June 9, 2006
Cellfire Offers Downloadable Coupons to Cingular Users

Soon, you won't need scissors to clip out discount coupons -- your cell phone will do the work for you.

San Jose-based Cellfire has been quietly serving up mobile discount coupons to Cingular Wireless subscribers in California since December. So far, eight retailers, including Hollywood Video and Supercuts, have signed on.

The company will take its service national June 27, allowing customers to get discounts on travel, food and other products and services by calling up a coupon on their cell phone screen and showing it to the cashier. Other cellular carriers and retailers are expected to join later this year, including Bath & Body Works.

The expansion of the service comes as several companies are trying to turn the cell phone-as-a-wallet dream into reality. In April, eBay's PayPal launched PayPal Mobile, a service allowing users to buy items or send money to people or a charity through text messaging. In 2005, consumers paid $8.6 billion for transactions conducted with their cell phones or other wireless devices, up 86 percent from the prior year, according to CTIA-The Wireless Association, a trade group.

Industry experts expect the online coupon trend to also grow. About 25 percent of the 175 million people with cell phones use them for something other than talking, whether that's downloading ring tones or sending text messages, said Brent Iadarola, industry manager for the mobile and wireless group at business consulting firm Frost & Sullivan.

Cellfire's founders say the coupon industry is in dire need of a makeover, since so few people who receive paper coupons ever use them. Marketers distributed 323 billion coupons in 2005, but consumers redeemed only about 1 percent of them, according to marketing trade magazine Promo.

TGI Friday's has used Cellfire to send out mobile coupons redeemable at its 31 Southern California restaurants for the past three months. The company is about to expand the service to all its 57 stores in California and five other states.

Younger customers

The chain considers mobile coupons a way to reach younger customers who tend to spend more time on their cell phones, said TGI Friday's spokeswoman Judy Schumacher.

```On average, people use their cell phones 400 hours a month, vs. 120 hours of TV and 40 hours on the Web,'' Schumacher said. ``So you go where the people are, and people are on their cell phones.''

More than 200 retailers, from grocery chains to Coca-Cola to the National Football League, already make money from sending out mobile advertising or promotions, said Laura Marriott, executive director of the Colorado-based Mobile Marketing Association trade group. Still, she said, ``as an industry, it's in the early days.''

Brent Dusing, Cellfire's chief executive, said the genesis of the business he founded in 2005 came from his own frustrating coupon-clipping experiences.

``Every time I got a coupon I was interested in, I wound up leaving it stuck to my refrigerator door under a magnet or leaving it in the car or washing it in my jeans,'' Dusing said. ``Your cell phone is the one thing you don't leave home without, so you don't have to worry about cutting out paper coupons and storing them somewhere.''

Customers register with Cellfire (www.cellfire.com) by downloading the program to their cell phone. Any data-transfer costs affiliated with a person's cell phone plan would apply; Cellfire estimates the charge for the download at about 60 cents. People can receive new coupons and delete ones that have expired by updating their electronic coupon ``wallets,'' again, paying any data transfer costs. There is no charge to cell users to redeem the coupon once at a restaurant or store.

Five-digit code

To use a coupon, people call it up on their cell phone screen and show it to the cashier. Each coupon has a five-digit code, which cashiers type into the register to calculate the appropriate discount.

Retailers pay Cellfire a fee for each mobile coupon that's redeemed.

The service is likely to do well as long as customers present just one coupon per establishment, said Rob Enderle, principal analyst with the Enderle Group. ``It will not work anyplace where you have to give the phone to someone and they wander off. For one coupon, it would be all right. Maybe it will open a new market and attract folks who usually do not use coupons,'' he said.

At TGI Friday's, for example, customers can use their cell phone coupons to get $5 off a purchase of $15 or a free appetizer with purchase of two entrees.

While print coupons and other offers have slightly higher redemption rates, Schumacher said, ``for a test program, I am very pleased with the redemptions we've seen. We see this as another tool. We very much want to be at the cutting edge.''