Why retailers love your phone on Black Friday

Derek Davis | Portland Press Herald | Getty Images

If you're heading out shopping on Black Friday, don't forget your mobile phone. It can be a valuable tool for deal seekers — and for retailers who want to learn more what you like.

Thanks to advances in technology, the ads you see on your cellphone can be tailored to your tastes and exact location.

And, retailers love it because they can pinpoint which digital ad pushed you to get up off the couch and head to the store. Companies allow retailers to figure out which search terms, ad groups or videos directly drove consumers to visit store locations, thanks to users who use a combination of Google search and Google maps.

"Until relatively recently, the consumers' desire for what they want their phone to do has been way out in front of what retailers can deliver on," said Jason Spero, Google vice president of performance solutions. "The reality is the technology has caught up to what consumers want their phone to do."

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Despite the reports that online shopping is going to be the future, real-world shopping is still beating digital. A 2014 A.T. Kearney study found that 90 percent of all retail sales still take place in stores. Ninety-five percent of purchases are bought from retailers that have a physical location. Sucharita Mulpuru-Kodali, vice president and principal analyst at Forrester, pointed out that even digital-native millennials are shopping in stores like J.C. Penney and Sears.

"It's not that people have cut down on the number of shopping trips," she said. "If anything, they go on more trips because there are more stores around them, and they are splitting up their baskets among stores."

The trend isn't likely to change anytime soon. The kind of purchases that take place in-store versus online is different, Spero said. Online retailers are perfect for immediate buys. Brick-and-mortar locations allow people to get the entire shopping experience.

"Ultimately, there's certain categories where it's all about the experience, and not just the convenience," said Wolfgang Schaefer, global chief strategy officer at branding agency SelectNY. "It's the fun, the joy of diving into that world and experiencing that world, touching the product, selling the product, trying it out and trying it on, and mingling with people from a certain scene."

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What is rapidly changing is that people are reliant on their mobile phones. According to the Pew Internet Project, 64 percent of American adults own a smartphone. A Gallup poll in July found that more than half of smartphone owners checked their phone a few times an hour or more.

Changing consumer behavior is leading to an increase in mobile advertising. While traditional print and TV ads still exist, more retailers are dabbling in search-based advertising, Instagram-worthy displays and location-based discounts.

Google's ad product works like this. Let's say that you're searching for a pair of boots this Black Friday, and decide to type in the term "black boots" in Google search or look up a YouTube video featuring someone talking about trendy pairs of black boots. The company will pull up all relevant links, but also show you nearby stores that participate in its "local inventory ads" function that carry said footwear.

Now, you want to try on those shoes. So, you pull up directions on Google maps to find your closest retail location. If you're logged into your Google account (and Spero said an increasing number of its users are), Google can track you into the store and how long you spent in there via your mobile phone.

"We've built a bridge from the digital world to the physical world to understand the role digital media is playing in visits to the store," Spero said. "The measure of attribution allows retailers to play with their creative, their targeting and even the number of registers available."

In the last 12 to 18 months, more than 1,000 retailers including Best Buy and Famous Footware have signed up for the service. Google claims retailers are seeing four times more conversions to purchases when using its ad services. When the users are on mobile, that number jumps to 10 times overall.

There's also companies like RetailMeNot, a digital media company that offer discounts at various retailers. CMO Marissa Tarleton said RetailMeNot found its users were still going into stores to make the purchase, but 70 percent were doing research online before committing to the buy.

People who download RetailMeNot's app get push notifications for upcoming sales, like early Black Friday deals. Once they head to a location with their mobile phone, more push notifications and deals pop up thanks to geotargeting and beacons hidden inside stores. Retailers know when you enter the mall, when you're walking by their store. They can target you with more deals to ensure you walk in the door.

"Our foundation and heritage is in the coupon business," Tarleton said. "We've also been able to understand how mobile in particular is used to create a relationship with shoppers on their shopping journey. It factors in ... early consideration into purchase, into loyalty, and ultimately into checkout. We've built content and work it out all the way across that journey."

Other brands are leveraging the power of social media to drive people in stores. SelectNY's Schaefer said its agency creates in-store events to persuade consumers to shop at a physical location. For example, SelectNY curated Champagne parties with style, and fashion influencers co-picked with the editorial team from O, The Oprah Magazine for Nine West. It used Instagram to send previews and videos.

"You have to create the idea and the feeling that there is something you don't want to miss by inviting people to the actual event, and then by posting and then disseminating pictures and snaps from the event," Schaefer said.

The evolution of digital advertising

Before paranoia sets in, Spero said Google's data is aggregated into percentages. Retailers don't find out if you specifically went to their store from Google, and Google doesn't follow you to your next location. However, the technology does exist, and some companies create heat maps that tell retailers exactly where their consumers head after they shop. These insights could provide more accurate ad targeting.

Forrester's Mulpuru-Kodali also points out that the technology is relatively new, and not all retailers are investing their entire advertising budget in digital marketing. She estimates that most companies' store divisions invest less than 10 percent of their overall advertising budget in mobile.

Perhaps more important is that even though attribution is possible, retail sales aren't increasing that much. U.S. retail sales rose 0.1 percent in October, according to the Commerce Department.

"I think the bigger issue is they're not investing big dollars because the returns aren't enormous yet," she said. "Yeah, you can say 60 percent of sales were driven by this mobile ad, but unless my sales are 50 percent higher, why would I invest more money in that?"

Still, it's undeniable that digital advertising will be the way of the future.

"Mobile has become seamless with all channels, and mobile is really the driving force with what's driving all commerce," Tarleton said.