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Location-based marketing can increase average order value, frequency, loyalty

ShopAlerts by AT&T Kmart HP JetBlue

Multiple brands and retailers have launched geofences and are distributing mobile coupons via ShopAlerts by AT&T

While privacy concerns persist, adding a location component to a campaign gives mobile marketers the opportunity to increase the relevancy of their messages and make them immediately actionable.

Following the Mobile Marketing Association's best-practice guidelines and getting the consumer to opt in via SMS or before downloading a location-based application should take care of most consumer privacy concerns. In addition, location-based mobile marketing is all about relevancy and communicating a clear value proposition to the brand’s target audience.

“When done with the consumer top-of-mind, and with their explicit permission, location-based mobile services can provide benefits to both the retailer and the consumer,” said Stephanie Bauer Marshall, Washington-based director of new market development at Verizon Wireless.

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“Adding location as a dimension can increase the relevancy to the consumer and provide a more meaningful response to the retailer, making it a win for all parties,” she said.

“There’s an opportunity to add creativity as the use cases get more sophisticated, but we should always remember, location should be one element of a marketing campaign, not the only element.”

The Gap, Clinique, HP, Ritz Camera test new locati

JiWire's Compass is designed to let brands deliver location-based services within mobile ads

Marketers should be encouraged that carriers such as Verizon Wireless here in the United States and O2 in Britain are increasingly embracing mobile location-based services.

AT&T recently became the first wireless carrier in the U.S. to offer a large-scale, location-based mobile marketing program to consumers and advertisers.

ShopAlerts by AT&T delivers coupons and discount offers to consumers via their mobile phones when they are near a participating store or brand via geofence technology.

Mojiva mobile ad

Kmart, Hewlett-Packard, Del Monte Foods, SC Johnson and JetBlue Airways are among the initial brands offering coupons via the landmark initiative.

“After consumers opt-in, they will be able to connect meaningfully with brands they are interested in learning more about,” said Danielle Lee, vice president of ad product innovation at AT&T Advanced Advertising Solutions, New York. “Consumers can be targeted more accurately and given more relevant offerings on their mobile phones in real time.

“ShopAlerts by AT&T is designed to work easily and efficiently within the existing marketing structure and needs of the retailers,” she said. “The program is seamlessly integrated into retailers’ CRM and marketing programs.

“The message content can mirror retailers’ existing marketing calendars, current promotions or on-the-fly events.”

Ms. Lee said that the remaining barriers to more widespread adoption of mobile LBS and geo-targeting include the need to create more awareness in the market place with retailers and consumers.

Once general awareness is achieved, consumers and brands will be able to engage in a meaningful and impactful way, per AT&T.

The carrier partnered with Placecast to power the ShopAlerts initiative.

“Location and granular geo-targeting are actually strong predictors of consumer intent – because where someone is and when they are there says a lot about what they might be interested in,” said Alistair Goodman, CEO of Placecast, San Francisco. “For example, if it’s noon and I’ve opted in to get offers from restaurants, a great promotion available nearby is easy to act on.

“We have been running location-based marketing programs for the past five years, and we’ve consistently seen that adding location intelligence to mobile marketing dramatically increases performance by any measure – whether it’s dynamically adding a nearby store address and promotion to a mobile banner which can increase clicks by 2X, or delivering a location-triggered SMS alert for a nearby retailer with a specific offer that gets opened and acted on immediately,” he said.

Consumers are beginning to use their phones for every stage of the purchase cycle – from locating stores to researching products, reading peer reviews and looking for coupons.

It is becoming clear to retailers that location-based services is an important key to driving foot traffic among consumers who are in the mindset to make a purchase.

And the performance of these programs is demonstrating that mobile and location can increase average order value, frequency and loyalty, per Placecast.

According to research from our ShopAlerts programs, 55-79 percent of consumers find location-based alerts from retailers appealing, and 11-34 percent report making a purchase, depending on the brand and the offer.

“Retailers are learning that useful offers nearby on your phone can trump other less-targeted forms of advertising,” Mr. Goodman said. “The interest level has always been there – from the days of sandwich boards and street corner fliers, retailers have recognized the importance of place and time promotions.

“The challenge has been reach: while apps can provide immersive experiences, real active users have been relatively small,” he said. “Retailers are interested in scale, and only recently have they been able to run programs for millions of users.

“Consumer acceptance is also increasing – though people want the ability to control what and when they receive offers for, through opt-in or check-in and preference-type settings. While 2010 was the year of apps, 2011 is clearly the year we see scale in location-based marketing programs.”

Indoor vs. outdoor location
Polaris Wireless, a company specializing in location data, said that from a technology standpoint, Wi-Fi and Bluetooth are unscalable and unmanaged, and it is difficult to use them to pinpoint the location of mobile devices when they are indoors.

“Market drivers and enablers for mobile LBS and marketing include sophisticated devices—more advanced smartphones—more powerful GPS, Wi-Fi and Bluetooth chips, faster wireless networks with better coverage and adoption of mass-market location-based applications,” said Bhavin Shah, vice president of marketing and business development at Polaris Wireless, Santa Clara, CA.

“GPS penetration is increasing—still not fully mass-market, but getting there,” he said. “Wi-Fi is still not there in terms of mass-market, but it is getting there as well—all of these are on the upswing.

“If you have a broad, network-wide solution like ours, you can go after 100 percent of your user base, not just smartphone users.”

Why is indoor location relevant? Because most people spend the majority of times indoors, and tracking via GPS, Wi-Fi and Bluetooth is limited when mobile devices are within a building of some sort—home, office or store.

Source: Polaris Wireless

The more technologies that marketers can leverage to pinpoint location and target advertising and messaging, the more relevant they can make their campaign, and the better response they will get from their target consumers.

Polaris claims that the increasing rollout of technology such as femtocells, small cellular base stations that let service providers extend service coverage indoors, will help that process immensely.

“Indoor location is going to become the phenomenon of the future, because more than 60 percent of wireless calls are made indoors as people give up their landline,” Mr. Shah said. “In addition, on average, Americans spend more than 80 percent of their time indoors, and more than 25 percent of U.S. homes have only mobile phones.

“Indoor location will become more and more important in the future, because marketers’ target audience is usually indoors,” he said. “The ecosystem is confusing, and consolidation could help clear the air.

“Consumers are willing to make some tradeoffs, so do the best that you can, although with mission-critical applications for the enterprise and network monitoring optimization, as well as those related to safety of life, companies need the most accurate level of location data possible.”

Location-based mobile advertising
Consumers are generally much more receptive to ads that are relevant to them personally. If they see an ad for a store that has a location that is near wherever they happen to be, it is only natural that they would be more inclined to interact with that ad and immediate take action to redeem that offer or earn that incentive.

“Adding location or geo-targeting to a marketing campaign dramatically increases the results, the click-throughs and the action, because that campaign becomes locally relevant for that individual,” said Rip Gerber, president/CEO of Loc-Aid Technologies Inc., San Francisco. “In addition, by adding location, brands themselves can make campaigns locally relevant to users –that’s what location or presence allows you to do.

“What’s driving the adoption of location-based marketing among brands and retailers is the desire to reach the right person at the right time for the right need,” he said. “Instead of sending the same message to everyone in their database, marketers can send something that is relevant and provides a much higher ROI.”

Retailers and brands want location data to more effectively reach the people who are using all of the various location-based services. They then want to know how to pull that data and modify what is happening on those screens, whether it be an ad, a coupon or another incentive to close the proverbial loop.

“The premise of being able to purchase location-targeted media nationally has always been on the list of marketer wants, but low on the ability to execute it,” said Rob Gorrie, CEO of Adcentricity, New York. “Location definitely enhances the outbound and inbound media opportunities, marketers can tie their messaging to a specific location, and brands can dictate the context of the message.

“All of that adds to the ability to hone the messaging—this is the promise of true digital marketing and media, being in the right place at the right time with right message, which brands have never been able to do previously,” he said. “It has taken this long to get us here—this is the ultimate in fluid communication between a brand and a consumer, where you can take all of the middlemen out of the equation and just enable a conversation between brands and consumers.

“Brands have wanted this for decades, but the real challenge, with thousands of companies in the mix, it is really tough for brands to wade through all of them, and it depends on the specific vertical, so there is still a lot of educating to do.”

Another common complaint is that, with different standards for the various carriers and operating systems, there is so much fragmentation in the marketplace that brands do not know where to start.

Some marketers are looking for over-the-top location-based services that are carrier-agnostic and that work on many different OSs.

“Brands are saying, ‘Mobile is such a big part of consumers’ lives, so how do I reach them on that device that I know they have with them 24/7?’” said Karen Morris, Raleigh, NC-based chief marketing officer of Zos Communications. “A lot of brands now want to incorporate mobile into their strategy—they’re looking at their traditional marketing mix and asking ‘How do we incorporate mobile as part of our plan?’

“They are looking at geo-fencing or location-targeting to get messages to people while they are in store, offering them a deal or coupon on a certain product,” she said. “Geofencing helps reach people while they are out and about and get them into shops to purchase a product—messaging based on their location is an effective way to try to route them to a specific location.

“Location adds geo-relevance with the right offer, but traditionally the barriers for location-targeting have been related to cost.”

Proximity advertising
Most of what we are seeing today is known as “proximity advertising,” ads from local establishments within walking distance that are delivered mostly through check-in apps such as Foursquare.

Driving foot traffic is a major goal for these retail establishments, so being able to reach potential customers nearby and encourage them to visit is worth a great deal of money to the retailer. 

Going forward, geo-targeting may evolve to include the usage of location history data, per Skyhook Wireless.

“Where you are tells a whole lot about who you are, who you associate with and what you buy,” said Ted Morgan, founder/CEO of Skyhook Wireless, Boston.

“Right now there is excitement about leveraging the enthusiasm for check-in apps like Foursquare and Shopkick, so brands and retailers are testing out new concepts around these promotions to explore if these campaigns can drive foot traffic and ultimately more sales,” he said.

The two main barriers to wide adoption are inventory and privacy, per Skyhook.

Right now there are very few campaigns and they are with pilot budgets.

“As you limit promotions to a small geographic area, you make the inventory problem even hard since you need to find advertisers for so many physical plots of land around a city,” Mr. Morgan said. “But that is improving every day thanks to the Groupon effect, which has brought so many small businesses into the online advertising world.

“Going forward, concerns over privacy will become more of an issue as consumers ask what types of information is being collected about them and how much about their physical travels are being exposed to advertisers,” he said.

“The industry will need to continue to be very open about the data it collects and how it is used.”

Final Take
Placecast ShopAlerts

 
Related content: Advertising, Location based services, LBS, location based marketing, location targeting, geotargeting, geofencing, Stephanie Bauer Marshall, Verizon Wireless, ShopAlerts, Placecast, Alistair Goodman, ATT, ATT Mobility, Danielle Lee, Rob Gorrie, Adcentricity, LOCAID, L

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Comments on "Location-based marketing can increase average order value, frequency, loyalty"

  1. fabnomics Arden says:

    March 27, 2012 at 10:47am

    Really cool stuff. Have you come across any empirical evidence on AOV based on location?
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