shape the development path of LBA, always solely focusing on his own interest, and therefore not necessarily for the sake of LBA itself. The mobile network operator is expected to inhibit any possible entrance of players that might endanger its position and force it to cede some of its LBA market share. However, it is questionable if the mobile operator is able to tackle all tasks alone, especially as LBA does not belong to the core business and it barely has any experience on this field. Furthermore does the direct customer management of every single retailer seem to be exceeding the resources of the mobile network operator. Apart from that this model only applies to LBA within the same mobile communication network. It seem to be infeasible to exploit LBA independently from the specific network because no operator will share the access to sensitive information of its own customers with any competitor. Without the interoperability, however, the development and growth of LBA will be dampened.

Reported by

YellowMap AG
Wilhelm-Schickard-Strasse 12
76131 Karlsruhe
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