The decision by the largest regional mall owner in the country to embrace a smartphone application marked a new stage in the rapidly unfolding evolution of mall marketing.

In mid August, Indianapolis-based Simon Property Group joined retailers Macy’s, Best Buy, American Eagle Outfitters and Sports Authority in endorsing an application called Shopkick developed by Palo Alto, Calif.-based developer Shopkick Inc. Simon rolled out the app at 25 of its centers in New York, Los Angeles, San Francisco and Chicago. By the holiday shopping season, Simon plans to have Shopkick available at 100 centers nationwide.

The location-based app goes a step further than what existed before and gives retailers and mall owners the ability to know when a person carrying a smartphone with the app installed crosses a physical threshold, scans bar codes inside stores or malls or does other activities that retailers and mall owners may want to incentivize. In return, users of the app receive “kickbucks”—points in the customer’s account that can be redeemed for rewards. The app currently works solely on Apple iPhones, but a Droid version is in development.

Simon’s move upped the ante considerably in the race among owners to provide tools to consumers that enhance the in-mall shopping experience.

Its announcement was followed quickly by Chattanooga, Tenn.-based CBL & Associates Properties Inc. divulging that it too was in the process of developing an enhanced smartphone app for tis properties. The company, which owns 82.6 million square feet of space, has partnered with Slicker Interactive LLC, a Charleston, S.C.-based technology firm, to develop mallMerlin, an app that would give its shoppers access to special promotions, high-definition video and mall navigation tools based on their location within a CBL center.

The app is designed to mimic the natural way people shop, says a CBL spokesperson. All of CBL’s tenants will be able to participate in mallMerlin, but those who choose to upgrade their service to include more product and storefront photos, videos or the ability to send customers digital coupons, will have to pay a fee, reportedly ranging from $25 to $50 per month. The app will be available for use on iPhones, iPads and iPod Touch devices at most of CBL’s properties by the beginning of next year.

In part, it’s a recognition of the increasing number of consumers who use smartphones. Overall, approximately 26 percent of U.S. mobile subscribers use their mobile devices for Web browsing, according to Synovate, a market research firm. There are a total of 50 million mobile users in the U.S. with access to the Web, according to a recent mobile marketing study completed by Jones Lang LaSalle Retail, an Atlanta-based third party property manager. By the end of the year, the number is expected to double to 100 million people.

The difference between Foursquare and the next stage of apps is that Shopkick, for example, can be used passively. It does not require users to remember to check in when they go to a location. Moreover, since sensors for the app are inside stores and malls, it is more precise at pinpointing a shopper’s location. Apps that rely on cell phone signals or GPS can’t determine if a person is standing inside a store or simply near it.

The availability of new marketing tools offers many advantages, the most important of which is the ability to reach an ever-widening circle of customers, mall owners say. The challenge lies in figuring out which tools best fit the mall business and how to use them effectively. For now, the word mall marketing professionals use most often is “testing”—while many plan to integrate apps and mobile sites into their strategies in coming months, they are only in the initial stages.

“The digital, mobile and social networking world is a fast-evolving space and we are going to be learning as we go along to figure out how it works best for our consumers and our retailers,” says Mikael Thygesen, chief marketing officer with Simon Property Group, which operates a245-million-square-foot domestic portfolio. “That’s sort of the approach we are taking with this—we realize that today’s vision is going to be very different from the vision two years from now.”

After thinking about mobile marketing strategies for a year, Simon executives chose Shopkick because they felt the app was retail-focused rather than being a social media app with retail as just one of its capabilities.

A number of other companies plan to follow Simon’s and CBL’s lead in the coming months, with their own mobile app launches and mobile Web sites. The key to using these new tools is making sure the costs don’t outweigh the benefits.

For instance, Cousins Properties, an Atlanta-based property owner with 20 million square feet of retail space, has always tried to stay ahead of the game in its marketing efforts with sophisticated social networking campaigns. So when smartphone apps became popular, Cousins looked into rolling out apps for its “Avenue” branded lifestyle centers. After a cost-benefit analysis, however, it turned out that investing in app development did not make much economic sense for the company at this point, says Angie Leccese, senior vice president of corporate marketing with Cousins.

Today, only approximately 6 percent of the traffic on Cousins’ Web sites comes from smartphone users—a number the company considered too small to devote a lot of capital to developing an app. Building an app from scratch would cost Cousins between $10,000 and $15,000 and would benefit only those of its customers with compatible smartphones, Leccese says. Instead, Cousins opted to launch mobile sites for Avenue centers that cost between $5,000 and $6,000 to develop and are accessible through multiple mobile platforms. It will launch mobile sites for eight of its properties this month.

“The mobile site has the same functionality that you would get from an app,” Leccese says. “It would not only give you the basics you might be looking for, like directions and which retailers are there, but it would also give you the added value of accessing the discounts and events that are happening at the center that day.”

Still, some retail property owners feel that mobile apps are worth the investment and have pursued their development. Just before Memorial Day weekend, Madison Marquette, a Washington, D.C.-based firm with a 10.5-million-square-foot portfolio, rolled out an iPhone app for Asbury Park, its 400,000-square-foot lifestyle center in Asbury Park, N.J. The app gives shoppers updates on cultural events happening at the property in addition to informing them of retail sales and providing links to Asbury Park’s Facebook and Twitter pages. Madison Marquette chose Asbury Park for the roll-out because it has a large entertainment component and customers benefit from getting event updates for the center, in addition to using the app to scan for retail discounts.

The firm worked with Toronto-based mobile marketing agency Mobile Fringe to develop the app.

Social life

Mall owners are also increasing their presence on social networking sites and learning how to use those sites to drive sales. A recent study by Alexander Babbage Inc., an Atlanta-based research firm, found that of more than 1,800 U.S. retail centers larger than 300,000 square feet that it observed, 608 have Facebook pages and 557 have Twitter feeds. Babbage and Madison Marquette also formed the Center Social site that is aimed at providing research and data on the use of social media by shopping centers.

This year, Simon is launching Facebook pages for 180 of its 382 properties. The firm also plans to expand its use of Twitter. Macerich Co., a Santa Monica, Calif.-based regional mall owner with a 74.6-million-square-foot portfolio, now has Facebook and Twitter accounts for all of its centers. Macerich owns 71 regional malls and 14 shopping centers.

According to the Alexander Babbage study, previously, Columbus, Ohio-based Glimcher Realty Trust was the only large scale U.S. retail developer to have Facebook and Twitter presence for 100 percent of its properties. Glimcher owns 26 regional malls.

CBL & Associates has integrated Facebook and Twitter at about one-third of its 135 malls. The firm uses the sites primarily to update shoppers on discounts and special events, says Faucette. The challenge is that using social networking to connect with shoppers is only effective if the sites are updated on a regular basis.

“With those types of sites, you can’t just put something up and leave it because the downfall could be that people don’t get answers [to their questions],” says Faucette. “We have a designated person in each region that checks the pages and responds to customer inquiries. In general, our Facebook and Twitter sites are updated daily, unless we are having a big event.”

In that case, CBL promotes the event with more frequent postings in the several days leading up to it.

Responding to shoppers’ questions in a timely manner often pays off in increased sales, says Mechelle Peters, senior marketing manager with Macerich. When the marketing personnel at the company’s Biltmore Fashion Park in Phoenix, Ariz. tweeted about a new product at cosmetics retailer Origins, the store ended up having the best sales for that product out of all Origins stores in the region. In another instance, an 11-year-old customer used Facebook to ask what her date should wear to the school dance. The mall’s marketing manager posted photos of potential outfits and the 11-year-old pair ended up buying clothes from one of the mall’s stores.

Over time, mall owners have gotten savvier about combining traditional, on-site marketing events with their social networking efforts. In advance of the upcoming school year, Jones Lang LaSalle Retail gave members of its teen advisory board at the Valdosta Mall in Valdosta, Ga. a set dollar amount to buy a complete back-to-school outfit at the center. The teenagers then posted photos of the clothes they bought on Valdosta Mall’s Facebook page. Some of the stores subsequently sold out of posted items within two or three days, says Elizabeth Faulkner, vice president of regional marketing with Jones Lang LaSalle.

“It’s not a [paid] advertisement for Abercrombie & Fitch, it’s your girlfriend Jill telling you what she bought,” Faulkner says. “You don’t throw everything [you’ve done in the past] out because you have a new medium. It should all be integrated.”

Some property owners, however, are holding off on launching Facebook and Twitter accounts until they can quantify the benefits of social networking efforts. One such company is Youngstown, Ohio-based Cafaro Co., which owns 32 million square feet of regional mall space. Cafaro does use social networking sites, but not directly. For example, in August, the actor Peter Facinelli, who has a role in the Twilight movie series, made an appearance at Cafaro’s Spotsylvania Towne Centre in Fredericksburg, Va. Facinelli is hugely popular on Twitter with more than 1.6 million followers, so Cafaro’s marketing team asked him to tweet about his upcoming engagement at their center.

When Facinelli tweeted about his appearance at Cafaro’s Mall of Monroe in Monroe, Michigan last November, he attracted a group of 2,000 autograph-seekers.

“We are using strong, already well-established sites to distribute our information,” says Esther Buschau, director of corporate marketing with Cafaro. “We only have so much money and so many resources. It’s about using whatever’s most effective right now.”

Buschau’s concern about launching Facebook and Twitter pages for individual Cafaro properties has to do with the industry’s spotty record in building fan bases on those sites. She points out that for every center that has amassed 20,000 followers there are several that have only 20 followers. The Mall of America in Bloomington, Minn. and Westfield Garden State Plaza in Paramus, N.J. currently have the most Facebook followers in the U.S. shopping center industry, with 107,649 and 36,844 fans respectively, according to Center Social. The Grove in Los Angeles and Mall of America, have the most Twitter followers, with 5,205 and 3,263.

Overall, Alexander Babbage found that in third quarter of 2010, retail centers with Facebook accounts had on average 1,563 fans. Retail centers’ Twitter followers averaged 281 per center.

ICSC recently published a survey that found that 58 percent of adult consumers use social media. Approximately 25 percent of consumers have become fans of at least one retail-based company. The majority, however, follow brick-and-mortar retailers, rather than malls.

The Jones Lang LaSalle study found that 24 percent of those surveyed incorporate social networks into their purchasing behavior, primarily by sharing information on what they are buying.

But even though presence on social networking sites is free, to make them effective marketing tools landlords need to invest in manpower to update them on a regular basis, Buschau points out. Cafaro plans to establish a presence on Facebook within the next few months, but it will most likely be for business networking, rather than for interaction with its shoppers. Then, next year, it might do Facebook test runs for individual properties.

In fact, property owners have started establishing their own networking sites that allow them to connect with brokers, tenants and customers through the same online venue. Earlier this year, Developers Diversified Realty, a Beachwood, Ohio-based shopping center REIT, created what it calls an “online hub” where tenants can advertise special events and giveaways and shoppers can get useful information about their local center. The site also allows members to discuss non retail-related topics, including cooking recipes and vacation destinations. Launched in June, ShopStar already has more than 1,100 members.

“It was important for us to tie together both the online and in-center experiences and we felt we could better do this by developing a customized online program,” instead of a stand-alone Facebook page, says Scott Schroeder, vice president of marketing and corporate communications at Developers Diversified. “We wanted our online program to seamlessly integrate into our current company culture and truly engage shoppers and give them a reason to continually return to our sites.”

Meanwhile, another shopping center REIT, Houston, Texas-based Weingarten Realty, has created the Virtual Partner Network (VPN). VPN targets leasing brokers, agents and potential property investors. The network uses Facebook, Twitter and LinkedIn to offer a continuous feed of latest Weingarten news, real-time vacancy listings and leasing updates, in addition to retailer events. The vacancy reports for each center include the names of the former tenants, the location of the vacancies’ on the centers’ site plans, store size and links to corresponding property Websites.