The Importance of Relevance

By Marc Leclerc

Previously, I discussed the importance of contextual information (identity, presence, group lists, location, session, the weather, etc…) and how it can be used to anticipate peoples’ future actions and trigger an offer of services they will likely want. More specifically, the service provider takes on a more active role by proposing actions to the consumer, making it easier to introduce new services while creating an improved user experience.

This approach could be easily be overused and as a result be a major annoyance to the consumer. Fortunately, context is not the only way to understand consumers’ needs. The most direct way is to simply ask about a person’s preferences and then create a mechanism that can store this information as a "profile" allowing for selective services exposure.

Asking for information is not only smart and polite, but in many jurisdictions it is a legal requirement for consumers to specifically select services which require the use of personal historical data for any purpose beyond its original context. Direct discussions with consumers also gives them a feeling of control over their own information, a significant factor in service adoption rates. Of course, this mechanism could also be augmented passively (without requiring consumer intervention) by collecting users’ purchase choices and activities. However, it is paramount that the consumer decides whether they will allow this information to be collected.

Why would a consumer choose to participate? Well, first let’s review a simple mathematical formula:
Context + Preferences = Relevance

By combining contextual information about a person’s environment with the preferences about what choices this person is likely to make under certain circumstances, a service provider can offer choices that are relevant to the person’s situation and inclination.

Consumers benefit in (at least) two main ways from relevance:

1. It reduces the constant inflow of offers cluttering their message boxes, and 2. The service provider is enabled to reduce or even totally eliminate usage costs via advertising and sponsorships.

Not all spam is useless, otherwise no one would ever act on it, spam would cease to generate revenue and disappear. Actually, some spam are acted upon by the recipients to generate sales. But the sheer volume that makes spam such an annoyance necessitates spending time separating out the chaff from relevant messages. By using "Context + Preferences = Relevance" as a filter, service providers can make timely, targeted offers that are more likely to be of genuine value and acted upon by the consumer.

Opting for quality over quantity is even more important to another crucial stakeholder in the value chain: advertisers. Many people considered advertising to be the bane of modern life — and then spam came along! However, advertising pays for broadcast TV, subsidizes the consumer cost of magazines and newspapers, and informs the public about products they may want and where they might purchase them. The relevance mechanism allows advertisers to reach highly interested consumers who are more likely to pay attention, more likely to buy, and less likely to be annoyed into the arms of a competitor. Targeted advertising is gold for advertisers, and means the service provider can charge a good price, raising ARPU. In fact, taking and improving on a widely-used Internet marketing technique, targeted advertising revenues might even justify offering the service to consumers for free.

What could such a service look like? Here’s an example: Mike leaves the office mid-morning to go visit a customer downtown. He arrives 20 minutes early and notices that it’s cold outside. His mobile carrier knows he is out of the office, downtown and between appointments. While waiting, Mike gets a generated ad message for "20% off a latte" at his favorite coffee chain. In mid-summer, the same situation repeats itself. However, this time its sweltering downtown and Mike instead gets a different offer for "20% off an iced cappuccino."

Let’s explore a more complex scenario. After leaving the office, Mike is standing in the parking lot when he receives a message with detailed driving directions, allowing him to avoid current traffic hot spots. He also gets a message from his wife reminding him to buy apples, milk and bread. Attached to the message is a map showing his favorite grocery store’s location and a brief ad of the week’s special on fruit. On the way home he receives a route update due to a traffic accident. Included with the update is a map directing him to the next-closest grocery store of the same preferred chain along his new route.

These are relatively simple ideas, but the principle remains: combine context with preferences to offer choices relevant to consumers’ changing situations and desires. This supports and enhances the two-sided business models of Telco 2.0 and Web 2.0, generating revenues for carriers from both subscribers (ARPU) and service providers (advertising, web service providers, retailers, etc.). Perhaps most importantly, this approach leverages key capabilities of telecom networks, including IMS, to deliver value to consumers, provide rich communications services and new ways to monetize them, and build an offering that can even compete effectively with free services on the Internet.

Marc Leclerc is Manager, Global IMS Expert Center, Ericsson (www.ericsson.com).

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