In 2015, Gartner stated that beacon technology – the type used in retail stores to locate, track and communicate with consumers via their smartphones – had moved beyond the ‘Peak of Inflated Expectations’ in its Hypecycle for Consumer Devices, to the phase known as the ‘Trough of Disillusionment’.
In real terms, this means the initial hyperbole around the topic had passed: replaced with the need for marketers to knuckle down, and establish what the practical methods are for actually using the technology.
Subsequently, recent years have seen brands regularly trialling and testing not just beacons, but all manner of location-based marketing technologies, including NFC, GPS, WiFi, geo-target advertising, proximity tools and push notifications.
Whilst the range of terminology can be overwhelming, the basic premise – using location to market and advertise to consumers – remains the same. And the reason for such a heightened interest in location-based marketing among brands and marketers is clear: by 2018, global smartphone users are set to reach the 2.5 billion mark. Consumer expectations around smartphone capabilities continue to rise, and brands are under increasing pressure to offer more value straight to their customers’ mobile devices in the form of personalised discounts, coupons and loyalty points.
With the capacity to establish exact geographic locations, the theory of location-based marketing is that brands will be able to offer more targeted offers that connect their customers’ on- and offline experiences – from delivering personalised, relevant adverts based on proximity, to connecting directly with customers in-store via beacons in order to offer improved, in-the-moment discounts as they browse a shop.
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And location-based marketing at its most innovative is creating widespread disruption. Mobile apps such as Uber and Tinder have taken the central premise of a consumer’s location to reimagine services such as hailing a cab or finding love through the swipe of a screen.
“In nine short years the proliferation of smartphones to the point of ubiquity has opened up a vast consumer group that is always on, and always transmitting their location,” says Az Ahmed, senior marketing consultant at SmartFocus.
“Whether it be through GPS, Wifi, Bluetooth or any other technology that smartphones support, with the right software solution these signals can be listened to, aggregated and received as triggers to deliver context rich marketing moments for brands. Shrewd marketers are now focused on localised personalisation in the context of real-time interactions that help drive customer sales, wherever they happen to be.”
According to eMarketer, location-based adverts and offers will make up over 40% of mobile spend over the next five years. Yet, for many brands, establishing what resonates with customers is the biggest location-based challenge, and is making them tentative.
In Adobe’s February 2015 Digital Trends report, just 8% of retailers were using location-based technologies, compared with 23% of telecoms providers, 18% of financial services, 18% of consumer goods suppliers and 10% of travel and hospitality providers.
Part of the issue is establishing what represents a fair value exchange. But research from Brainstorm also found consumer attitudes towards location-based services were still relatively conservative, especially in terms of privacy. 32% say they would only be happy sharing location data via their mobiles if they remained anonymous to brands, while 34% say privacy is a major concern and would mean they’d wish to opt-in to businesses aiming to use location-based tracking with them.
If brands just send what they want in an unrestricted fashion, then consumers will be overwhelmed, demonising the channel before it is properly established
High profile cases of location tracking without clear intent have also led to some labelling the practice as creepy. Mobile apps that require location data but don’t clarify the necessity only amplify this concern. Yet conversely, a recent SmartFocus survey found that 60% of people were happy to share location with a brand if they received a reward (like improved service or a discount) in return. For younger audiences, this figure was even higher.
“In order for brands to tackle this issue and win over consumers’ loyalty and trust, they must tackle the problem of user experience,” says Theo Theodorou, MD of EMEA at xAd. “This can be achieved by using contextual targeting through precise, accurate and scalable real-time location data. Intrusive ads are frustrating, but quality ads delivered to the desired consumer at the right time and right place are not. When brand campaigns reach the right audience, it results in a deeper connection between the brand and consumer, but also wastes less spend, through precision targeting, only the relevant people are exposed to the ads.”
“If done properly and carefully, location-based marketing will really flourish,” adds Rupert Harrison, Planning Director at Zeta Interactive. “It will become something that we expect every brand to provide.
“Of course, there needs to be some form of opt-in. If brands just send what they want in an unrestricted fashion, then consumers will be overwhelmed, demonising the channel before it is properly established. Once customers understand that the benefits outweigh the risks, though, it will become the norm.”
Path to purchase
So what are the benefits of location-based marketing? For the consumer, location represents an expectation that brands will adapt their marketing to align with their evolving path to purchase.
A recent report from xAd found that 45% of ‘on the go’ researchers (those that use their phones to showroom prices whilst out shopping) are more likely to make a purchase within an hour – far quicker than those researching at home. In addition to this, the report found that 1 in 4 smartphone and tablet owners use mobile exclusively in their purchase decisions.
Just 8% of retailers were using location-based technologies in 2015, according to Adobe research
The act of “showrooming” has developed from being a practice that retailers fearer to one that represented an opportunity to establish a customer’s need and encourage a sale, in-the-moment. It works, too. Research from xAd has actually shown that with location marketing in place, 60% of in-store shoppers convert in-store, vs. 21% buying by smartphone and 14% later on desktop.
“Location-based marketing makes marketing messages more relevant and timely. If an advertiser knows the users’ location then it becomes easier to target to those particular customers,” says Brian Lonsdale, managing director of Smarter Digital Marketing.
“Advertisers may choose to recommend local cafes, restaurants, bars or any other business which customers are interested in. Browser habits and demographics can be collected and shape the purchase path as it makes it easy and relevant to select goods and services these customers may wish to buy.”
From promotions, to advertising and in-store innovation, a number of brands provide examples of how location marketing can result in success for both the consumer and the brand. Even back in 2012, Jimmy Choo was leaning on platforms such as Twitter and Foursquare to engage with audiences through treasure hunt-style promotions that relied on customer location. In the US, brands like Dunkin’ Donuts have evolved from similar promotions into using location data to better understand exactly where and why people might be interested in buying their products at any given time.
In the UK, supermarkets such as Asda and Waitrose have introduced beacon technology to improve in-store interaction for customers, while retailers, House of Fraser have gone one step further in embedding mannequins with beacons in-store, in order to communicate information about the clothes each mannequin is wearing and offer discounts based on intent.
In some cases, location marketing has led to brands to rethink their own marketing strategy, sometimes partnering up with unexpected brands for success. One example is Coca-Cola’s recent beacon trial in Norwegian cinemas, which lent on an already-popular third-party cinema app to deliver a promotion that yielded higher-than-normal results.
24% of the people that had the app on their phone clicked on the offer, while 50% collected their free Coke at the cinema and 60% of those went on to click on retargeting ads served up some time later and offered a free cinema ticket courtesy of the soft drinks giant.
“Collecting data through location based marketing allows brands and retailers to effectively target their products and services to a local area,” Lonsdale adds.
“The value derived from collecting information through location-based marketing is highly segmented as it means brands know exactly where their customers are and can target them with pin point accuracy. For example, a large retailer may wish to use SMS marketing to customers within a 2 mile radius of their flagship store.”
All the stats point towards further innovation in the field as marketers continue to test the boundaries of what’s achievable. According to the IAB and PwC, mobile marketing accounted for 78% of all digital growth in 2015. As mobile devices become increasingly part of our everyday lives, location-based marketing is set to become centre stage, as long as brands are able to keep the consumer front of mind.
“Privacy and snooping are obvious concerns, but as with any data collection, it comes back to the value exchange,” adds Harrison.
“Each customer needs to understand exactly what they are signing up to, what a brand will do with their data and how this will benefit them personally. This transparency is vital for the consumer to trust that their personal information and location will be used solely for means that result in them receiving a better customer experience.”
About Chris Ward
Chris is Editor of MyCustomer. He is a practiced editor, having worked as a copywriter for creative agency, Stranger Collective from 2009 to 2011 and subsequently as a journalist covering technology, marketing and customer service from 2011-2014 as editor of Business Cloud News. He joined MyCustomer in 2014.