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Short Messaging Service

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Introduction
Short Message Service SMS is today's simplest and cost-effective way to reach a global mobile audience. Thousands of organizations are using messaging already to communicate with customers and employees. SMS was built into the European Global System for Mobile (GSM) standard as an insignificant, additional capability. Yet in many countries SMS was perceived as cheap, and it offered one-to-one, or one-to-many, text communications that could be read at leisure, or more often, immediately. SMS was avidly taken up by young people, forming new cultures of media use.(Goggin & Spurgeon, 2005). Text messaging is instantaneous, inexpensive and personal, and enables numerous applications. In the face of turbulent economic conditions and significant cost pressures, U.S. financial institutions, like their counterparts around the world, are focusing on improving the profitability of their customer relationships, lowering channel costs and enabling more self-service electronic banking. In recent years, the rise of mobile banking has opened a new path for financial institutions to lower the cost to serve their customers, improve their competitive position and increase customer acquisition and loyalty. At the same time, mobile banking establishes a foundation for delivering future products and services that can be monetized, such as mobile payments and remittances. Despite this new ROI opportunity, most institutions have primarily utilized this new channel to drive mobile banking adoption among current online banking customers. “The success of this short messaging service provided Mari Matsunaga and Takeishi Natsuno with additional ammunition in their internal battle with those who preferred a focus on business users”(Funk, 2004).
Technical Description:
Short Message Service (SMS) is a text messaging service component of phone, web, or mobile communication systems, using standardized communications protocols that allow the exchange of short text messages between mobile phone devices. SMS text messaging is the most widely used data application in the world, with 2.4 billion active users, or 74% of all mobile phone subscribers(wikipedia, 2011). The message from the sending mobile is stored in a central short message centre (SMC) which then forwards it to the destination mobile. This means that in the case that the recipient is not available; the short message is stored and can be sent later. Each short message can be no longer than 160 characters, while these characters can be text (alphanumeric) or binary Non-Text Short messages. SMS messages are transmitted over the Common Channel Signalling System 7 (SS7). SS7 is a global standard that defines the procedures and protocols for exchanging information among network elements of wire line and wireless telephone carriers. These network elements use the SS7 standard to exchange control information for call setup, routing, mobility management, etc. Figure 1 shows the typical network architecture for SMS communication. Conceptually, the network architecture consists of two segments that are central to the SMS model of operation: the Mobile Originating (MO) part, which includes the mobile handset of the sender, a base station that provides the radio infrastructure for wireless communications, and the originating Mobile Switching Centre (MSC) that routes and switches all traffic into and out of the cellular system on behalf of the sender.
The other segment, the Mobile Terminating (MT) part, includes a base station and the terminating MSC for the receiver, as well as a centralized store-and-forward server known as SMS Centre (SMSC). The SMSC is responsible for accepting and storing messages, retrieving account status, and forwarding messages to the intended recipients.( Veena K.Katankar et. al., 2010). This is assisted by two databases: the Home Location Registrar (HLR) and the Visitor Location Registrar (VLR). The two databases contain respectively permanent and temporary mobile subscriber information, e.g., the address of the MSC the device is associated with. Though the Short Message Service has been popularized by the exchange of text messages among cell phone users, it has been increasingly used by businesses as a low-cost bearer to deliver various types of content such as ringbones, news, stock price, quizzes, and casting of votes. Such content providers, also known as External Short Message Entities (ESMEs), initiate or receive text messages through gateways which bridge the SMS interface to the internet

Fig. 1. Typical network architecture for SMS
Business Application: Today we can see businesses using SMS for different purposes – marketing, notification, news, text to win campaigns and so on. In those cases usually SMS is a small part of a big project. However, there are plenty of businesses where SMS is in the middle of the business case and sometimes gives the competitive advantage. The last time that technology had a major impact in helping banks service their customers was with the introduction of the Internet banking. Internet Banking helped give the customer's anytime access to their banks. Customer's could check out their account details, get their bank statements, perform transactions like transferring money to other accounts and pay their bills sitting in the comfort of their homes and offices. Mobile usage has seen an explosive growth in most of the Asian economies like India, China and Korea. In fact Korea boasts about a 70% mobile penetration rate and with its tech-savvy populace has seen one of the most aggressive rollouts of mobile banking services. Mobile banking also known as M-Banking, m banking, SMS Banking etc. is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone. Mobile banking today is most often performed via SMS or the Mobile Internet. The main reason that Mobile Banking scores over Internet Banking is that it enables ‘Anywhere Banking'. Customers now don't need access to a computer terminal to access their banks, they can now do so on the go – when they are waiting for their bus to work, when they are travelling or when they are waiting for their orders to come through in a restaurant. In the face of turbulent economic conditions and significant cost pressures, U.S. financial institutions, like their counterparts around the world, are focusing on improving the profitability of their customer relationships, lowering channel costs and enabling more self-service electronic banking. In recent years, the rise of mobile banking has opened a new path for financial institutions to lower the cost to serve their customers, improve their competitive position and increase customer acquisition and loyalty. At the same time, mobile banking establishes a foundation for delivering future products and services that can be monetized, such as mobile payments and remittances. Despite this new ROI opportunity, most institutions have primarily utilized this new channel to drive mobile banking adoption among current online banking customers.
An “estimated 58 percent of adult Americans today use a mobile device to perform non-voice data activities such as texting, e-mailing, taking a picture, looking for directions or recording video”. Indeed, consumers’ increasing use of mobile devices for non-voice communications is one of the key drivers for mainstream adoption of mobile financial services (Julia, 2008). While still in the early adoption phases, mobile banking is gaining strong momentum. A recent survey showed that “among the largest U.S. financial institutions, 59 percent indicated that they would likely purchase or replace their mobile banking application” (Nick, 2009).
Some case studies of short message service business application are :
1. Dunkin' Donuts
A two month mobile interactive ad campaign in Italy has resulted in a 9% increase in sales for Dunkin’ Donuts, according to the two companies that created it. As a result of an SMS-based marketing campaign, customers were able to get coupons for Dunkin’ Donuts product by using their mobile handsets to respond to advertisements displayed on store signage, billboards and on the radio. By sending a short message to the published numbers, users receive an immediate reply featuring a free gift coupon or special offer redeemable at local outlets. Sales were reportedly up 9% within the first three weeks of the campaign. By enticing consumers to request special offers, Dunkin Donuts ensures that they achieve a great consumer push without running the risk of breaking down the client relationship by contributing to the wealth of 'spam'. By ensuring that the power of the SMS medium is put to good use in an ethical way and one which doesn't encroach upon users' privacy was key to the success of campaigns such as this one with Dunkin’ Donuts. And Dunkin Donuts' Italian franchisee GianLuigi Contin says that the SMS marketing solution has been a positive brand-building experience: "We are directly reaching our targets with a message they can understand. Cellular coupons are not cute promotions, rather they are serious marketing tools that not only extend the brand but are also directed towards the people we want to reach."( textsmsmarketing.com)
2. Hilton Uses SMS With Success The Hilton Hotel group has successfully used SMS messaging to increase guest numbers to its hotels and build customer loyalty. The hotel sent out important marketing messages such as on-site specials and promotions directly to its members’ mobile handsets. SMS allowed the hotel to get the messages out instantly and at the most appropriate time of day. The use of SMS as a direct marketing tool resulted in a 10-25% increase in offer redemptions sent out by the hotel and proved to be an integral part its direct marketing and loyalty strategy.( textsmsmarketing.com) Mobile banking is also a brand new way for financial institutions to interact with their customers and deliver a wide range of valuable banking services and processes such as customer service, support and alerts, and cross-channel security authentication, to name a few examples. In this way, the mobile device can become a potential point of convergence that integrates and streamlines customer processes and activities across multiple bank channels. The mobile channel may provide a supporting role for a banking process that may start and/or end in another bank channel. For example, one- and two-way mobile alerts may notify a customer of the current status of a loan application or the need to update mailing address information in the case of returned mail. These mobile alerts can speed up response times and improve bank process efficiency, and result in average cost savings of $1 to $2 per transaction.

Business model for Revenue collection: Revenue is derived through revenue-sharing arrangements with content providers and mobile operators. Specifically, the company enables content providers to bill subscribers for consumption of video, music, and widgets through SMS-based (text message) mobile billing. To realize revenue, SMS services can choose to between two pricing models, standard or premium. Standard messages charge customers only the base text message price set by their telecommunications carrier. This money goes directly to the carrier. None of it is seen by the SMS service provider. Alternatively, the SMS service providers can choose to can charge customers for premium messages. This means in addition to being charged the standard text message fee, users are billed an additional amount for premium content. The SMS service provider receives a portion of this revenue while the rest is again taken by the carrier.
I believe the key to establishing a self-sustaining SMS based service will be to chase message quantity by providing standard priced messages and realizing revenue on razor marketing profits. Under this model, even a million message market will only support a small number of dedicated SMS based business. SMS's simplicity and timelessness are amazingly powerful and currently unmatched by any other service. Balancing the strengths and weakness of text messaging to create an SMS service is undoubtedly a challenge, but also an amazing opportunity. According industry players the 2011 and years to come are bringing the call for shaping the business models using the SMS channel in more ways than one. Return on mobile marketing investment (ROMMI) is an important measure to keep track of because it lets you know whether you're achieving your objectives and getting more out of your mobile marketing than you're putting into it. There are two basic ROMMI measures: a ROMMI against direct revenue generating programs and a ROMMI against indirect revenue generating programs. Calculating your ROMMI for revenue generating mobile marketing programs is a simple math exercise. The ROMMI for revenue generating programs compares the sales you generated, or expect to generate, in revenue terms against your mobile marketing spending, or expected spending, that helped generate those revenues.
Here's the formula:
Return on mobile marketing investment (ROMMI) = [incremental revenue attributed to mobile marketing (in dollars) * sales contribution margin - mobile marketing spending (in dollars)] / mobile marketing spending (in dollars) (Michael & John, 2010)

Conclusion: Mobile message services as mobile phone application is a good match for current environment because there is no more wasting of paper! Every day we throw out countless envelopes and inserts that we never read. Not only does text message marketing reduce waste, your message is also stored on the recipient's phone! By transitioning to SMS mobile marketing, you will be saving the planet while actually helping your company! Also, basic SMS text messaging will be a key revenue driver for mobile network operators in the Middle East and Africa over the next five years, helping to offset continuing declines in average revenue per subscriber (ARPS) for mobile voice services in the regions.

References:
SMS; http://en.wikipedia.org/wiki/SMS; Retrieved September 6, 2011
Gerard Goggin & Christina Spurgeon; Mobile Message Services and Communication Policy; Prometheus, Vol. 23, No. 2, June 2005, p. 183
Funk, Jeffrey L.. Mobile Disruption: The Technologies and Applications Driving the Mobile Internet. John Wiley STMS, 2004. p. 35.
Veena K.Katankar & Dr.V.M.Thakare, “Short Message Service using SMS Gateway “ (IJCSE) International Journal on Computer Science and Engineering Vol. 02, No. 04, 2010, p.1487-1489
Julia S. Cheney, An Examination of Mobile Banking and Mobile Payments: Building Adoption as Experience Goods, Payment Cards Center, (Federal Reserve Bank of Philadelphia, Discussion Paper, June 2008) Retrieved September 6, 2011.
Nick Holland, Mobile Banking Vendor Evaluation: The Slightly Maturing U.S. Landscape, (Aite Group, January 2009).
SMS Text Marketing Case Studies; http://www.textsmsmarketing.com/sms-text-marketing-case-studies.php; Retrieved September 7, 2011.
Case Study: How Dunkin’ Donuts use SMS Marketing effectively; http://smilessms.wordpress.com/2011/08/18/case-study-how-dunkin-donuts-use-sms-marketing-effectively-2/; Retrieved September 7, 2011.
Michael Becker and John Arnold; Mobile Marketing For Dummies;John Wiley & Sons, 2010

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