Mobile usage is increasing daily and will continue to do so in the future. According to eMarketer, on average, consumers will spend more than 4 hours a day on their mobile devices this year. This is a huge number that marketers should never overlook. It gives them a great opportunity to deliver highly relevant and personalized messages to their desired audience within the locality. Location-based marketing is a strategy that lets you use location data to target your audience.
But how does it work? Let’s discuss.
Understanding Location-Based Marketing
Let’s say you are passing by your favorite bookstore and suddenly receive a message with a tempting offer for the same shop. It sounds familiar, right? This happens because of location-based marketing. It uses technology to deliver targeted messages to customers based on their live location. With this strategy, marketers can create offers and content that match users’ locations.
Definition of Location-Based Marketing
Location-based marketing is a marketing strategy that uses mobile device data to deliver targeted messages to customers in real time. By identifying a customer’s location, you can send highly personalized content like offers and promotions based on their immediate context.
For example, you can send an exciting deal to a customer as they pass by your store or are near your location. This encourages them to come inside your store and purchase something.
Location-based marketing bridges the gap between the digital and physical worlds. It connects brands with customers at the exact moment they are most receptive.
Targeting customers near your store is a common strategy. But, location-based marketing can be employed in different scenarios. For example, you can reach out to customers in areas where they frequently use their mobile devices or near competitor locations.
Evolution of Location-Based Marketing
Location-based marketing has come a long way since its early days. Do you remember the old-school days when radio ads used to mention a particular store or restaurant in the area? That was a primitive form of location-based marketing strategy. As technology advanced, so did our ability to target consumers more accurately.
With the development of smartphones and GPS technology, marketers started to identify customers’ exact locations. This led to the rise of geofencing, which allowed businesses to create virtual boundaries around particular areas. If a customer entered that boundary, they could receive targeted ads or promotions.
Over time, location-based marketing has become even more advanced. Now, we have tools that can send highly personalized messages based on a customer’s proximity to a physical location. With the rise in the number of mobile apps, businesses can offer location-based features like loyalty programs, in-store navigation, and even augmented reality experiences.
How Location-Based Marketing Works
Location-based marketing delivers targeted messages to users based on their physical location by combining location data with different technologies. But how does it know where your customers are? Let’s understand.
Geotargeting vs. Geofencing
Location data is used in location-based marketing in two main ways: geotargeting and geofencing. Although both target users based on location, they differ in their approach.
- Geotargeting: This strategy uses broader geographic areas like zip codes, cities, or countries. Marketers use demographics, browsing data, and location data of these areas to build audience profiles. Let’s take an example: a furniture store wants to reach customers interested in redecorating. Geotargeting allows them to display ads to users within a certain radius of their store or in areas with high homeownership rates.
- Geofencing: It uses GPS technology to create virtual boundaries around particular locations, like a store, mall, or competitor’s location. When a user with location services enabled enters this virtual boundary, they can trigger specific marketing actions. They might receive targeted notifications, promotions, or messages. A coffee shop might send a “Welcome back!” push notification with a special offer when a customer enters their geofenced zone.
Both geotargeting and geofencing have their strengths. Geotargeting is ideal for broader campaigns that reach a wider audience within a particular region. Geofencing offers hyper-targeting, capitalizing on real-time location data to deliver highly personalized messaging when a customer is most receptive.
Tools and Technologies Used
Location-based marketing uses different types of tools and technologies to collect and utilize user’s location-based data. Here are some major players:
- GPS (Global Positioning Satellites): This technology uses satellites to identify a device’s location with high accuracy. Most smartphones and tablets have built-in GPS features. Apps can access this data with user permission to determine their location.
- Wi-Fi Triangulation: When GPS is not available, Wi-Fi signals can be used to estimate a user’s location. This method is less accurate than GPS but can still be useful for better targeting.
- Cellular Network Data: Mobile network providers can also provide an approximate location based on the cell towers a user’s phone connects to.
- IP Addresses: Although it’s not as accurate as other methods, IP addresses can be used to understand a user’s general location based on their internet service provider.
- Beacon Technology: Beacons are small devices that transmit signals to nearby smartphones via Bluetooth. Businesses can use beacons to send targeted messages and promotions based on a user’s proximity to the beacon location.
Data Privacy and Ethical Considerations
Location-based marketing will be effective only when you use user location data, which raises important privacy concerns. Businesses need to give user privacy and trust more priority to make their campaign successful. Some major factors to consider are:
- Be transparent about how location data is collected and used. Users should be able to opt in or out of location tracking.
- Businesses must be responsible enough to make sure all location data is securely stored and protected from unauthorized access.
- The purpose of data collection should be clear. Only collect the location data necessary to achieve campaign goals. Don’t track users beyond that.
- Don’t bombard users with irrelevant messages. Location data should be used to deliver targeted, important information, such as deals or directions.
- Respect user privacy to build trust and loyalty. Businesses can create a more positive relationship with their customers by being transparent and ethically using location data.
Benefits of Location-Based Marketing
Consumers receive multiple marketing messages from across the web every day. Location-based marketing can be a great solution to cut through the noise and connect with your audience. Location-based targeting offers many benefits to businesses that want to engage with their customers on a more personal and relevant level.
Enhanced Customer Engagement
Location-based marketing delivers messages based on a customer’s current location. This means the information is highly relevant to their immediate needs and interests. For example, a free pastry notification becomes all the more attractive if they are already craving a coffee break. With LBM, you can also send them a notification about a limited-time happy hour offer or a new seasonal beverage.
Location-based marketing allows for real-time interaction with customers. A restaurant can send lunchtime specials to users within a specific radius and encourage them to visit. This immediate trigger can drive foot traffic and increase sales. Businesses can also customize their offers and promotions based on user preferences and past behavior. A customer who regularly visits a sports store might receive targeted notifications about upcoming product launches or exclusive deals on their favorite teams’ merchants.
You can easily integrate LBM with other marketing strategies. A customer who receives a location-based offer might visit a brand’s website or social media page for more information. It creates a cohesive customer journey.
Improved ROI
While engagement is a major benefit of LBM, improved sales is another. When you focus on a targeted audience based on location, you eliminate wasted ad impressions that won’t resonate with some customers. Suppose you are targeting gym enthusiasts with fitness ads only when they are near a sporting goods store. This focused approach will increase your conversion rates and return on investment for your marketing campaigns. Customers tend to click on an offer or visit a store when it’s directly relevant to their immediate needs.
Geo-fencing and location-based promotions can attract customers who are already in the vicinity to visit your physical store. This can also increase store visits and improve sales.
Local Business Growth
Local businesses can benefit from LBM in multiple ways. Through this marketing strategy, they can attract new customers and retain existing ones. LBM allows you to target customers who are geographically close to your business. So, you can tap into a new customer base without relying completely on traditional local advertising methods.
Repeated exposure through location-based messages increases brand awareness in your local area. Targeted promotions and incentives encourage customers who are already nearby to visit your store. This leads to immediate sales and creates local word-of-mouth marketing.
LBM lets local businesses stand out from the crowd. They can offer a different and engaging customer experience through mobile marketing efforts and personalized messaging. When they reach the right local audience at the right time, local businesses create a strong local following and experience sustainable growth.
Challenges in Location-Based Marketing
Location data relies on multiple sources. This means each source can create different challenges when extracting accurate data.
Here are some common challenges and solutions to overcome them:
Data Accuracy
One of the main concerns in LBM is that the data has to be accurate. But this may not always be possible. Location data can become outdated if not refreshed regularly. GPS signals can be affected by building structures, dense foliage, and atmospheric conditions. As a result, location tracking can be inaccurate, which means irrelevant and annoying messages. Users may have their location services disabled or set to low accuracy. This also affects the accuracy of location data.
To address these issues, businesses can combine GPS data with other location technologies, such as Wi-Fi triangulation and cellular network data. This hybrid approach can improve accuracy and reliability.
Also, it’s essential to regularly validate the accuracy of location data before using it. This can be done by comparing GPS coordinates with other data sources or by conducting periodic audits.
Consumer Skepticism
Many consumers are concerned about privacy and the use of their personal data. LBM, which relies heavily on location data, can face consumer skepticism.
Businesses must be transparent about how they collect and use location data. Make sure that users understand the benefits and risks. Offer users opt-in and opt-out options for location tracking. It shows respect for user privacy and avoids intrusive marketing practices.
To overcome skepticism, you need to show how location data can be used to provide personalized offers and improve customer experience.
Regulatory Compliance
LBM collects and processes personal data, which is subject to various data protection laws and regulations. Businesses must strictly follow these regulations to avoid legal consequences and maintain consumer trust.
Know what data protection laws, such as the General Data Protection Regulation (GDPR) in the EU and similar regulations in other jurisdictions, say. Collect only the necessary location data to achieve your marketing goals. Avoid excessive data collection that could raise concerns. Make sure that you have valid consent from users before collecting and processing their location data.
Future Trends in Location-Based Marketing
More and more businesses are adopting location-based marketing strategies. Marketers are expecting to get many more benefits than usual from this marketing strategy in the near future.
Integration with AI and Machine Learning
Like many other marketing strategies, artificial intelligence and machine learning will also have an impact on location based marketing strategy. These technologies can be used to analyze vast data, customer behavior patterns, and purchase intent. This is going to help businesses create hyper-personalized marketing experiences.
For example, a clothing store can use AI to recognize a customer entering their geofenced area. Based on past purchases and browsing history, they can send a push notification promoting a new jacket that perfectly complements their favorite pair of jeans. AI and ML can be used to track this data to drive higher conversion rates.
The Role of Augmented Reality (AR)
AR offers a more interactive and engaging approach. Instead of depending completely on conventional feeds, with the help of AR, businesses can deliver ads that are highly relevant to a customer’s current location. This can be particularly beneficial for local businesses. It encourages customers to visit nearby stores or take advantage of quick delivery options.
Walking down the street and seeing a virtual sign above a restaurant that offers a special discount based on the user’s past preferences. This is just one example of how AR can improve the customer experience.
Marketing experts predict that location-based AR will increase the potential of mobile marketing.
Conclusion
Location-based marketing is a more personalized and effective way for businesses to target users with highly relevant content. However, this marketing strategy will be more relevant when the location data is combined with other relevant information. Attribution models like Unified Marketing Measurements (UMM) can help you get a more extensive view of the customer journey.
Make sure you are not using location-based marketing as a standalone strategy. Instead, integrate it into your broader marketing efforts to create a better customer experience.