Smart Location-based Targeted Marketing

Stephen DeAngelis

December 29, 2015

Mobile technology is playing an ever-increasing role in the consumer’s digital path to purchase. A majority of all U.S. consumers used smartphones during the holiday season to help them make their purchases. Nevertheless, brick-and-mortar stores still draw people in. Combining mobile technology with traditional store shopping seems like a no-brainer. The question is: What is the best way to do that? Location-based marketing may be the answer. Chris Perez, Co-Owner of Golden Flame Hot Wings, writes, “The best business principles are timeless. For instance, the saying, ‘Location, location, location,’ is and always has been, undeniably true. How you harness your business’s operating location towards creating an effective marketing strategy can cause a company to sink or swim. … It’s an undying strategic influence, and all brick and mortar businesses absolutely must respect it. With that said, technology and the web hasn’t only provided for a rapid expansion in geographical marketing range, but it’s also provided an incredible new way to target customers with stunning effectiveness.”[1] The technology to which Perez refers is called geo-fencing and it has opened the door to location-based mobile marketing. Perez calls it, “Location marketing on steroids.”

Location-based marketing is not quite the cash cow Perez makes it out to be. Don’t get me wrong, location-based marketing has a bright future; but, it has to be implemented correctly. Perez writes, “Imagine being able to know when one of your loyal customers comes within a mile of your parking lot — and then being able to automatically send them a text about a promotion to draw them in.” The most important point Perez makes about that situation is that you are targeting “loyal customers.” That means you have data about them and they have opted in to receive your offers. The more you know about your customers and their desires the more personal you can make your offers. Zheng Fang, Xueming Luo, and Megan E. Keith explain, “Advances in mobile communication and geo-positioning technologies … have presented marketers with a new media channel: location-targeted mobile advertising. Location-targeted mobile advertising involves the provision of ad messages to cellular subscribers based on their geographic locations; this allows marketers to deliver ads and coupons that are customized to an individual’s tastes and geographic location and the time of day.”[2]

Being within a mile of your store at a particular time of day doesn’t mean a customer will necessarily be tempted to divert from what they are doing to take up your offer. Lauren Johnson (@LaurenJohnson) reports that companies are concerned about the effectiveness of location-based marketing. “To address marketers’ qualms for better measurement and analytics,” she writes, “mobile ad networks have started creating campaigns where location is only one of several targeting options.”[3] In other words, targeted marketing works best when consumer intentions are better understood. If, for example, a customer is actually in your store, a safe assumption is that they are in a buying mood and are looking for the type of products your store is selling. This kind of location-based targeted marketing is called proximity marketing and it takes advantage of beacon technology. Gene Marks (@genemarks), explains, “Beacon technology is hot. The sensors, which mostly use Bluetooth Low Energy (BLE), transmit a low energy communications beam from a source to mobile devices or other receivers that are configured to recognize it.”[4] Beacons are generally used inside a store so one thing you can be sure of is the proximity of your customer. Thomas Husson (@Thomas_Husson), Vice President and principal analyst at Forrester Research, explains why this is important, “With 82% of shoppers making their actual purchasing decision in-aisle,” he writes, “it’s no wonder that vendors are betting on beacons and indoor positioning systems to help marketers interact with consumers in real time.”[5]

Companies have known for some time that the deeper into a store a customer wanders (and the more area they cover) the more money they are likely to spend. Location-based targeted marketing can help stores accomplish that goal through the strategic placement of items involved in a mobile campaign. The challenge, of course, is to get consumers to opt in to mobile marketing schemes. Matt James (@HelloMattJames), writes, “Today, customers have far more control in their interactions with companies — whether that’s in the course of purchasing products, getting deals or for some other reason. Many factors have contributed to the shift, but one thing is clear: The voice of the customer has become paramount, and customers are driving the bus on purchasing.”[6] What that means, James insists, is that companies must gain a consumer’s trust before they are likely to partner with them. He writes, “Companies exploring the benefits of mobile location-based services need to ask some hard questions first: How much do customers trust your company? How comfortable are your customers with sharing their personal data? What kinds of experiences are you offering your customers and are they important to them?” He continues:

“In the war for customer acquisition and retention, a customer’s location has become a key piece of information. When combined with other data, such as customer demographics and location, companies can target a customer with offers and other content that make customers feel valued or engaged with the brand. At the same time, companies have to be sensitized to the fact that customers are concerned about their data privacy — and the intrusiveness of location-based techniques, which may barrage them with too many messages that hold little value for them. … Companies must strike a balance between forging customer trust and privacy concerns. And they must be able to articulate the value of these so-called mobile location-based services (LBS) to consumers. … Mobile location-based services enable companies to gather data about their customers based on a customer’s location. The company can, in turn, provide offers, discounts or other information based on that knowledge. On the surface, LBS represent a win for companies and customers alike: Companies collect data on their customers and how they behave on their mobile devices, and customers get specialized discounts or other promotions that they value.”

Marks agrees with James that customers want a real relationship with companies. “The typical customer doesn’t want ads,” Marks writes. “He doesn’t want to be a marketing target. He wants service. He wants information. And he wants to be in control of how he receives that information. For beacon technology to succeed, it should say to the customer: ‘Hey, I’m here if you need me,’ not ‘Welcome back … now buy this product’. … Once retailers realize that beacon technology is better positioned as a customer service tool and not an advertising platform, they’ll see much higher acceptance and benefit from the data about their customers’ buying behaviors that they don’t currently have. And customers will enjoy their in-store experience more.” To implement location-based targeted marketing in the most effective way possible, a number of variables need to be analyzed. One of the best technologies for analyzing a large number of variables looking for insights is cognitive computing. As Husson notes, “Location data alone is dumb.” He goes on to state, “Sending someone a coupon to redeem in a nearby store just because they’re passing by isn’t enough. For ads and messages to be relevant, firms must combine location data with insights like past behaviors, preferences, needs, and situations. It is also likely they will have to combine multiple technologies to reduce the complexity of in-store operational deployments and boost the accuracy of location data.” Get it right and location-based targeting marketing can greatly benefit your bottom line. Get it wrong and you could drive customers away rather than draw them in.

Footnotes
[1] Chris Perez, “2014: Why Location-Based Marketing Is (Still) the Cash Cow,” EZmobile, 8 August 2014.
[2] Zheng Fang, Xueming Luo and Megan E. Keith, “How Effective Is Location-Targeted Mobile Advertising?MIT Sloan Management Review, 21 October 2014.
[3] Lauren Johnson, “Does Mobile Marketing Actually Work in the Real World?Adweek, 4 November 2014.
[4] Gene Marks, “Why Target’s Beacon Strategy Is Doomed,” Forbes, 24 August 2014.
[5] Thomas Husson, “Beyond The Beacon Proximity-Contextual Marketing and Location Data,” Information Management, 2 December 2015.
[6] Matt James, “Mobile location-based services require customer trust,” TechTarget, September 2015.