Crash Course to Location-based Marketing Technology

Information is clouding up more than ever and customers are increasingly performing shopping-related activities on the go.

While online retailers are definitively capitalizing on this drift, brick & mortar stores aren’t too far behind. Physical store owners are also becoming adept in modern technology to win back sales that they have been losing to the hands of e-Commerce.

Apart from using traditional marketing tactics online and offline, offline retailers are also capitalizing on GPS-enabled technologies like beacon, geo-targeting, and geo-fencing which gives customers what they want, when and where they want it.

Through this article, I will shed some light on what these technologies are, the challenges associated with them, and how they will grow with time to help retailers leverage them better.

Targeting customers Based On Location & Timing

Advanced location-based mobile marketing technologies allow retailers to reach deeper into their customers’ psychology to earn their loyalty by hitting that sweet spot.

So far the adoption rate among retailers has been gradual but with the rise of m-Commerce in recent times, a huge surge is expected in their acceptance.

Let’s start by understanding what these technologies are and how they work.

1. Geo-targeting

Geo-targeting allows businesses to send tailored message to customers of a specific geographic area.

It is crucial to consider people from different locations to have different interests and needs. Online and large offline retailers with outlets in various locations are already leveraging this technology for better customer targeting.

Small brick and mortar retailers can capitalize on this by using it to understand the local demographics better.

For instance, a sportswear store in Manchester can tailor its offers and online promotions better by first knowing where the majority of United and City fans live.

2. Geo-fencing

Using this technology, offline retailers can set a virtual perimeter around their stores, so that whenever opt-in customers (those who have installed store’s app) enter that area, this triggers a message on their mobile devices about the day’s offer and other relevant information.

For example, as you are about to walk into your regular coffee shop, you receive a good morning message on your smartphone with special offer on a particular snack on offer that day.

As a customer, you might opt for that snack due to being informed about it, even when you had not initially planned to do so.

3. Beacon

The most recent entrant in this list, beacon technology was introduced by Apple in 2013 with the release of iBeacon.

Google also launched Eddystone beacons in mid-2015 for Android and other mobile platforms. Beacons are Bluetooth low energy devices that retailers can install in their stores to target customers with high accuracy, in specific micro-locations: aisle by aisle, store entrance and exit.

Beacons work with specific apps installed on the customers’ smartphone, tablet or smartwatch, and trigger specific messages or actions as they walk by a particular micro-location in the store

For instance, walking by a particular product will trigger a push notification about any offer on that product, or as a customer walks out of the store, payment is automatically made by a pre-selected payment channel, and so on.

These advanced technologies are certainly taking mobile marketing to a whole new level. By removing friction from customer interaction, they are allowing store owners to provide customers a highly personalized shopping experience.

We have seen an example, although purely theatrical version of this in Steven Spielberg’s Minority Report from 2002.

In the movie, this happens through retinal scan rather than identification via an app on your smartphone.

The Downsides

Despite the allure of the idea, along with this opportunity comes a handful of significant challenges.

Privacy Concerns

These technologies offer seamless interaction and convenience to customers. But it is done at the expense of the customer’s privacy.

A technology that gets activated based on a customer’s proximity, and having that information stored in a retailers’ analytics application may allow store owners to further target them with this data, for unrelated matters.

Annoyance

Taking the example of the coffee shop scenario, if the customer is only walking past the store in a rush instead of entering it, receiving a notification about the coffee shop’s offer can cause annoyance.

Of course, it can be prevented by turning off the app, but then making the customer to do something repeatedly only causes further annoyance.

Lack of Data

These technologies have been around for a good while now but they are still in a somewhat nascent stage.

There are still no well-defined patterns for how exactly customers are behaving towards these in-store digital interactions. So to some retailers, investing on them might seem like a gamble at this stage.

Battery Drainage

Beacon is built upon low energy Bluetooth technology. Enhancements it has gone through over the past couple of years have also cut down the battery consumption issue significantly.

But on the ground, since spending a couple of hours in supermarkets is normal behavior for customers, they may need to deal with some battery drainage if they want to keep their Bluetooth on for that period as well.

Native App Requirement

Another major challenge with these mobile marketing technologies is that they require customers to install specific apps to interact with them.

This may be mor feasible for big retailers like Walmart, Sears and Target whereas smaller retailers might use them to engage only their most loyal of customers.

What does the future hold?

Despite these challenges, the future of these technologies looks hopeful. After all, nothing is more desirable for customers than knowing about interesting offers without even having to search for them.

In fact, a study said that about 70% people find location-based push notifications to be useful. These technologies also increase app usage about two times, which consequently gives retailers more time to engage their customers.

Several other studies also suggest that in coming times, these technologies will be widely accepted. According to MediaPost, in 2015, 46% US retailers used beacon technology (up from 15% in 2014). And about 71% of them were able to understand customers’ buying patterns.

Business Insider has also estimated that in 2016 beacon based technologies will drive about $44 billion worth of sales for big retailers in the US alone, 10 times higher than in 2015.

Apart from these numbers, the growing trend of the internet of things (IoT) and the idea of gadget speaking to gadgets will also work in favor of these location based marketing technologies (since essentially, that’s exactly what they do).

Conclusion

So we have established that beacon, geo-targeting and geo-fencing have substantial long-term potential and will gain notable growth in times to come (especially in more mobile-oriented countries).

But on the other hand, the challenges associated with them also clearly indicate that they need further enhancements for easier implementation, more precise targeting, and better customer experience.

How long they will take to go mainstream completely depends on how quickly these enhancements take place. However, the important thing for retailers at this stage is to start adopting and using these location based marketing techniques and building upon them as the need arises in the market.

What’s your take on the utilization of location based marketing? Share with us.