Shopper Tracking is the Next Phase of Location-based Marketing

Stephen DeAngelis

May 5, 2014

Alistair Barr reports, “Retailers have long struggled to determine whether online ads fuel sales in their bricks-and-mortar stores. Now, Google Inc. is testing a way to solve that puzzle. [“Google Tests a Way to Follow You to the Mall,” Wall Street Journal, 11 April 2014] Barr explains:

“A pilot program begun by the Internet company is helping about six advertisers match the anonymous tracking cookies on users’ computers to in-store sales information collected by data providers like Acxiom Corp. and DataLogix Holdings Inc., according to people familiar with the test. One participant in the program is the arts-and-crafts chain Michaels Stores Inc., the people said. The other participants couldn’t be identified. ‘We are running a number of tests to help clients use their own sales data to measure how their search campaigns impact sales,’ said a Google spokesman.”

Anytime that Google gets involved in an activity it makes headlines. But Google’s experiment is not the first consumer tracking experiment to be conducted. Elizabeth Dwoskin and Greg Bensinger report, “Such technology has been creeping into commerce for years. Now, it is becoming commonplace.” [“Tracking Technology Sheds Light on Shopper Habits,” Wall Street Journal, 9 December 2013] I first discussed this topic in a post entitled “Location-based Marketing: Shoppers Won’t Ever Be Alone Again.” Brick-and-mortar retailers have long envied online retailers for being able to track how consumers move through their site and respond to offers. There are number of companies that are now offering technologies that could help level the playing field. As I noted in my earlier post, one such firm is ShopperTrak, which specializes “in people counter technology and foot traffic analysis.” [“Location-Sensing Helps Retailers Pinpoint ‘Power Hours’ for Shopper Activity,” by Nicole Marie Melton, FierceRetailIT, 15 January 2014] Melton reports:

“Retailers are using new advances in technology to help them better understand shopper behavior. … ShopperTrak … says that retailers are now able to track exactly where shoppers navigate within their stores using in-store activity caught on video. This is an upgrade over former tracking data, which primarily focused on customers coming in and leaving the store. ‘Now, we can see more specific data, such as where shoppers are going inside the store, where they go first, and where they go next,’ said Bill Martin, founder of ShopperTrak. ‘We’re able to better understand things like abandonment rate, if shoppers are standing in long lines and how many associates the customer is interacting with when they come into the stores.’ According to Martin, the retail clients he services have been using data from video and sensors, offered through ShopperTrak Interior Analytics, to evaluate if the store is living up to its best practices. ‘Each store has its own service level promise and now we can begin to measure whether associates are actually maintaining and keeping those promises, or should we implement coaching, training, or replacement of personnel to get the desired result,’ said Martin. Interior Analytics is also helping retailers identify what Martin calls ‘power hours.’ These are timeframes when 1.5 percent of the week’s shopping activity occurs and are different and unique for each retailer. Understanding key traffic hours can help retailers make adjustments that will enhance the customer experience when it matters most.”

Google’s approach is different in both practice and intent. It is not concerned with where a consumer moves within a store only with whether the consumer purchases an item he or she has previously viewed an ad for online. And, instead of using in-store video systems, Google uses a combination of consumer online activity and purchase history. Barr explains:

“The company’s new pilot program involves AdWords, its biggest advertising program, in which advertisers place links next to Internet-search results. Google gets paid when users click on an ad and visit the advertiser’s website. While tracking clicks is an effective way to measure a Web ad’s impact on online sales, the system breaks down when shoppers enter a physical store, where their behavior is harder to monitor. ‘Clicks are just the beginning, and everyone knows that there’s more value to tying ads to purchases,’ said Benny Arbel, CEO of myThings, an advertising-technology company that works with Google but isn’t involved in the pilot program. ‘If Google can demonstrate that people did not just click on an ad but that they actually bought something, that is the Holy Grail.’ … When a user clicks on an ad, Google sends an anonymous ‘click ID’ to the advertiser. The advertiser likely has a cookie on the user’s computer, and matches that cookie to the click ID. Days or weeks later, the user might buy a product in the retailer’s store. The data company and the retailer can take that purchase and link it back to the user’s cookie. Then they match the cookie to Google’s click ID. Ultimately, Google can tell advertisers which ads generated in-store sales and how much they generated, the people said.”

Regardless of how consumers are tracked, the issue of privacy is always a concern. “The Google spokesman said the company designed the test so that Google never knows the identity of the user.” Barr describes how Google rival Facebook works with data providers to ensure consumer privacy.

“Facebook … knows the identity of its users, their email addresses and what ads they have viewed online. To avoid breaching personal privacy, Facebook and DataLogix don’t share their data directly, according to executives at the data companies. Instead, the two companies use an algorithm to scramble their data into random numbers. Because both companies use the same algorithm, information about a specific consumer is assigned the same number in both sets of data, and can be matched. The process, known as ‘hashing,’ allows the companies to share their data without passing along any information that might reveal a person’s identity, the executives said. Facebook takes those matched, anonymous profiles and divides them into two groups of users — one that is shown ads, and one that isn’t. The data companies can tell Facebook whether the group that viewed the ads bought more of the products being advertised.”

In still another approach to consumer tracking, a company called aisle411, “uses Bluetooth ‘beacons’ made by Estimote to detect when shoppers pass certain locations or aisles, so it can push them offers and other deals.” [“How location tracking will change the way you shop,” by Zach Miners, TechHive, 9 October 2013] Aisle411 CEO Nathan Pettyjohn told Miners that the company “helps physical stores digitize and map their inventory so customers can find items more easily. Users can create lists, browse recipes, and search for products in participating stores. Searchable store maps can be accessed from the app in more than 12,000 retail locations. … The St. Louis, Missouri-based company sees itself as helping to fill the digital void that impedes brick-and-mortar stores’ ability to compete with shopping channels online.” All of these approaches are part the digital path to purchase that now defines the modern consumer journey.

The ability for retailers to tie their brick-and-mortar operations into their online operations is critical for ensuring an efficient and effective multi-channel strategy. Consumers now expect to enjoy a seamless experience as they move from channel to channel and shopper tracking is becoming an increasingly important part of being able to ensure that happens.