There’s an old real estate saying that quips, “There are three things that matter in property: location, location, location.” The same could be said for commerce. While e-commerce has brought the marketplace to consumer’s computers, most retail purchases are still made in brick-and-mortar stores. In data released by the U.S. Census last May, it was reported only 4% of retail purchases were made online.
While the war for certain product categories or specifics brands still wage within the walls of a store, getting a consumer into a location is the first battle. Geofencing is a new weapon in this fight, but with any new technology comes the question of how consumers will engage with it in the short- and long-term. Many businesses have expressed interest in using location-based services to deliver ads and coupons to mobile devices, but only a few have implemented programs. The Gap recently made headlines with their test campaign.
Bridging the Gap between marketing channels
In late February, the Gap used geofencing in conjunction with traditional bus and transit ads to deliver a unique brand experience to consumers. Smartphone and tablet owners who were waiting for the bus in in NYC, San Francisco or Chicago not only saw alarge, print bus ad for the Gap, but had a mobile coupon offer delivered to their mobile device if they had certain applications open. Words with Friends players could then click through to receive a $10 off $50 coupon at their local store. Gap reported an up-tick in sales during the test period, which wrapped in early March, and “delivered 2.5 million impressions, with a 0.93 percent click-through rate.”
Measuring geofencing effectiveness
Mobile CTR (click-through rates) are currently higher than online CTR for a variety of reasons (mobile phones are held closer to faces, don’t compete with other ads, and are more likely to benefit from accidental clicks), but it’s still early to definitively measure the effectiveness of this young marketing channel. When a new technology appears, consumer interest is piqued, but as other advertisers join in the trend, the market can become diluted. Only then can long-term effectiveness of the marketing tactic be measured.
Central High Mounted Stop Lamps (the brake light in your rear windshield) didn’t always come standard on vehicles. In 1986, the U.S. National Highway Traffic Safety Administration mandated all new passenger vehicles come with a CHMSL in order to curb the number of rear-end collisions. They did. In 1987, rear impact crashes dropped by an overwhelming 8.5%. But as time passed and the novelty of these new lights wore off, folks returned to rear-ending one another just like they did before. Still, the long-term crash-reduction benefit came in at 4.3%.
Geofencing might follow a similar path. Aggressive early adoption coupled with heightened consumer engagement might create an early interest, but it will likely be followed by a plateau as the experience becomes more common to consumers. What will keep consumers engaged beyond the novelty of being targeted based on their location will be a strong mobile CRM program that is catered to their demographics, interests, and purchase history.
The most successful geofencing Cellit has managed occurs with businesses that have robust mobile CRM program already in place. Location-based services are then used to target users who are already interested in the brand and have opted-in to a mobile program. Alistair Goodman, CEO of Placecast, San Francisco,states “retailers must enable consumers to share their preferences in order to send the most tailored, relevant messages possible….Opt-in programs that put the consumer in control of their experience have proven much more successful than other types of mobile marketing such as banner ads, etc.” Chantal Tode of Mobile Commerce Daily writes that “Retailers that really put the time and research into developing mobile databases and the ability to deliver relevant offers will see better results than retailers who simply put geofences around stores and wait for consumers to come by.” As smartphone penetration rises and more consumers become aware of this new marketing tactic, the prevalence of geofencing will likely rise. While the long-term value remains to be seen, it’s certain that early adopters will see the most consumer engagement.
Contact Cellit to learn about adding geofencing to your mobile program.
 US Census Data, 2009 E-commerce Multi-sector Data Tables, released May 26, 2011, accessible at http://www.census.gov/econ/estats/2009/all2009tables.html
 “The Long-Term Effectiveness of Center High Mounted Stop Lamps in Passenger Cars and Light Trucks,” March 1998, accessible at http://www.nhtsa.gov/cars/rules/regrev/evaluate/808696.html