Imagine a world in which you, a small-business owner, can offer personalized deals to customers who are just walking by your store, thereby increasing the likelihood they will enter your store and purchase something.
Imagine no more. Thanks to geo-fencing and beaconing on mobile phones, this world is a reality.
How geo-fencing works
With geo-fencing, business owners can set up a digital perimeter around their store (or elsewhere). When a customer who has the business's app downloaded to their smartphone enters that specified area (with their phone), they receive an alert – daily deals, a coupon, a reminder about products they had previously browsed. The perimeter is not limited only to the area around a business owner's store; it can also be placed around a competitor's store. That way, when a customer enters Coffee Shop A, for example, they will receive an alert notifying them of a better deal at Coffee Shop B.
How beacons work
Beacons are similar to geo-fencing except that they use Bluetooth technology to connect with customers. A beacon, which is a small piece of hardware, can be placed anywhere – in a store, on a moving vehicle, anywhere. Its function is simply to transmit a signal. That signal is then picked up by smart phones in the area that have a business's app downloaded.
Unlike geo-fencing, the beacon itself does not send out an alert; rather, that job is left up to the app. A beacon is essentially a transmitter. The notification is based on a user's in-app preferences, location and previous shopping habits. For example, a user who placed a particular brand of television in their shopping cart within the app but then exited the app without completing the purchase may receive a notification as they pass the brick-and-mortar store alerting them to a promotion on that television.
So, why use geo-fencing and beacons? In this day and age, there are so many messages and notifications out there that the ones most relevant to a particular customer may not ever be seen. Geo-fencing and beacons help ensure that notifications sent to mobile devices are time- and location-relevant. Chances are, if a customer enters the perimeter and has a history of mobile shopping, they are looking to purchase a product anyway; why not give them that extra nudge?
Pros and cons
As with everything, there are both positive and negative aspects to geo-fencing and beacons.
Pros of geo-fencing
- Deals can be hyper-local. As soon as a mobile device user enters a perimeter, a notification or advertisement pops up within an app, alerting them to a nearby deal. For example, in the days leading up to Valentine's Day, 1-800-Flowers used geo-fencing to push out targeted ads directing people to the company's stores. Anyone who clicked on the ad was directed to a map showing them how to get to the nearest store.
- Add more depth to analytics. Marketers know the importance of tracking digital analytics in order to improve campaign performance. The more metrics available, the better the understanding of customer behavior. Geo-fencing adds location, how often a customer visits a store and how long they shop to those available metrics.
Cons of geo-fencing
- Customers may grow weary. While initially the delivery of tailored promotions may create the impression that a company really "gets" a customer, a constant onslaught could be tiring, or even violating.
- Increasing privacy concerns. With any location-based technology, privacy is an issue. While personalized deals delivered right to the customer's mobile device do have their appeal, there is the potential for abuse of such knowledge. Geo-fencing is not only used for marketing purposes; it is also, for example, used to monitor criminals under house arrest.
Pros of beacons
- Use less advertising. When ads are so targeted, businesses are able to serve fewer advertisements overall – but the ads they do serve are more effective.
- Hardware can be placed anywhere. This includes stores, vehicles or wherever is deemed valuable by a business.
- Battery life is longer. A beacon can potentially last up to three years without draining the batteries; there are also plug-in varieties available. Because of this, beacons are easy to maintain once installed.
Cons of beacons
- Hyper-customized messages can miss the mark. With such specifically targeted promotions, there is the potential to get it wrong, whether that is serving an ad at the wrong moment, over-promoting or sending irrelevant alerts.
- The signal does not interact with mobile devices itself. An app set up to receive the transmission must be downloaded on a mobile device in order to work. Customers must grant the app access to location services before it can receive signals.
Small business strategy
The first question any small-business owner must ask themselves when considering using geo-fencing and beacons is: Is this something my customers will want? Any marketing strategy, if used improperly, has the potential to chase away customers. With something so hyper-targeted like geo-fencing and beacons, there is even greater risk of irritating customers – whether by sending irrelevant messages or too many messages. Promotional notifications must be brief, relevant to the customer's location and prompt action.
Location-based targeting also requires business owners to define their ideal perimeter. For businesses like coffee shops or Chinese restaurants, a smaller perimeter is better as many alternatives likely are available in any given area. On the other hand, businesses that benefit from scarcity (less competition nearby) can broaden their perimeter a bit.
Because of mobile reach alone (two-thirds of American adults own a smart phone), small businesses should at least consider implementing geo-fencing and beacons into their marketing strategy. The potential for increasing foot traffic and sales is too promising to miss out on.