Location-based Marketing: Shoppers Won’t Ever Be Alone Again

Stephen DeAngelis

March 10, 2014

“Ever since smartphone makers began incorporating GPS receivers into their handsets,” writes Brad Howarth, “marketers have dreamed about making use of the technology. Their goal has been to use location to target consumers with messages based on not just who they are, but where they are.” [“What you need to know about location-based marketing,” CMO, 8 January 2014] It’s just common sense that a consumer is more likely to act when they have both motive (i.e., an enticing offer) and opportunity (i.e., they are located in the vicinity of the establishment extending that offering). Howarth reports, however, “While telecommunications companies have talked about triangulating the location of consumers down to a matter of metres for the best part of a decade, a successful advertising model that uses this capability has yet to emerge.” He also points out the dark side of location marketing, namely, “Consumers have hardly warmed to the idea of advertisers knowing where they are.” We have all been exposed to books and movies in which characters live in evil, controlling societies where their every movement is tracked. Such fare has undoubtedly colored our perceptions about location-based marketing.

“On the flip side,” Howarth reports, “even one of the most successful implementations of mobile location-based services, Foursquare, has not delivered a user base large enough to retain the interest of major brand advertisers.” By “flip side,” Howarth means the opposite of GPS tracking (i.e., the voluntary sharing of your location). Foursquare advertises itself as “a free app that helps you and your friends make the most of where you are. When you’re out and about, use Foursquare to share and save the places you visit. And, when you’re looking for inspiration for what to do next, we’ll give you personalized recommendations and deals based on where you, your friends, and people with your tastes have been.” On the bright side, Howarth predicts, “New technology initiatives and business models, and increasing consumer acceptance, could see mobile location becoming a much bigger part of a marketer’s arsenal in 2014.” He makes this bold prediction because he has interviewed executives with companies who are trying to make location-based marketing more personal (i.e., understanding what a consumer’s tastes and preferences are before making an location-based offer). Howarth points out that everyone who passes by a fast-food establishment isn’t looking for a hamburger. Paul Robson, the managing director for Adobe Systems in Australia, told Howarth, “When we sit down to meetings with … organisations they all talk about personalisation. They want to have a personal relationship with their customers, and they want to be able to provide them with relevant content, relevant data, and understand what they want.”

The challenge, of course, is that many retailers don’t have sufficient personal information about shoppers who roam their aisles (unless those consumers are a member of a loyalty program). Retailers understand, however, that “opportunity” (i.e., having consumers in the immediate vicinity of an item) could help them increase sales. Zach Miners reports, “In an emerging area that combines location data, marketing, and analytics, retailers are testing new ways to learn how customers shop and move about their stores, and targeting them with promotions and in-store maps on their smartphones. The concept, sometimes called place-based marketing, uses detailed location information, often down to the shelf you’re walking past, to drive sales and give retailers more information about foot traffic in their stores. That means picking up a trail of digital breadcrumbs from people’s smartphones and mobile apps.” [“How location tracking will change the way you shop,” TechHive, 9 October 2013] Such concepts conjure up scenes shown in the Tom Cruise movie “Minority Report.” Although Miners’ article would lead one to believe that these systems are only in the testing phase, Elizabeth Dwoskin and Greg Bensinger report, “Such technology has been creeping into commerce for years. Now, it is becoming commonplace.” [“Tracking Technology Sheds Light on Shopper Habits,” Wall Street Journal, 9 December 2013]

Brad Stone believes that another reason brick-and-mortar stores are adopting tracking technologies is to try and level the playing field with their online competitors. “Of the many advantages online retailers enjoy over their brick-and-mortar counterparts,” he writes, “the preponderance of data might be the most significant. While physical stores know how many customers visit and what they buy, e-commerce sites know which section customers head to first, how long they look at each product, and who browses but doesn’t make a purchase.” [“To Catch Up With E-tail, Tools to Track Shoppers in the Store,” Bloomberg BusinessWeek, 25 April 2013] Now some of this same kind of data can be obtained using in-store tracking technologies. Bill Martin, founder of ShopperTrak, a firm specializing in people counter technology and foot traffic analysis, told Nicole Marie Melton, “We’re able to better understand things like abandonment rate, if shoppers are standing in long lines and how many associates the customer is interacting with when they come into the stores.” [“Location-Sensing Helps Retailers Pinpoint ‘Power Hours’ for Shopper Activity,” FierceRetailIT, 15 January 2014] Melton continues:

“According to Martin, the retail clients he services have been using data from video and sensors, offered through ShopperTrak Interior Analytics, to evaluate if the store is living up to its best practices. ‘Each store has its own service level promise and now we can begin to measure whether associates are actually maintaining and keeping those promises, or should we implement coaching, training, or replacement of personnel to get the desired result,’ said Martin. Interior Analytics is also helping retailers identify what Martin calls ‘power hours.’ These are timeframes when 1.5 percent of the week’s shopping activity occurs and are different and unique for each retailer. Understanding key traffic hours can help retailers make adjustments that will enhance the customer experience when it matters most.”

Brick-and-mortar retailers are obviously trying not to fall further behind online retailers. Stone reports:

“U.S. Census data show physical stores still account for 95 percent of retail sales. Still, they’re growing at barely one-quarter the rate of online retailers, and so several technology startups are trying to find ways to provide them with e-commerce-level data. Prism Skylabs uploads and analyzes video from in-store surveillance cameras to track customer movement and the effectiveness of promotions. ‘All of retail is in a knife fight,’ says Steve Russell, co-founder and chief executive officer of the two-year-old San Francisco startup. ‘There is a lot of pressure from the online world on physical retailers to change, and we are trying to facilitate that.'”

The pressure on traditional retailers is so intense that they will inevitably adopt some form of in-store tracking and analysis in hopes of boosting sales. The challenge, Miners writes, “is to do it without trampling on customers’ privacy.” Nevertheless, he adds, “Retailers hope they can persuade shoppers to trade a bit of privacy if they get something useful in return, like a better deal or some helpful shopping information.” Some of that “helpful shopping information” is likely to be provided virtually. Heather Somerville reports, “In the not-too-distant future, grocery shoppers wearing Google Glass will see coupons for a new cereal flash before their eyes as they search for Cheerios, while others browsing the dairy section will have information about the health benefits of soy milk pop up automatically on their iPads.” [“Virtual reality transforms real-life shopping in stores,” Inside Bay Area, 30 December 2013] Although what Somerville discussed is more like enhanced (or augmented) reality than virtual reality, she indicates that virtual reality is on its way. Somerville explains:

“Dozens of big-name retailers — including Bloomingdale’s, Victoria’s Secret, Tesco, Walmart and Target — already are experimenting with virtual reality, a computer-simulated 3-D environment viewed through a computer screen or wireless glasses, or augmented reality, which uses technology to alter the physical environment by adding sound, images or words to enhance the real-world experience. Give it a few more years, industry experts say, and the once ho-hum trip to the average store will be radically different. For consumers, this is mostly good news, experts say. The technology will give shoppers the power to make better buying decisions and eliminate some shopping irritations. Retailers are using virtual reality to improve store layouts, and companies are creating augmented reality apps for in-store navigation, so shoppers aren’t searching up and down aisles for five of the 10 ingredients to make dinner. Shoppers will also be able to try on clothes virtually — no more running in and out of dressing rooms with clothes that don’t fit. ‘In five years you will not walk into a retailer and get lost,’ said Barbara Barclay, general manager of North America for Tobii, an eye-tracking technology company with offices in Mountain View. ‘They’ll know who you are and what your last shopping experience was. They will know where you’re looking on a shelf. The whole shopping experience in five years will be highly personalized.'”

Whether enhanced location-based marketing will be considered good news by consumers remains to be seen. I think they will welcome some advances in technology, like in-store navigation and virtual dressing rooms. Nevertheless, privacy will remain an issue that will have to be handled carefully. The line between helpful and creepy is very narrow.