Location-based marketing: keep it transparent or scare customers away

The future of location-based marketing is bright, says Sebastian Wild, as long as marketers focus on using technology in transparent and intelligent ways.

SW-Head-Shot copyLocation-based marketing (LBM) offers the illustrious possibility of connecting to our audience in the exact moment they are in a geographic area we define as important. The surge in interest in LBM is not only anecdotal: research company BIA/Kelsey recently projected the segment will grow from $12.4 billion currently to $32.4 billion by 2021. And Google also reported that 56% of its searches ‘on the go’ now have a local intent.

The company says 50% of the searches done on a smartphone prompted a store visit within a day.

It’s clear that location-based information offers huge potential to us marketers, yet today we are overwhelmed with more data than – let’s be honest – most really know what to do with. Are we truly ready to add another level of data complexity? Can we fuse this new information successfully with our creative effectively? Further, can we adequately address the privacy concerns held by many consumers?

 

Location based marketing needs transparency for consumers

Although the rise and success of LBM has marketers and their clients licking their lips, a cautious approached is imperative to ensure consumers aren’t scared off. There have been a number of international incidents where retailers have been called to account for tracking shoppers’ movements without disclosure.

In the US, for example, Coca-Cola has been using Google’s cloud platform to send videos and discount coupons to customers’ smartphones in Albertsons grocery stores, directing them to specials in the soft drinks aisle. While privacy advocates see this targeted approach as an aggressive invasion of privacy, marketers are congratulating themselves on the crafty combination of LBM facilitated by mobile phone signals.

It is clear that transparency and effort are needed to explain data collection and privacy protection, or marketers risk scaring consumers off for good, even if nothing untoward is happening. The key is to make these practices and policies clear and accessible to consumers: for example, by not burying them in the fine print. Or, in the case of apps, terms-of-service agreements that often sit on company websites, instead of in the app itself. Consumers fear that app makers include location tracking even if the app they’ve downloaded doesn’t actually need it. They are concerned the developers then extract this data and sell it to third parties who use it to target consumers, without letting the app user know.

 

Are consumers prepared to open up their digital lives?

It’s not all bad news, and despite misgivings, consumers are generally open to location-based tracking, as long as there is a genuine, valuable payback. Most of us are comfortable trading some privacy for the value of location pinpointing within Google Maps, for example. But in cases where the trade-off is less obvious, marketers need to be transparent about the tracking, the reason for it, and how the collected data will be used.

A Microsoft ‘Consumer Data Value Exchange’ study found that consumers were willing to share data in exchange for cash rewards, discounts, and other perceived benefits. Here are some of the incentives identified by the study:

  • 99.6% would share data for cash rewards,
  • 89.3% would share data for location-based discounts, and
  • 65.2% would share data for loyalty points.

 

While monetary rewards are persuasive, discounts aren’t the only value brands have to offer in exchange for location data. They can also offer contextually relevant content to consumers based on their location data. Supporting this assertion is research from MDG Advertising, which found that nearly three quarters (72%) of consumers say they follow through with a call to action if they receive it while near the physical location of the retailer. However, while the sentiment towards LBM is strongly positive, in a demonstration of the slow adoption of location based marketing, this same research showed that only 23% of retail marketers use such geo-targeted strategies.

 

Digital advertising must be targeted, intelligent and effective

I spent time with digital futurist Chris Riddell recently. He expressed some strong impressions around the question of traditional marketing techniques. Chris “can’t wait for a world where I am no longer fed irrelevant advertising. Digital advertising is supposed to be targeted and intelligent and we’re still not doing this correctly,” he explained.

He added that if he were served content that mattered to him at the right moment in time, he would view it and find it valuable. “Right content, right place, right time, right person.”

Chris foresees a future where location based marketing is paired with another emerging technology, augmented reality, to create a personalised experience that consumers value. The same holds true for programmatic advertising, where space is purchased in real-time and advertising presented to audiences with a message that is timely and relevant.

Yet with all these fancy new toys, data gaps put the brakes on the effectiveness of location campaigns. A study by Integral Ad Science found that 22% of marketers pegged in-store attribution as the biggest marketing challenge. They struggle to connect the dots from online to offline in order to get a picture of the sales lift powered by their marketing outlays.

To get around this, marketers need to layer location information with other data so it can inform media tactics, cross-channel strategy, competitive intelligence, retail site selection and supply chain optimisation.

 

Clever examples of using LBM to deliver cut-through

One of the most obvious channels to benefit from LBM technology is digital OOH ‘smart’ billboards, which offer advertisers a range of functionality, including customisation of content based on the local market. They also allow consumers to interact directly and are able to provide detailed analytics such as foot and vehicle traffic volumes in their vicinity.

Location based marketing has also found a handy partner in video, with the technology taking a leap forward in June with the launch of Verve’s location based mobile video ad. It capitalises on the popularity of location, sight, sound and motion that is becoming increasingly mainstream for advertisers and publishers.

Supporting the launch of their ad offering, Verve quoted figures from the Interactive Advertising Bureau’s 2016 Full Year Report that mobile video ad spending jumped 145% year-over-year to nearly $4.2 billion – a clear demonstration of brands’ interest in video’s acceptance on smaller screens.

In another example, Australian marketing services company ReachLocal has launched its new location-based mobile marketing solution that uses geofencing technology to track conversions and better measure return on investment. The technology uses location based marketing to enable businesses to pinpoint and target customers where and when products and services are more relevant to them. Once the geofence ‘boundary’ is set up, consumers are tracked and targeted based on the GPS beacons in their smartphones.

ReachLocal Australian MD, Justin O’Sullivan, says the technology puts a company in front of consumers where they are spending the majority of their time – on their smartphones.

 

On the road to a bright future

While location-based marketing has a bright future, it’s still early days for this emerging technology. Clear payoffs include more engaging marketing campaigns, an enhanced customer experience and of course, increased returns. The curve is developing fast, yet there are still significant hurdles ahead including the need for marketers to address consumer privacy concerns, as well as data accuracy and complexity.

As with all the great new promises from martech, tread lightly and take all promised gains with a pinch of salt, a dash of optimism and sprinkle of fairy dust for good measure.

 

 

Sebastian Wild is CMO at SMSGlobal

 

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