QR Codes Gain Ground

Picture this: While waiting in line at a fast food restaurant, a customer notices a sign advertising a "healthy" new chicken sandwich. Skeptical about the claim, he holds up his cell phone to the black-and-white, matrix-style bar code printed on the corner of the sign and snaps a picture. Immediately, his screen calls up a Web page that contains nutritional information about the sandwich. Satisfied with what he reads, he buys the item.Scenarios like this one, at least in the U.S., have yet to materialize with any regularity -- in restaurants, shopping malls, grocery stores or anywhere else, for that matter. But that may soon change.The graphic device described above is commonly referred to as a "quick-response" or QR code. In actuality, the term QR code has become a catch-all for any scannable 2-D bar code that can be encrypted with large amounts of data. There are many kinds of 2-D codes, but each one has the ability to store information in both horizontal and vertical directions, thus allowing it to carry up to several hundred times the amount of data of a standard one-dimensional UPC bar code. For years, marketers have been enticed by QR codes (which were originally created by Japanese auto parts manufacturer Denso Wave in 1994) because of their ability to reach consumers instantaneously at the point of purchase. While the codes are ubiquitous in Japan and increasingly common in Europe, their use has been rather sparse in the U.S. due to limited consumer awareness and technological barriers including the standardization of code readers on mobile handsets.This past year, however, there has been a noticeable uptick in the application of QR codes, mainly in nontraditional shopping channels. Several automakers have deployed them in brochures and print/outdoor ads to help launch new vehicles, offering consumers a chance to download pictures and videos of the cars. High-end fashion brands including Ralph Lauren and Gucci, meanwhile, have placed the codes in mailers and window displays to deliver mobile-based information about upcoming events and new products.Elsewhere, movie studios, magazines and even the likes of Facebook and Google (which has tested QR codes by giving window stickers to local businesses that link to Google Place Pages) have all dabbled in the technology. "QR codes have the potential to be very useful in marketing," says Allison Mooney, vice president of emerging trends at MobileBehavior, a New York-based Omnicom unit that focuses on the mobile consumer. "The ability to tie data to an object is very powerful. I think it could become a big trend here. If not, then it will be another [related] technology such as image or logo recognition."Coming to a Store Near YouSlowly but surely, CPG manufacturers are beginning to employ QR codes in the U.S. Some of their efforts are now reaching shoppers in stores. Johnson & Johnson, for example, recently promoted its new Zyrtec liquid gels with signage at CVS. Zyrtec banners urged consumers to text or scan the codes to obtain a $4.50 coupon off their next purchase of the product. Jeff Weidauer, vice president of Little Rock, Ark.-based Vestcom, says his firm is launching a number of 2-D bar code programs, primarily in the supermarket channel, this summer. These include two trials in the beer, wine and spirits category that will put the codes on shelf labels adjacent to the price sticker. Consumers could, for instance, scan the codes to call up a mobile Web page with drink recipes, wine pairings or "anything that is relevant to the shopper," says Weidauer.Manufacturers may soon extend the reach of QR codes even further by placing them directly on product packaging, a practice long undertaken by big brands like Coke and Pepsi overseas. There is a precedent in the U.S., however. Earlier this spring, MillerCoors placed a SnapTag (an alternative to a 2-D barcode from Denver-based SpyderLink) on bottles of its new Colorado Native craft beer, hoping consumers would engage with the brand in much the same way as they would with QR codes. "It is difficult to predict, but I will be surprised if we don't see QR codes on packaging before the end of 2010," says Weidauer. "Standardization will come with time, but use of the codes has to precede that. This will follow the same process as VCRs in the 1980s, and high-definition formats more recently. Consumers will ultimately determine the standard based on the perceived benefits."He predicts the push for adoption of QR codes will likely come more from retailers than manufacturers. "In order for QR codes to be effective, they need to solve a problem for the shopper. Retailers have a greater ability to do this with their customers throughout the path to purchase," Weidauer says.What's Holding Us Back?Whether QR codes have the potential to reach critical mass is tied to a persistent chicken-and-egg problem: Consumers won't engage with QR codes unless marketers do more to raise awareness, yet companies won't make a significant investment in education until they are convinced that consumers will participate in the trend.Moreover, there are fundamental barriers related to the technology itself. In Japan, wireless carriers pre-install readers on all mobile phones, rendering the scanning of codes a relatively simple task. By contrast, users in the U.S. must first download an application in order to be able to scan most types of QR codes. (A notable exception is Princeton, N.J.-based Jagtag, whose 2-D barcode system can be activated by any camera-enabled mobile phone.) Additionally, different readers are required to scan different codes, creating another potential hurdle for consumers."Until there is a common standard and phones come equipped with readers, I'm not sure we'll see a tipping point," suggests Mooney. "That said, as more people download and use [bar code scanning] apps like Red Laser and Shop Savvy, this could become a more common behavior."Yet another issue is that Web-proficient smartphones (which make branded content more accessible for users) are far more prevalent in countries like Japan than they are in the U.S. While Apple's iPhone and Google Android sales are growing quickly, smartphones currently represent only about 20% of the overall U.S. handset market."QR codes are poised to take another leap forward because they do work well on smartphones," says Garrick Schmitt, managing director of experience and platforms at San Francisco-based Razorfish. "Their success depends on how creatively marketers use them. If you give people snippets of exclusive content, they will seek it out and remember it."Meanwhile, progress is being made with U.S. wireless carriers. Industry experts generally expect between 40 and 60 million phones (about one-sixth of the total U.S. handset market) to have bar code readers built into the device by early 2011, as opposed to between 5 and 10 million now. As for consumer behavior, many observers believe that early adopters will help spread the practice of scanning 2-D codes, just as they did with texting. Once it is seen as a common thing to do, the argument goes, the technology will follow suit.Who's Scanning Now?So which consumer groups are actually using QR codes? "Right now, it's mostly the hyper-engaged consumer who's likely to scan the codes. Eventually, it will become so easy that anyone can do it," says Christian Johanneson, senior director of worldwide digital retail marketing at Microsoft, which demos its colorful Tag 2-D bar codes at the company's Retail Experience Center in Redmond, Wash. One particularly successful test, for the launch of Xbox "Halo 3," involved placing the Tags on packaging and P-O-S including shelf talkers and standees. "We got a lot more click-throughs than we expected," notes Johanneson. "We're continuing to work with retailers to get the right [merchandising] mix."In general, the success of QR codes is typically measured against engagement metrics, such as number of scans/responses or time spent online at a mobile website. And those results can vary widely depending on the program. "Most engagement rates run between 8% and 20%, though we've seen rates as high as 48%," says Dudley Fitzpatrick, founder and CEO of Jagtag, which has conducted mobile bar code programs for NBC Universal, Toyota, Yahoo!, Sports Illustrated and Dell. "We charge on a pay-per-engagement model, so you only pay for what you get. It is similar to a keyword search model."Jonathan Bulkeley, CEO of New York-based Scanbuy, argues that the technology is relevant to consumers of all backgrounds. "It's no different than the early days of the Internet when it was difficult to imagine people typing a URL into a browser," says Bulkeley, whose firm has recently executed 2-D bar code programs for Discovery Communications, Volkswagen, Esquire and Hard Rock Hotel. Tens of millions of people in the U.S. currently have the ability to scan QR codes, and millions are actually scanning, he says, adding, "We expect exponential growth in the next 12 to 18 months."

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