Location-based Marketing is on the Move

Stephen DeAngelis

January 22, 2015

Last year, Michele Nemschoff (@mnemschoff), Vice President, Corporate Marketing at MapR, asserted, “Thanks to the rise of the mobile consumer, location-based marketing has taken off as a way to target consumers when they are in a position to enter a store.” [“Five Tips for Getting the Most Out of Location-based Marketing,” Directions Magazine, 9 January 2014] That trend continues unabated. At this year’s Consumer Electronics Show (CES 2015), General Motors announced that it is expanding its subscription-based OnStar program in the United States and Canada by adding an “AtYourService” feature. This e-commerce capability will partner “with companies such as Dunkin’ Donuts, Parkopedia, Audiobooks.com and Priceline, and will offer drivers coupons through RetailMeNot and Entertainment Book. By connecting with live OnStar advisors, consumers will be able to take advantage of specials at a nearby Dunkin’ Donuts or book a discounted same-day hotel via Priceline.” [“GM to announce new connected-car features at CES,” by Marco della Cava (), USA Today, 5 January 2015] GM’s announcement adds to the growing number of location-based marketing technologies becoming available for retailers.

Unlike other targeted marketing schemes available to bricks-and-mortar establishments, location-based marketing enjoys the advantage knowing that a consumer is nearby and, therefore, a potential customer. Lauren Johnson (@LaurenJohnson) reports, however, that consumer location is not enough to target offers successfully. As a result, “location-based ad networks are enhancing basic geo-fencing capabilities with deeper consumer behavior formats.” [“Mobile Marketers Know Who You Are and Where You’ve Been,” Adweek, 24 June 2014] She explains:

“Mobile ad networks, including xAd, Verve and PlaceIQ, offer marketers granular and retargeting capabilities that build campaigns around sets of consumers — a tactic that advertisers are already familiar with. … The belief is that hitting a consumer with an ad based on their exact location at one moment is not as effective as serving up ads tailored around the last 20 places where that consumer has been or other pieces of content that they’ve recently looked at on a smartphone. ‘It adds another dimension to not only where [consumers are] standing but also who they are,’ said Michael Boland, chief analyst and vp of content at BIA/Kelsey.”

Nemschoff agrees that geo-fencing alone is not a good enough strategy to lure customers inside store doors. When targeted super deals and geo-fencing are combined, chances improve. Nemschoff notes, however, that heavily discounting goods might not be the preferred strategy. She explains:

“Brands have been using geofencing for several years now to send an offer to all who happen to walk within a certain area. The problem with this approach is most customers are unlikely to change their plans and walk into a store unless the offer is compelling enough, that is, a huge bargain or specifically tailored to them. Since businesses can’t afford to continually heavily discount merchandise, they should instead seek to achieve a 360 degree view of the consumer through big data. Big data tools, such as Hadoop, allow business owners to capture and analyze multi-structured data, such as conversations on Twitter or click stream data. By using this kind of data, businesses can create a profile of a consumer, such as their age, gender and interests, to create a highly targeted offer when that person hits a geofence.”

Last fall Facebook announced that it was going to launch “hyper-local advertising, targeting ads within a specific distance of a bricks and mortar retailer. Advertisers can set their message as near as a single mile, meaning it would appear only on the mobile devices of consumers within that specific geography.” [“5 Ways Facebook Geo-Targeting Will Change Your Life,” by Kathleen Kusek (@Need2KnowMktg), Forbes, 11 October 2014] I’m not sure that I would categorize a mile radius as “hyper-local.” There are a number of technologies that can target consumers much closer than that. For example, in 2013, Apple launched its iBeacon technology that knows when consumers are at a particular location within a store so that location-sensitive devices can send out push notifications to shoppers who have downloaded a brand’s mobile app. [“4 Location-Based Marketing Tactics That Are Working,” by Lauren Johnson, Adweek, 4 August 2014]

Tom Van Riper () reports that grocery stores may soon be using in-store location-based strategies to manipulate consumers’ paths as they walk through stores. [“Supermarkets Could Soon Manipulate Where You Walk,” Forbes, 8 July 2014] You may ask yourself, “Why would they want to do that?” The answer is simple: increased sales. Van Riper reports that Professor Jeffrey Inman, from the Katz business school at the University of Pittsburgh, conducted a study involving supermarket consumers during which he tracked their movements through stores. “Inman found that a typical shopper spends precisely $1 above his [or her] planned budget for every 55 feet (or, say, 20 paces) he [or she] walks in the store,” reports Van Riper. “That finding comes from pre-shopping interviews on planned purchases, RFID tracking to trace [consumer] movements through the store, and then an inspection of receipts afterward.” So how can location-based technologies be used to keep the consumer moving? Van Riper explains:

“The more significant part of the study involved coupons. With all the data that supermarkets can now collect from customers through loyalty programs, coupons touting savings can be personalized and delivered through mobile devices. Inman took one sample of people and divided them into two groups: 1) those getting a coupon for a product located close to the path they would normally travel, 2) those getting a coupon for a product further off that path, forcing them to cover more ground in the store. Result: those forced off the beaten path spent $21 more than they had planned to, while those sticking closer to their routine spent $13 more than planned, a 61% difference. Inman notes that supermarkets and other retailers haven’t yet rolled out any meaningful plan aimed at guiding customers through their stores in direction the manager wants. ‘Retailers are still struggling to get their apps together, and there are always privacy concerns over whether a customer will opt in to a coupon,’ he says. But customers have generally shown a willingness to sacrifice some privacy in exchange for savings and convenience.”

Nemschoff cautions that retailers need to be sure that consumers understand they are be treated special as a result of their opting to share personal information (including location) with the store. She offers four pieces of advice for dealing with consumers:

Be Responsive — Many businesses rely on check-ins on FourSquare or Facebook to get their location-based marketing data. However, it’s important to remember that these sites should be used as an opportunity to build a relationship with the customer, not just for sending offers and advertising. Notice the customers that check in regularly or write a good review of your product, and be sure to engage with them and thank them. Be sure to answer questions, as well. Customers want to know that they, not just their wallets, are important to you.

Be Convenient and Useful — To stand out from all of the other companies sending out messages and advertising, your business needs to provide real value to the consumer. This means going beyond advertising and offering an additional service, such as insider tips on landmarks to see around a city or information on the nearest subway station. Another method is to try to upsell the consumer when they are already inside the door, such as a discount for a hotel room upgrade. Sending an offer like that when the guest is already planning on staying with you feels like a nice gesture rather than an advertisement.

Use Rewards — One way to engage the customer in the marketing process is to offer a reward after a certain action is completed. This may be checking in, liking the company on Facebook or simply walking into one of the stores. For example, Shopkick, a mobile shopping app, works with retailers like Target to offer rewards via indoor positioning. Users win awards by entering a participating store or by scanning products in the store or making purchases. This way offers are only given to those who have shown interest in the company and who are most likely to act on it.

Augment the Customer Experience — Finally, take advantage of your mobile apps to augment the customer experience. Boston Children’s Hospital does this well with its MyWay app, which gives visitors turn-by-turn directions to help them find their way around the hospital’s huge campus. The app also helps visitors find restaurants, hotels and other services nearby.

By now it should be clear that a location-based marketing strategy that uses geo-fencing alone is probably not going to achieve hoped for results. Adding customer biographic, demographic, and psychographic data to geo-fencing technologies and then providing consumers with valuable and targeted offers as a result is a much better way forward. As General Motors’ announcement indicates, location-based marketing is here to stay and technologies that improve how it can be used are only going to improve.