Geofencing; What, Why and How

Want to enhance your business by targeting local customers and increasing sales? Check out our handy guide to geofence advertising.

You are reading: Geofencing; What, Why and How

Libby mentioned in her recent blog post that a big trend we’re bound to see increasing in marketing through 2017 will be personalisation, and as such the ad world is looking at ways to monetise this.

Minority Report - Personal Advertising in the Future

One method is geofencing. The technology has been around for years, but geofencing in its current incarnation is fairly recent, and is looking to be big next year.

What the heck is geofencing?

Geofencing uses GPS technology to define a virtual perimeter for a real world geographic area. In terms of advertising, this geofence is used to trigger a notification or advert on a consumer’s mobile device when they’ve entered a certain area. This could be anywhere you like, from a neighbourhood to a particular shop or street.

It usually works using a combination of GPS, WiFi and, to a lesser extent, cellular data. Whereas it used to take the form of using cellular data to send a text message to consumers within a certain area, it’s now most commonly facilitated by applications which require customers to opt in to location services and push notifications, so that they are aware that their GPS data is being used – unlike before.

There are two types of geofencing; active and passive. Active is when an application is open on the shopper’s device, actively using GPS services (which can be a big drain on battery), whereas passive geofencing is always on, working in the background, not using GPS.

How can geofencing be utilised?

Geofencing can be great if you’re a retailer operating on a local scale. There are several ways you can use it to enhance your business by targeting customers on a super granular level:

  1. It can remind consumers that they’re near your shop by sending them adverts or offers if they are within a certain proximity of your location
  2. It can be used to tempt them away from competitors by sending them adverts or offers for your shop if they are near a competitor’s location
  3. It can be used in conjunction with non-direct competitors to enhance sales e.g. sending an ad or offer to customers of a nearby flower shop for your confectionary business
  4. It can be used to deploy targeted offers and promotions in a certain area based on local events or holidays e.g. offering 20% off purchases to customers within a certain proximity of your confectionary shop in the days leading up to Valentine’s day
  5. Not only can you localise your advertising, you can personalise it too; by using the purchase history of past customers, you can provide them offers for products that they are likely to either be purchasing again (a routine purchase) or that they might be interested in based on similar products they’ve bought in the past. (Bonus tip – if you cross reference this with a local event or holiday, the likelihood of conversion will be high.)
  6. You can also target customers as they dwell. For example, a shopper has walked into your store and has been browsing for a few minutes or more. You can send them a product advert or offer after a set amount of time in order to entice them to purchase.

The upsides to geofencing

As well as helping to increase your sales, it can help increase loyalty; ads can be used to offer shoppers some sort of reward for walking into a participating store e.g. a discount code or gift card. You can also use it to tell previous customers about new lines or products that you’re now selling that might interest them.

You’ll be able to see how frequently a customer visits your shop. This will enable you to reward regular shoppers, carry out win-back campaigns for shoppers that haven’t visited in a while, and target first time visitors with first time buyer discounts or rewards, to maximise conversions from every type of customer.

It also adds depth to your customer data; not only will you be able to analyse whether targeted customers convert better than walk-ins and how well different adverts work for your business, you can survey customers when they leave your store. This can be done by sending a survey request notification to a customer when they exit the geofence, thanking them for their custom and asking them to rate their experience. Remember to offer them a reward or incentive for completing the survey – this will not only make it more likely that you’ll get the data from them, it makes it more likely that the customer will return to your shop, and, hopefully, make another purchase.

Likewise, targeting competitor or related businesses will help you accumulate customer behaviour data which you can then analyse and use to inform your marketing. (Remember, for transparency, to put in your T&Cs that you will be tracking not only your own stores, but also that of competitors and related businesses.)

The downsides to geofencing

As touched on above, active geofencing requires the shopper to have the application open on their device as they shop, whereas passive geofencing runs in the background. Both have their faults; active geofencing not only runs down a customer’s battery, it’s inaccurate and also tends to be prone to bugs. This results in less than optimum results for both consumers and retailers; best case scenario is that the data is inaccurate, worst case is that the customer gets so frustrated with the app that they delete it from their phone, eliminating your opportunity for targeted marketing completely.

Likewise passive geofencing is just that – behind the scenes and designed to be unobtrusive. This is fine if you’re using geofencing purely to collect customer data, however it makes it hard to get adverts noticed, or even delivered in the first place.

In addition, if you want accurate geofencing, consumers really need to have their device connected to WiFi. Cellular data is very inaccurate and makes it difficult to track shoppers in and out of geofences effectively.

In terms of ads themselves, whilst you can collect geofencing data without any difficulty when the consumer has opted into location services on their app(s), if you want to send them adverts or offers then they will need to have opted in for push notifications as well. Be aware that not every shopper will opt in for this, and likewise not every shopper will turn on WiFi on their device. So whilst geofencing can be a valuable way of targeting existing and potential customers locally, it will by no means target everyone in the area, so make sure that if you implement geofencing it is as one part of your overall marketing arsenal.

There are also concerns around the implications on privacy. Firstly, the idea of being tracked doesn’t sit comfortably with everyone. Whilst geofencing only tracks consumers in close to the virtual barrier, many believe that it tracks 24/7. This can lead to distrust and opting out of the location services which the service needs. Likewise, for those who have opted in, if they receive a barrage of adverts then they will most likely end up opting out.

Is geofencing right for my business?

For any retailer operating on a local level, geofencing can undoubtedly be of value. Despite some of the challenges, it can be very effective; just make sure you stick to best practices and that you have a good handle on your CRM data in order to get the most from it – there’s no point setting up targeted marketing if you’re lacking the foundation on which your targeting will be based. Part of this is making sure that all your other marketing ducks are in a row; in particular, the way in which you collect and collate customer information, be it at the enquiry stage, point-of-sale, or through any other marketing activity. Next, analyse it in as many ways as you can; the more you interrogate your customer data the better you’ll be able to target individuals.

If you’d like help deciding whether geofencing could benefit your business and work alongside your existing PPC, or would like help with your current paid marketing, please don’t hesitate to get in touch!

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