As the popularity of Google Maps, Snapchat and Pokémon Go has made clear, location-based technologies have revolutionized how people use mobile phones. By 2018, there will be 2.5 billion smartphone users worldwide, according to eMarketer Inc. They will be navigating to restaurants, Snapchatting their vacations, checking movies playing at the nearest cinema, RSVPing on Meetup or looking up product availability at area Walmart stores.
According to the Pew Research Center, 90% of smartphone owners use them to get information related to their location. Now, companies are starting to tap the location-based services (LBS) on consumers' phones in order to send them relevant offers and messages. According to the Location Based Marketing Association's (LBMA) latest trends report, 75% of marketers agree and believe that location-based marketing is an important business issue for 2016.
Location-based technologies use wireless transmission, such as between a smartphone and a beacon or Wi-Fi access point, to pinpoint a user's location. A mobile app that has access to a phone's location services can provide navigation as well as location-specific content, like coupons or product reviews. In fact, there are myriad uses for LBS in marketing, advertising and customer engagement.
MEPLAN GmbH, a German trade services provider, created the expoNAVIGATION app to help conference attendees find their favorite exhibitors faster. A user searches a database of exhibitors and enters a list of those he wants to visit. The app uses beacons to plot the shortest route around the floor, thus optimizing the customer's time and, hopefully, boosting sales for exhibitors.
The Aquarium of Western Australia (AQWA), based in Hillarys, Australia, has a mobile app that guides visitors along several themed tours (like the Shipwreck Coast or Animal Extremes tours) with interactive activities for kids. Created by Apps Ppl, a developer of cloud-based mobile apps, the AQWA app is part of a larger mobile app -- "Everythere" -- that tourists use to research activities around Perth and to get directions.
Asif Khanpresident, Location Based Marketing Association
But it's the ability to combine location data with other customer information collected from a mobile app or store loyalty program that has the biggest potential for personalizing how businesses engage with their customers. People often use smartphones to browse the web, make online purchases and pay at the checkout counter. That information, and more, can be accessed and used to understand the buyer's habits and shopping preferences.
"[LBS] can tie your entire marketing strategy together," said Asif Khan, president of the LBMA. "We're using location to blend brick and mortar with e-commerce and digital."
The data can also be aggregated and combined with other consumer information and used to analyze consumer behaviors and trends.
Investment in location-based technologies will rise significantly in the near future, according to Juniper Research Ltd., based in Hampshire, England. The firm expects the LBS market to jump from $12.2 billion in 2014 to $43.3 billion by 2019, with context-aware mobile services being the main driving force.
Potholes in the road to location-based technologies
Nevertheless, businesses have been cautious about adopting LBS, despite their interest. Forrester Research's report "Make Smart Wireless Location Technology Decisions" found that just 3% of businesses surveyed were actually using beacons, while another 11% were piloting them.
This is because location-based services are actually a collection of technologies -- some old, some new and others still in research and development. It's a rapidly developing market, one that can quickly confound an unsuspecting marketer or business owner.
The most common technologies are the following:
GPS: GPS systems are commonly used for maps and other outdoor navigation. They can't penetrate walls and aren't accurate enough for use in small spaces, so they're not used for indoor tracking.
Wi-Fi: Already generally offered free to customers, Wi-Fi is often used for simple tracking of store traffic. One downside is it can't identify unique individuals if they're using an iPhone, and accuracy can vary.
Bluetooth beacons: Used primarily for indoor navigation, beacons have an accuracy range of one to several meters, depending on the product and whether fingerprinting or triangulation techniques are also used. Available in sizes as small as a matchbook, they can be hidden behind pictures or in lights. According to Forrester's June 2016 report "Make Smart Wireless Location Decisions," some beacons can send only basic data and can't accept updates, while others are more flexible. Beacons also require maintenance.
"You have to place them, manage them, change batteries in them. They're operationally intensive," explained Andre Kindness, principal analyst at Forrester, which estimated an annual maintenance cost of $240,000 for keeping beacons operational in a 1,000-square-meter store versus $60,000 for Wi-Fi. On the other hand, Wi-Fi nodes run $900 a piece, according to the same study.
Two emerging technologies are visible light, emitted via smart LED lights and potentially capable of tracking with an accuracy of a few centimeters, and ultrasound waves, which send out chirps that are picked up by a phone's audio receiver.
Both are promising technologies, said Bruce Krulwich, chief analyst at New York-based Grizzly Analytics Ltd., which specializes in mobile technologies like location-based services and IoT. However, both have their drawbacks, as well. For visible light, businesses have to replace their lighting with smart LED lights and controllers. Meanwhile, ultrasound may trip on other ambient sounds.
With more work, however, both may achieve performance better than today's Bluetooth-based solutions, said Krulwich.
Fear of big brother
Consumer concerns about privacy are another challenge for location-based technologies. To work well, the apps need access to the phone's location services, and consumers can deny apps access. According to the Pew Research Center, over one-third of adults and 46% of teenagers turn off location services due to fears over privacy.
The Los Angeles County Museum of Art's (LACMA) mobile app requires both Bluetooth and location services to be fully functional. To encourage participation, the museum pre-empted the usual terse system messages users get asking if they want to share location data with one that asks, "Would you like to receive location-based data?"
"We created it to be less intimidating," said Tomas Garcia, digital media product developer at LACMA. He added that it's also faster than using individual service prompts.
In fact, users will give up their location data for the right incentive. A Forrester brief, "Fuel Contextual Marketing with Location Data," found that most phone owners would do so in exchange for benefits like discounts, a loyalty program, rewards for visiting a store or to get navigational aid in a store.
A location-based future?
Location is rapidly becoming the most valuable piece of information for consumer marketing.
Social media platforms and many mobile apps, like weather and news, already collect a user's location information, said Khan, and they make it available in aggregate form to advertisers.
"We describe location as the cookie for the physical world. Location is the only piece of data that lets you know where people are throughout the day so you can engage [with] them," he said.
Behavioral data, such as location, is fast becoming more important in marketing than standard demographics, said Maribel Lopez, head of mobile marketing research firm Lopez Research, based in San Francisco.
"Behavioral demographics are much more interesting," said Lopez. "You may find that Android users do this, iOS users do that, people who are in my store 10 minutes do one thing, while those who stay much longer do another."
But that also means marketers must think through their messages to target customers' preferences without making them feel stalked.
"The greatest challenge will be to figure out what messages you want to send and where," said Lopez. "It's the most contextual engagement you can have, and people expect engagement, not a generic message or coupon."
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