Consumers? unprecedented need to always be connected and in constant communication with their peers has led to an explosion in location-based services that take advantage of social functionality. Here are some tips on navigating the LBS landscape and targeting consumers on a hyper-local level. 

According to industry experts, the opportunity is now. Devices provide marketers with location opportunities that let them not only reach consumers wherever they are, but also offer them incentives to further engage them with the brand.

?I think that the market opportunity for companies to use location-based services as a marketing tool cannot be ignored,? said Dan Gilmartin, vice president of marketing at Where, Boston. ?Given the reach and the ability to target a user based on location allows marketers to deliver a message in a way that they haven't in the past. 

?Any business that wants to connect with a local audience can benefit from location-based services,? he said. ?I think that most people consider restaurants as the target business for location based services.?

Location, location, location
A recent survey by JiWire states that more than 50 percent of mobile users would like to receive location-specific advertising. Another 39 percent would like to receive location-based coupons.

According to Mr. Gilmartin, companies should use the same tactics that they employ in their other marketing, but tailor these offers to consumers based on location.

Incentives can be great to convert potential new customers, but may be a means of margin erosion for existing customers. 

Additionally, loyalty programs that reward repeat business offer distinct incentives for existing customers. 

?Companies must consider this in their marketing strategies,? Mr. Gilmartin said. ?Based on the growth rates we have seen ? both on the app side and our ad network side ? we see great opportunities in this space. 

?What we are really excited about is the impact that commerce will have on this category,? he said.

?Today, we seek to connect consumers and merchants while tomorrow we will connect them via commerce ? a huge and exciting opportunity for all involved.?

Targeting youth
Location-based services are also a great way to tap into a younger audience. Users in the younger demographic are early adopters of location-based applications and services.

?Given their level of engagement, companies that are targeting those demos will find a large addressable audience,? Mr. Gilmartin said. ?Marketers seeking to engage this audience must ensure that they are focusing efforts on compelling applications and user experiences.? 

Brands are using different types of location-based services such as foursquare, Where, Facebook Places, Placecast and Gowalla to get the word out about new products or to reward loyal consumers.

Crumbs Bakery drives store traffic to its locations every Friday by offering consumers who check-in free iced coffee. Those that hold the Mayor title get a free cupcake.

Similarly, Saks Fifth Ave and InStyle offer several foursquare promotions throughout the year where customers can check-in to certain departments to get a prize such as lip gloss or gloves.

Companies such as Sonic and American Eagle Outfitters and even musicians such as The Black Eyed Peas are hopping on the location-based services bandwagon.

The Black Eyed Peas recently partnered with mobile rewards company Scvngr to reward its fans via mobile challenges.

Additionally, Sonic and American Eagle Outfitters partnered with Placecast to use its ShopAlerts, which deliver location-triggered mobile messages when shoppers enter geo-fences.

Using the service, consumers can choose the brands they are interested in and can opt-in through a variety of ways such as in-store, via SMS or the mobile Web.

?Location, coupled with time of day, are hugely predictive of interest and intent for consumers who are considering the purchase of any real-world product or service ? and the mobile phone is becoming the tool consumers turn to for help navigating the physical world,? said Alistair Goodman, CEO of Placecast, San Francisco, CA.

?We have seen in our own research from running different kinds of location-based marketing programs over the past 5 years,? he said. ?For impulse purchases like food and clothing, there is a particularly strong opportunity to point a consumer to a nearby deal and see them take action ? we?ve seen this with Starbucks.

?Interestingly, for longer purchase consideration cycle products, tying messaging to a location can serve as a strong reminder from the brand in the buying process ? The North Face is a good example of experiential and branding messaging around events like the X-Games.?

Young at heart
Mr. Goodman also agrees with Where?s Mr. Gilmartin that location-based services help tap into a younger audience.

?There is no doubt that social services with gaming features ? like Foursquare and Gowalla ? attract a younger audience, by definition, these services are being used by a younger audience,? Mr. Goodman said. ?However, the actual use of these services is still relatively small from a brand perspective ? both Forrester and the Pew Center found that only 4-5 percent of Americans have ever tried these apps.

?By contrast, many research studies indicate strong interest in getting location-based offers from brands when a product or service is available nearby,? he said. ?The difference lies in the mode of interaction ? time-starved parents, for example, know the brands they like and just want to get a convenient offer nearby automatically, not necessarily engage in a game.

?The good news for brands is that there are now opportunities to engage with all ages and demographics using location-based services, and to be able to do it at scale.?

With the rise of location-based applications such as Groupon and LivingSocial, consumers are increasingly being trained to look for deals and incentives. It is important that brands clearly tie their message to a real-world location and provide value for the user.

?We watch a number of metrics closely across all our brand programs, including purchase behavior and opt-out,? Mr. Goodman said. ?We have seen very strong response rates when an incentive is included ? and when the consumer believes they are getting something of value.

?When a brand changes their messaging or incentives we usually see a corresponding shift in behavior,? he said. ?With a great incentive for a specific deal, we?ve seen purchase behavior as high as 65 percent.

?When an incentive is eliminated, we?ve seen opt-out rates spike beyond our normal range of just 1-12 percent.?

According to Mr. Goodman, while 2010 was the year of experimentation with apps, 2011 is the year where brands are able to use location-based marketing at scale.

?With scale, we can expect to see more interest in opt-in programs from both consumers and brands ? both recognize the need for control and value,? Mr. Goodman said. ?I also expect that the patent space will heat up.

?Apple, Google, Microsoft, Yahoo, Nokia and others are all realizing the value of the IP they have developed ? and we can expect to see even more activity in this arena this year,? he said.

Final Take
Rimma Kats is editorial assistant on Mobile Marketer, New York