Wi-Fi Value-Added Services Improve the Retail Bottom-line

Retailing has always been a tough business.  But, the move to online shopping, the challenging economy and changes in shopper’s behavior has placed even more pressure on traditional retail margins.  Retailers are constantly looking for ways to get more people in to their store and to spend more.  Traditional retailers have long envied the massive amounts of valuable data that online retailers have available to help them better understand customer behavior and implement winning marketing tactics.  Online retailers know such valuable information as: how frequently customers return, how long they spend on the site, what they looked at but didn’t buy and where they went before and after coming to the site.  With this information, online retailers are able to rapidly adjust prices, promote certain items, and re-configure the layout of the site in almost real-time in order to increase the probability and value of a sale.  None of these data and insights has been available to bricks-and-mortar retailers - until now.  The increasing availability of Wi-Fi in retail locations is changing all of that.

Shopping malls and retailers are increasingly offering Wi-Fi to their customers as a service to connect their mobile devices to the Internet.  Hidden in this valuable service to the mobile user is an incredible amount of information and insight that retailers can exploit to deliver tangible value to their bottom-line.  In a previous blog, I identified 8 core technical capabilities available in many Wi-Fi networks that allow the collection of massive amounts of useful information that can be turned into key enablers of business value.  Hyper-sensitive location information, device details, identification of returning customers, and sophisticated path analysis are just some of the shopper data that are captured by the Wi-Fi networks.  Best of all, retail venues can now effectively collect valuable information from anyone who enters their store with a Wi-Fi activated mobile device in his pocket.  With over 50 percent of adults carrying Wi-Fi enabled smartphones, and growing, retailers can now capture information on the majority of their shoppers.  However, this does not raise personal privacy issues because only the MAC address of the device is collected and the information is aggregated across all users.

Aggregating the information available from the Wi-Fi access points provides unique insights into where people go, their common paths, and most visited places. Mall owners, for example, are using this detailed data to justify higher rents for stores in high-trafficked areas or to measure the impact of signage on customer traffic patterns. Trend analysis and history comparisons of data can show the effectiveness of changes in marketing programs or store layout. Retail chains are using footfall traffic patterns derived from Wi-Fi connection data to help them better locate new stores in highly trafficked sites of target shoppers.  Shopping malls and large box retailers can use the data to improve operations and security. Real-time shopper traffic flow patterns highlight congestion points and areas demanding more shop assistants, cashiers or security guards. 

Retailers are combining the location and user information from the Wi-Fi access points together with customer relationship management (CRM) and customer loyalty data to provide personalized experiences and offers to shoppers at points of purchase in the stores. Equally, retailers are combining location-based services and shopper services to provide additional product information and help customers navigate throughout the store.  While these Wi-Fi Big Data services may raise privacy concerns, shoppers are typically receptive to the idea if they have control over how their information is used and they are getting real value in return for sharing it with the retailer.  Our mobile user research confirms that shoppers are interested in an enhanced in-store shopping experience (52 percent were either somewhat or very interested) because they think that it will make them more efficient and enhance their shopping experience. Mobile users particularly liked the idea of personalized deals and coupons that would be presented when they were looking to buy something, rather than before or after as is now typically done.  

Despite concerns of show-rooming and loss of in-store sales to online purchases, many leading retailers are embracing mobility and including it as an integral part of their strategies. And many are outfitting their stores with public Wi-Fi access as a cornerstone of those strategies.  Wi-Fi value-added services not only allow retailers to compete on more equal terms against the data-driven world of online retailing but the returns more than justify the investment in the Wi-Fi infrastructure.  Retailers are finding that value-added services and insights are driving up customer spend, store dwell time, and allowing them to run more effective marketing campaigns, resulting in a better overall customer shopping experience.

Further details on how service providers can create new and innovative sources of value from Wi-Fi can be found in our recent white paper:  Wi-Fi: New Business Models Create Real Value for Service Providers

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The Mobile Paradox

Today’s world is characterized by what I call the “mobile explosion”—an environment defined by mobile cloud becoming a platform for delivering everything. It is a world of heterogeneous networks, licensed macro small cell networks, and unlicensed small cell networks (Wi-Fi for example), all seamlessly combined. In this world, however, I believe we are facing a mobile paradox: on the one hand, there is a staggering demand for data from our smartphones, tablets, and other connected devices; on the other hand, the telecommunications industry is grappling with business and monetization challenges around profitability, how to build up these networks fast enough, and competition from over-the-top (OTT) operators.  But, operators are struggling with building the business case and understanding how to make Wi-Fi pay.

The much quoted Cisco Visual Networking Index (VNI) predicts that global mobile data traffic will increase 13-fold from 2012 to 2017, reaching 11.2 exabytes per month. In parallel, the use of unlicensed small cell networks (Wi-Fi) for Internet access is exploding as more mobile devices are Wi-Fi-enabled, the number of public hotspots expands, and user acceptance grows. Until recently, most technologists and mobile industry executives viewed Wi-Fi as the “poor cousin” to licensed mobile communications.  And they most certainly never saw any role for Wi-Fi in mobile networks or their business. The explosion of mobile data traffic has changed all of that. Most mobile operators now realize that offloading data traffic to Wi-Fi can, and must, play a significant role in helping them avoid clogged networks and unhappy customers.

In the “Business Models and Monetization Video” in Big Thinkers in Small Cells, my colleagues and I discuss revenue opportunities and challenges mobile operators face today with small cells, both licensed and unlicensed. Mobile operators understand the business case behind offloading data traffic to cheaper Wi-Fi—deferring significant capital expenditures for further build-out of the licensed network.  However, operators around the world are asking if there is more to Wi-Fi than just data offload (the simple answer is “yes”). Or, more appropriately, how do they actually make money from Wi-Fi—turning a cost of doing business into profitable business models?

The Cisco Internet Business Group (IBSG) has identified and built business cases with service providers around additional ways to benefit from Wi-Fi, beyond data offloading. Our recent white paper (Wi-Fi: Service Providers Can Make Money with New Business Models) describes each of these business models in more detail – laying out the economics and providing case studies of success operators. 

As the pervasiveness and customer adoption of Wi-Fi continue to grow exponentially, these new business models provide meaningful opportunities for service providers. For example, we are seeing home broadband providers improve their customer retention by 10 to 15 percent by bundling their broadband service with access to free public Wi-Fi. In addition, we believe that operators can generate $10 to $15 per business user monthly by establishing a Wi-Fi-enabled “Business Anywhere Service.” Or, the could drive an incremental $100-$150 per retail store by delivering enhanced, value-added retail experiences, on top of the $50-$250 that operators charge per wireless access point to run a managed Wi‑Fi service for retailers. 

But, don’t just take my word for it. End users tell us that they want these new Wi‑Fi business models and truly see value in them. Unique Cisco IBSG customer research revealed that mobile users not only appreciate the lower cost and unlimited data usage of Wi-Fi, but also greatly value the flexibility and convenience that it offers. In particular, customers were very interested in the national/international roaming business model and the Wi-Fi value-added retail offering that would make them more efficient, save them money, and enhance their shopping experience. Remarkably, among U.S. broadband subscribers we surveyed who have free public Wi-Fi as part of their subscription, 61 percent said the inclusion of Wi-Fi was “very” or “extremely” important in their choice of broadband provider. Wi-Fi is a good way not only to attract subscribers, but to keep them as well.

Of course, not all business models are attractive to all service provider segments. In addition to aligning the business models to different industry segments, providers need to set priorities and plan where to start. 

We feel that Cisco IBSG’s research, insights, and approach arm SPs with guidelines for setting priorities and determining which approach is best for making real money from all small cell technologies. Click here to learn more about what additional Big Thinkers in Small Cells have to say about Business Model and Monetization Opportunities.

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The Next Generation of the Internet Is Mobile

No one could have imagined the fundamental impact the Internet would have on both society and the economy—changing our lives forever. The Internet has already transformed the way we work, live, play, and learn. And, this is only the beginning.

The extraordinary growth and transformation of the Internet is unprecedented, but what does the future of technology hold, and where is the Internet heading? Business executives, technologists, and policymakers are not only asking these questions—they also are looking for a map of the future that will help them assess changes in the Internet, and possible out-comes and implications of those changes for business, national policy, and regulation.

Recent research by Cisco IBSG has identified 10 major technology trends that we believe are shaping the direction of the Internet today and, most certainly, will change its direction in the future.

1.    A World Gone Mobile

2.    Cloud: A New Way of Delivering Technology

3.    Everything Can Be Delivered Over-the-Top

4.    Big Data: The New Oil

5.    A Global Village: Connecting the Unconnected

6.    Powerful Devices: The World in the Palm of Your Hand

7.    Bring Your Own Device: The Consumerization of IT

8.    The Internet of Things Is Already Evolving

9.    The New Mobile

10.  Converged Networks: A New Platform Architecture

Mobility is core to each and every one of these trends.  Whether it is the access, the devices that we are constantly carrying or the cloud services and big data that power our applications and experience, mobility is at its heart.  Mobility is redefining network architectures, and allowing both people and things around the world to achieve a level of connectivity that is unfathomable in a non-mobile world.  So, no matter how the Next Generation of Internet evolves one thing is certain: it will have mobility at its core.

Cisco IBSG has developed a plausible scenario for how these 10 disruptive technology trends might come together to shape the future of the Internet. We call this the “New Digital Explosion.” Why “new”? Changes in devices, networks, applications, delivery models, user behaviors, and mobility will create a step change in demand for and reliance on the Internet. 

The New Digital Explosion is not just about technology; it covers all aspects of consumers, the information and communications (ICT) industry, and global/national economies. One thing is certain: the New Digital Explosion will change the ICT industry, impacting all players across the value chain: There will be greater competition, redefined value chains/business models, and new strategies, resulting in both new challenges and business opportunities. Furthermore, the role of government will need to evolve to create an environment that encourages business and technology innovation, and investment and competition to the greater benefit of their societies.

Cisco IBSG’s recent point of view, The Next Generation of the Internet: Revolutionizing the Way We Work, Live, Play, and Learn, provides details on the 10 major technology trends, maps out the future of the Internet, and discusses the implications and opportunities for Internet businesses and governments in this new hyper-connected world.

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Creating a Wi-Fi Monetization Virtuous Circle

In the decade or so that Wi-Fi has existed, most technologists and mobile industry executives viewed it as the “poor cousin” to licensed mobile communications.  Now mobile operators around the world are asking how they can effectively use Wi-Fi to help them cope with the huge surge in mobile data traffic and to meet customer needs and expectations.  In addition, they are all eager to understand how they can make money from Wi-Fi and to make the business case to justify investments in deploying Wi-Fi networks. 

Based on extensive research and consultative engagements with leading global service providers Cisco has identified a number of new and innovative business models which we characterize as The Wi-Fi Monetization Pyramid – 3 layers of monetization opportunities which support the subsequent layers below (described in detail in our recent white paper W-Fi: New Business Models Create Real Value for Service Providers).

Approaching the fundamental question of Wi-Fi monetization as a pyramid, or series of layers of business opportunities, creates not only significant new business value for a service provider, but also a virtuous circle that leads to ever-increasing sources of new Wi-Fi value. As the Wi-Fi Monetization Virtuous Circle outlined below shows, the reinforcing network and scale effects of Wi-Fi investments not only deliver unique business benefits at each of the levels, but also establish a valuable platform to exploit additional monetization opportunities at the next level.

 

Deploying an initial public, home, and business Wi-Fi network provides a compelling ROI through Baseline business models. However, after this initial network is established there are now New Revenue opportunities that can be built on this platform. And, expanding the network through managed services and roaming agreements at key venues allows service providers to offer additional Value-Added Services to extract new sources of value from the Wi-Fi network. Now we have come full circle: Expansion of the network to new venues and the addition of new services make the network even more valuable to end users, making the ROI for the baseline models even higher.

 

Service providers who are successfully delivering business value from Wi-Fi do not view individual monetization opportunities in isolation.  Rather, they view investments in Wi-Fi as a platform upon which they can deliver a pyramid of new business models, creating a Monetization Virtual Circle of increasing business value.

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Unlocking the Business Value in Wi-Fi Networks

Wi-Fi networks seem to now be everywhere.  Once primarily confined to the home or office, we now expect Wi-Fi access in coffee shops, hotels, airports, stores and even in sport stadiums.  Not only are these Wi-Fi networks providing valuable Internet access to appreciative mobile users, they are collecting massive amounts of useful information.  Innovative businesses and operators are now learning how to unlock this valuable information to turn Wi-Fi networks into key enablers of business value.  We have identified eight technical characteristics of Wi-Fi networks that can help to deliver real value to the bottom-line:

1.       Recognizes All Wi-Fi Enabled Devices

Recent research by Cisco IBSG shows that consumers have an average of 2.6 mobile devices, most of which are now Wi-Fi enabled.  These devices are constantly signaling of their existence to Wi-Fi networks.  As a result, Wi-Fi access points are constantly collecting information on these devices and the movements of their owners without users having to authenticate on the network.  This means that venues are collecting information on a large number of people at an – effectively anyone who enters with a Wi-Fi activated mobile device in his pocket.  However, this does not raise personal privacy issues because only the MAC address of the device is collected and the information is aggregated across all users.

2.       Hyper-Sensitive Location

Triangulation from the access points can currently locate a mobile user to within 3 to 4 metres.  However, new technologies will make this even more accurate, down to 1 to 2 metres.  This means that location targeted advertising can be extremely sensitive to locations within a store or to specific stores within a shopping mall.  Equally, accurate and useful mapping and other location-based services can be offered to customers.

3.       Capture Device Information

By capturing the MAC address, the Wi-Fi network is collecting valuable information on the user’s device, such as type, manufacturer and the speed it moves about the venue.  This information allows businesses to vary their offers, advertising messages, services and customer experience by device type. 

4.       Identify Returning Customers

Capturing the MAC address of the different devices also allows the Wi-Fi network to identify returning customers, including the frequency, interval and the duration of their return visits.   This valuable information allows businesses to differentiate offers, advertising messages, services and customer experience between new and loyal customers.

5.       Sophisticated Path Analysis

Data analytic tools by Cisco allow sophisticated, user-friendly analysis of the extensive valuable data collected by the Wi-Fi networks.  These tools can display detailed maps and information of where and when people move about a venue.  Airports are using this to improve their operations in real-time and identifying opportunities to remove bottlenecks to the flow of travelers.  Equally, shopping mall owners are using it to justify different rents in the mall based on the amount of footfall in front of different shops.

6.       Advanced Filtering

Advanced filtering allows business users to drill down on the data and analytics that are most relevant to their business.  For example, users may want to identify the percentage of people who spent more than 10 minutes in a specific part of your store or shopping mall to evaluate the effective of their in-store merchandizing or marketing campaigns.

7.       Push Information to the Browser

Advanced Wi-Fi networks now have the ability to push information to the browser of the mobile device, giving the user the ability to accept or reject it.  This powerful capability means that businesses can now deliver targeted and rich messages directly to the browser, rather than just messages or banner ads.  Not only does this offer the ability to deliver much richer information, but the customer is much more receptive to receiving it.

8.       Analytics On Anything Happening on the Network

Future capabilities, currently under development, will allow business users to analyze anything that is happening on the Wi-Fi network.  For example, show me where those people using Facebook spend their time in the venue, and how often they return.  Or, show me where people are surfing price comparison sites in the store.  Imagine the value to a retailer of then being able to automatically push a price-matching offer to that price sensitive customer? 

The recent white paper (Wi-Fi: Service Providers Can Make Money with New Business Models) by Cisco IBSG describes the viable Wi-Fi business models for turning these technical capabilities into true business value. 

We are only just beginning to mine the valuable data available from Wi-Fi networks.  Innovative and pioneering businesses are showing us what can be done and the true business value that can be extracted from Wi-Fi Big Data.

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Creating Real Business Value from Wi-Fi

The insatiable demand for smartphones, tablets, and other connected devices is generating staggering amounts of mobile data. The recently released Cisco Visual Networking Index (VNI), predicts that global mobile data traffic will increase 13-fold from 2012 to 2017, reaching 11.2 exabytes per month.  In parallel, the use of Wi-Fi for Internet access is exploding as more mobile devices are Wi-Fi enabled, the number of public hotspots expands, and user acceptance grows. Until recently most technologists and mobile industry executives viewed it as the “poor cousin” to licensed mobile communications.  And they most certainly never viewed any role for Wi-Fi in mobile networks or their business.  The explosion of mobile data traffic has changed all of that.  Most mobile operators now realize that offloading data traffic to Wi-Fi can, and must, play a significant role in helping them to avoid clogged networks and unhappy customers.

Mobile operators understand the business case behind off-loading data traffic to cheaper Wi-Fi --deferring significant capital expenditures for further build-out of the licensed network.  However, operators around the world are asking if there is more to Wi-Fi than just data offload? Or, more appropriately how do they actually make money from Wi-Fi -- turning a cost of doing business into profitable business models?  The simple answer is “Yes.” 

Cisco views the Wi-Fi monetization opportunities as a pyramid, or set of layers.  Each of the layers supports the subsequent layer above.  Not only is it extremely difficult to make a compelling business case for a stand-alone layer without successfully implementing some of the business models in the previous layers, but it is not in the SP’s strategic interests to focus on only one of the layers.  However, the SP and its customers derive increasing value as they move up the Wi-Fi Monetization Pyramid.

The core layers of Wi-Fi monetization opportunities in the pyramid, starting at the bottom, include:

1.       Baseline – using Wi-Fi for broadband retention or mobile data offload offer a very compelling return on investment, largely based on cost reductions, to justify further investment in other layers of monetization.

2.       New Revenues – leveraging the Wi-Fi network deployed in the Baseline layer to offer premium connectivity services, managed hotspots or Wi-Fi roaming offers opportunities to generate significant new revenues from Wi-Fi.

3.       Value Added Services – increasing new opportunities are emerging to leverage the Wi-Fi network developed in the previous layers to provide new and innovative services related to advertising, location, analytics, retail store interactions and special venues, such as sporting facilities.

The recent white paper (Wi-Fi: Service Providers Can Make Money with New Business Models) by Cisco IBSG describes each of these business models in much more detail – laying out the economics and providing case studies of success operators. 

The rapid growth of mobile data and the popularity of Wi-Fi have created a number of new and innovative money-making opportunities for SPs. The question is no longer “Can SPs make money from Wi-Fi?” Rather, it is “Where should they focus their efforts, and when should they deploy?”  By methodically climbing the layers of the Wi-Fi monetization pyramid, SPs can create compelling new business models and sources of revenues and business benefits to readily justify investments in building robust Wi-Fi networks and operational capabilities.

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The Path to Wi-Fi Profitability

The insatiable demand for smartphones, tablets, and other connected devices is generating staggering amounts of mobile data and placing a crushing burden on networks. One barometer is the recently released Cisco Visual Networking Index (VNI), which predicts that global mobile data traffic will increase 13-fold from 2012 to 2017, reaching 11.2 exabytes per month.  The study also predicted that two-thirds of all mobile traffic will be video by 2015, and an additional 20 percent of this traffic will be devoted to both the mobile web and mobile data.

In parallel, we are witnessing a “perfect storm” in both Wi-Fi availability and customer acceptance that is resulting in a worldwide rise in the popularity of Wi-Fi.  Consumers can now readily use their numerous Wi-Fi enabled devices in their homes, offices and increasingly in many of the other places where they spend their lives.  Mobile users are actively searching out Wi-Fi connectivity as a cost-effective and adequate substitute or complement to mobile access to the Internet. 

Based on this Wi-Fi “perfect storm” and the explosion of mobile data traffic traversing their networks, Service Providers realize that they now need to pay attention to Wi-Fi.  In our conversations with SPs around the world they now recognize that that Wi-Fi is more than just data-off load and needs to be part of an integrated access strategy and architecture.  However, they are all anxious to understand how they can make money from Wi-Fi.  They want to understand what are the winning Wi-Fi business models? 

Cisco views the Wi-Fi monetization opportunities as a pyramid, or set of layers.  Each of the layers supports the subsequent layer above.  Not only is it extremely difficult to make a compelling business case for a stand-alone layer without successfully implementing some of the business models in the previous layers, but it is not in the SP’s strategic interests to focus on only one of the layers.  However, the SP and its customers derive increasing value as they move up the Wi-Fi Monetization Pyramid.

The core layers of Wi-Fi monetization opportunities in the pyramid, starting at the bottom, include:

1.     Baseline – using Wi-Fi for broadband retention or mobile data offload offer a very compelling return on investment, largely based on cost reductions, to justify further investment in other layers of monetization.

2.     New Revenues – leveraging the Wi-Fi network deployed in the Baseline layer to offer premium connectivity services, managed hotspots or Wi-Fi roaming offers opportunities to generate significant new revenues from Wi-Fi.

3.     Value Added Services – increasing new opportunities are emerging to leverage the Wi-Fi network developed in the previous layers to provide new and innovative services related to advertising, location, analytics, retail store interactions and special venues, such as sporting facilities.

My recent white paper (Wi-Fi: Service Providers Can Make Money with New BusinessModels) by Cisco IBSG describes each of these business models in much more detail – laying out the economics and providing case studies of success operators. 

The rapid growth of mobile data and the popularity of Wi-Fi have created a number of new and innovative money-making opportunities for SPs. The question is no longer “Can SPs make money from Wi-Fi?” Rather, it is “Where should they focus their efforts, and when should they deploy?”  By methodically climbing the layers of the Wi-Fi monetization pyramid, SPs can create compelling new business models and sources of revenues and business benefits to readily justify investments in building robust Wi-Fi networks and operational capabilities.

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