Location-based apps bring ease, and privacy concerns, to consumers

Location-based apps can pinpoint consumer location and make hailing a cab into a thing of the past. But the technology also causes consumer privacy concerns.

If you just learned about Gett, it might be because of the company's mid-January stir with Uber, the taxi-fetching application it seeks to rival in the Big Apple.

Uber made 100 bogus service calls to Gett drivers over a three-day period, cancelling them as the cars approached. Shortly after, texts went out to Gett drivers inviting them to come work for Uber.

Uber has since apologized, admitting that some of its drivers were overzealous in their recruiting, while Gett is considering legal action.

The incident speaks to the rapid emergence and growth of location-based taxi and car service apps. These apps are changing the game when it comes to customer service by eliminating the need to hail taxis by hand. As consumers embrace the apps, the competition – and the controversy -- are heating up.

Location-based applications stand to shake up other industries. According to analysts and industry insiders, the technology is poised to transform the way customers interact with retailers, insurance companies, cleaning services -- you name it. The implications for customer relationship managementare vast and far-reaching.

We are seeing [a] fundamental remaking of industries due to mobile.
Anshu Sharmamobile consultant

"We are seeing [a] fundamental remaking of industries due to mobile," said Anshu Sharma, a former vice president at Salesforce who left to pursue startup opportunities, most likely in the field of mobile technology.

"Now, with location-based technology, we know where are customers are and can walk up to them and say, 'Hey, Mr. Sharma, I know you're standing in the plumbing aisle, but I also saw you bought a new washing machine. Do you need help hooking it up? Do you need access to a plumber?'"

Changing the taxi game with location-based apps

To use a location-based taxi service, customers download the app, register and provide credit card information. When they request a car, the app uses GPS technology to find their location and ping available drivers within a certain radius. If no driver responds, the radius grows.

Rich Pleeth, vice president of marketing for Israel-based GetTaxi, which operates in New York as Gett, said customers love the fact that they can just turn on an app and drivers can find them.

"People don't want to stand in the pouring rain. If I had to go outside, I'd be sitting in the rain for 10 minutes waiting for a taxi," said Pleeth, former head of Google Chrome's U.K. team. "They don't have to go outside and wait in the cold. They can stay in the pub; they can stay in their house. It's literally one tap and they're riding."

Car options vary among services. Uber offers taxis, town cars and UberX, for which drivers use their personal cars. An app called Lyft offers peer-to-peer ride-sharing. Gett currently uses only town cars, but eventually plans to roll out a lower-cost option similar to what it offers in Israel, the U.K. and Russia.

Uber and Lyft, both San Francisco-based, did not respond to multiple attempts to be interviewed for this story. London-based Hailo, which matches traditional taxis with passengers in four U.S. cities, declined to participate.

Inconsistency, lack of scrutiny

Pricing varies, too. Gett offers a flat fee from one borough to the next, while Uber's and Hailo's fares are metered. Lyft's fees are donation-based in some markets. All taxi and car apps require payment through a credit card on file.

Pricing has been one source of controversy with taxi apps. Uber's so-called surge pricing, which jacks up the fares in busy times or bad weather, received a lot of backlash after a few incidents of pricey rides exceeding $100 were publicized.

Some 35% of adults who have downloaded apps to their cell phone have turned off the location-tracking feature.

The quality of drivers has been called into question, as well, particularly after an Uber driver hit and killed a 6-year-old on New Year's Eve. Uber has since expanded its background checks, and most other services conduct background checks, too.

Amid all that, traditional taxi companies and regulators in some cities are fighting back. Taxi drivers have sued the cities of Boston and Chicago for allowing taxi apps to circumvent costly licensing requirements. Several cities have blocked Uber from entering the market, questioning its legality.

Pleeth said services like Gett are trying to supplement traditional taxi services, not eliminate them. Gett partners with taxi drivers in most of its markets, as do most location-based taxi apps.

"We work with regular taxis, so we're not there to push them out at all," he said.

Location-based apps create privacy concerns

Beyond taxis, location-based apps are changing the way all sorts of industries interact with their customers.

The hospitality industry relies on location-based apps for booking. Apps like Hotel Tonight don't ask users to input their location like first-generation booking apps did; they know it, Sharma said.

Kate Leggett, a customer service strategies analyst at Forrester Research Inc. in Cambridge, Mass., noted that insurance companies now use location-based apps to record the scene of an accident.

The latest development -- which could revolutionize the retail industry -- is Apple's location-sensing iBeacon technology. If a customer has downloaded the store's app, the store can use iBeacon sensors to recognize that a customer has walked in, sending them special offers via smartphone or guiding them through the store to a specific item, among other possibilities.

With the technology comes increased privacy concerns. Location-based apps require that users opt-in before sharing location information, but some people are still uncomfortable with the idea of being tracked.

According to a September 2013 Pew Research Center report, some 35% of adults who have downloaded apps to their cell phone have turned off the location-tracking feature out of worry that companies could access that information.

Marios Damianides, former international president of the ISACA, said in a 2012 report that while businesses need to develop ethical and transparent policies for the use of location-based apps, consumers have a responsibility to understand the technology and its implications.

"Like any other kind of information sharing, location-based apps can be tremendously convenient, but [are] also risky," Damianides said. "Knowledge is power. People should educate themselves so they can understand how their data is being used or know how to disable this feature."

Sharma, for his part, emphasized the convenience. He said location-based apps reflect a shift in customer service to a more personalized, localized relationship that benefits customers. Companies in a variety of industries are repainting their relationships with customers by interacting with them at the local level, he said.

"I see a whole new generation of mobile apps that are the next generation of CRM for doctors, restaurants, car dealers," Sharma wrote in an October 2013 blog.

"They connect two people simultaneously, sometimes in real time," he added in a later phone interview. "Knowing location is a huge part of that."

In a Feb. 6 report, Leggett said customers have come to expect personalized service.

"Customers want to feel empowered to get service anywhere, anytime and expect their service interactions to be pain-free," she wrote.

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