Today, thrifty grocery shoppers have three choices: They can use paper coupons that they've clipped or printed out. They can electronically transfer the coupon to a loyalty card. Or they can display a coupon on their smartphone, which means the cashier has to manually input the coupon code.\nThe problem is that bar-code scanners in the checkout aisle can't read the screen of the smartphone.\nBut that could change. San Francisco-based Mobeam, a company specializing in light-based communications technology, recently announced a partnership with corporate giant Procter & Gamble\n aimed at bringing to market an all-digital mobile coupon system. Mobeam's technology makes it possible for existing retail point-of-sale (POS) systems to read electronic coupons presented on a mobile phone. \n\nGiven P&G's reputation as a bellwether company in the consumer products industry and a sophisticated user of IT, the new partnership bears watching. If other players in the smartphone and retail ecosystem go along\u2014not a sure bet\u2014the joint project could revolutionize the use of mobile coupons.\n\n"Couponing has been one of the tried and tested tools to incentivize consumers to try our products," says Jeff Weedman, vice president of P&G global business development. "Ads around the world have moved digital, but there is a hole in the system. You can deliver coupons digitally, but they don't scan at most grocery scanners. Neither shoppers nor retailers are happy because this slows down the system when the checkout person has to plug in the coupon codes manually."\n\nThe technology developed by Mobeam converts bar-code data on the smartphone to a beam of light that can be read by existing red laser bar-code scanners. This capability has been embraced by P&G, which as one of the world's leading coupon distributors stands to benefit from a vastly improved method for coupon redemption at the point of sale.\n\n"While we're still in the testing phase, we are excited about what our partnership with mobeam might help us do together to break through the current gap for the consumer," Weedman says. "For us, this is great example of collaboration, combining our consumer insights and marketing expertise with an external company with leading-edge technology to benefit consumers."Truly Digital Processing\n\nFor retailers, the big advantage of mobeam's technology is that it's embedded in the smartphone and the retailers don't have to install any new hardware at the point of sale. At the same time, digital processing of coupons through the use of mobile devices is faster and more efficient than scanning paper coupons. And once a sale is made, digitized data can more readily be analyzed for purposes such as measuring campaign effectiveness.\n\n"The key to the value is the one-to-one nature of the relationship manufacturers can develop with consumers via their mobile devices," says Chris Sellers, CEO of Mobeam. He says that while paper coupons are largely anonymous, digital coupons redeemed from a phone at point of sale can provide significant new data that more closely bond brands and retailers with consumers. \n\n"This will make manufacturers' products more valuable," says Tole Hart, an analyst who writes the Mobile World blog. "You can shoot a lot of coupons at once, and save store workers' time."\n\nConsumers should also benefit. The new process could eliminate the need to print coupons after downloading, transfer electronic copies to a loyalty card or wait while a store clerk enters coupon codes manually. "Consumers should go for it," Hart says. "They can store coupons in one place, and it will be easier to accumulate and redeem them."Tech Must be Embedded in Smartphones\n\nBut first, major phone manufacturers have to participate.\n\n"The service has to be universal to work," Hart says. But he says he anticipates that smartphone makers will see this as a desirable feature to make their own products more attractive. \n\n "It requires the technology to be integrated into new phones," says Thomas Husson, an analyst at Forrester Research. "So it will take a while to reach a critical mass of users, bearing in mind that discussions and implementations with OEMs take a long time."\n\nThat's the big question: How long will it take for this technology to be fully embraced?\n\n"Despite the great technology, Mobeam-enabled handsets are all in the future, so the technical innovation is dependent on its future take-up by handset manufacturers, application developers and [mobile network operators]," says David Snow, an analyst at Juniper Research. For P&G, the critical success factor will be achieving a high level of customer satisfaction.\n\n"The challenge for P&G will be to manage the introduction of mobeam coupons to market so that no one tries to redeem such a coupon without having a suitably enabled phone," Snow says. He notes that mobile coupons are attractive to consumers, but if the first time they try to use them they fail, users quickly become disenchanted, and will even feel like they are losing money.\n\n"This disenchantment won't be with their handset, it will be with the issuer and the retailer," Snow says. "They won't try again for a long time. They may even be put off the whole brand." \n\nThe possibility of customer dissatisfaction may cause some to adopt a wait-and-see stance. "My guess is, given this risk, that other companies and retailers will wait and see how P&G gets on before adopting the technology for themselves," Snow says. "Manufacturers will probably be happy to include it, particularly as no hardware changes are required." Connecting to CRM Systems\n\nUltimately, the real power of mobile coupons will come from how the industry exploits the consumer data.\n\nThe capability to integrate new mobile consumer behaviors at the point of sale with existing CRM systems will be critical, according to Husson. This will enable brands to integrate more data about consumer visits, location and time. To be successful, he adds, they will need to have the infrastructure in place to offer more personalized and contextualized services leveraging the capabilities of mobile devices.\n\nWill Mobeam coupons become the new standard? "That will depend on the take-up," Snow says. "In the mobile space there is rarely one 'standard' and I don't think that this technology will gain a position such that alternatives will disappear." He notes that the new approach will have to overcome the ubiquity of simple alphanumeric-coded SMS coupons and the elegance of future coupons using near-field communications, or NFC. \n\nThis is a critical year for the Mobeam technology. "What Mobeam is working on now is to have key phone manufacturers add the application into handheld phones," says P&G's Weedman. "Then we'll move into testing with consumers and selected retailers. We hope to test the technology in market in this year."\n\n What does the future hold? "It's definitely a good addition to the mobile coupon technology portfolio and has a real benefit from the retailer side, which has always been a constraint on the development of the market," Snow says. "In the end, though, consumers will decide. "\n\nMark Rowh is a freelance writer based in Virginia.