McDonald's Mobile Trial Raises Question: Who Owns The Data?

A group of 109 McDonald's restaurants in the Salt Lake City region are doing a mobile commerce trial, with participating consumers getting free iced coffee. Although those 109 stores are barely one coffee bean's worth, given the $22.8 billion chain's 31,377-store network, the trial is interesting both for its capabilities and for how much data-control McDonald's was willing to give up.

The trial started April 7 and is scheduled to run until April 27, with McDonald's in parts of Colorado, Nevada, Utah, Wyoming, Nebraska and Arizona. But the area is really considered to be Salt Lake City and its surrounding communities, said Paul Barrera, the McDonald's marketing manager responsible for the Rocky Mountain region.

McDonald's is working with a mobile coupon and discount firm called Cellfire. The San Jose-based company offers the mobile service free to consumers.

McDonald's is launching iced coffee as part of some new menu options and "part of our objective was to create additional awareness," Barrera said, especially among the younger consumers that McDonald's assumes will be receptive to a mobile coupon campaign. "The key thing is for us to say, 'Let's see how many young adults will know about this product.' The goal really was to get them to try the product," he said.

Cellfire told McDonald's it has 4,000 subscribers in the Salt Lake City region and that would be the extent of the campaign's reach, Barrera said.

Such campaigns can work both ways, of course, with the McDonald's publicity giving consumers a reason to subscribe to the cellphone service.

The way the coupon redemption is supposed to work is that a subscriber sees the latest offers—including this one from McDonald's—and signs up. A text message gives them the coupon. When they go into the restaurant to redeem it, they show the phone's screen (displaying a barcode and a number) to the cashier, who selects a preprogrammed POS button for the free coffee.

The McDonald's employee does not write anything down. This makes it easier for employees and places the data-retention burden on Cellfire.

One of the customizable aspects of this kind of program is expiration date and limits. McDonald's chose, for example, to allow consumers to use the coupon as many as three times. "That means we can tell [our customers, in this case McDonald's] how many [people] redeemed it once or twice or even three times," said Dwight Moore, Cellfire's vice president of Corporate Marketing.

Moore said that part of the benefit of using a firm like Cellfire is that it knows a lot about the consumer customers, who sign up revealing their phone number, age, gender and the ZIP code they live in. For privacy concern purposes, Moore said, Cellfire keeps that data in aggregate, to maintain a little bit of anonymity. "We know people's phone numbers but we don't know their names," he said.

Getting someone's name when you already know their cellphone number is usually not too tricky, but we won't go there. Generally, there isn't much reason to know consumers' names as long as you know their habits. Retailers want to reach people who tend to buy certain things and attend certain events. Their names are not merely private: They're usually quite irrelevant and unnecessary.

But the McDonald's Salt Lake City mobile trial is interesting because of a different data issue: Control. And it's an issue that retailers will need to figure out as they experiment more with mobile commerce.

On the one hand, there are some major advantages to McDonald's in letting the data sit with a company like Cellfire. There are the training savings, because McDonald's employees have to push just one button. And the company instantly knows how many iced coffees are being given away, which is much of what it really wants to know.

And if McDonald's wants to know more—such as a demographic analysis of who specifically redeemed the mobile coupons (90 percent female, for example, or 87 percent between the ages of 17 and 23 or 56 percent from ZIP codes 84101 and 84158)— the company can simply ask and be told.

Then there's the downside of control. If a customer, McDonald's for example, wanted to take some additional action—such as "Next month, send another coupon just to the 856 customers who used the iced coffee coupon two or three times and offer them a free salad and let's see what happens"—that customer presumably would be locked into using the same service provider.

There's an even more frightening retail scenario. Companies like Cellfire certainly start with a modest amount of customer-volunteered data (such as phone number, age, gender and ZIP code), but their customer database grows quickly as they do various advertiser trials. Because they own all of that data, they can provide more sophisticated services to clients as time goes by. That's a good thing.

But what happens when a rival gets interested? Let's consider this McDonald's iced coffee trial. One of the companies that McDonald's is aiming at with this iced coffee testing is clearly Starbucks. What happens if, a week after the trial ends, Starbucks approaches Cellfire and says that now it wants to do a mobile trial?

What if Starbucks asks Cellfire to send an offer of free cappuccinos to any Cellfire customer who has previously responded to any coffee promotions? This starts to get interesting. Cellfire can't betray the confidence of any customer, but all information is owned by the company and it clearly has a right to use the knowledge of its customers' habits for its advertisers.

If Cellfire did that, in a sense, McDonald's would have subsidized marketing research for its arch enemy. (I won't lie to you. That pun was intended.)

It's simply one of the downsides of allowing a partner to own marketing—and ultimately CRM—data from your trials. That data, which you paid for, could easily aid your direct rival.