Geofencing: Fad Or Emerging Standard Practice?

Written by Ed Higdon on . Posted in Insight

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Location, location, location. Everywhere you turn, it seems like people are talking about proximity marketing strategies, a hot new component of retail mobile marketing initiatives. One of the newest kids on the proximity block is geofencing – and it’s got some amazing potential for retailers who approach it with the right strategy in place. Never heard of geofencing? Don’t worry. We’ll explain what it is and how retailers can leverage it.

What is Geofencing?

Geofencing is the creation of a virtual border or “fence” around a specific location, such as a local retail store. When your customers enter the fence, they are able to receive coupons, announcements, and other messages directly on their smartphones or mobile devices. The goal of geofencing is simple: to drive consumers to the nearest store.

A geofencing strategy targets people who are out and about and, presumably, actively shopping. This gives stores the opportunity to influence buying decisions while customers are in a spending mode. Let’s say you operate a shoe store and you have a geofence in place. As your customers enter the area near the shopping center, they might receive an alert about a clearance sale going on at that moment. They might not have planned on driving to your end of the center that day, but if they know discounts await, they will be more likely to swing by, since they happen to be in the vicinity. Ideally, you might even draw them away from a competitor if they had planned on buying shoes that day from a different retailer.

Geofences can be any size, but the radius likely depends upon the size of the retailer. Large brands might set up geofences that span several miles. Smaller retailers might set up a geofence that is only a few blocks. The size of the fence may also depend on the initiative or message itself. It stands to reason that someone who is a mile away from a store should receive a different message than someone who has entered the parking lot.

A 50-50 Bargain

If you want to use geofencing effectively, you’ve got to get your customers’ permission first. Randomly sending your customers text messages every time they enter a shopping center will alienate them quickly.

Be clear about your initiative and outline all of the benefits of receiving proximity-based messages. Only when they know those benefits will they be able to make an informed decision. Let them opt in several ways – either by text, by app registration, or through your website. Then, send a follow up message asking them to confirm their opt-in.

By opting in, customers have held up their end of the bargain. It is up to you, as the retailer, to hold up yours and provide real value. Avoid sending them spam or overloading their inboxes. Provide information that’s actually worthwhile to them and give them a reason to stay opted-in.

Analytics: The Key to Add Value

To create that relevant messaging, retailers need more than just a geofence and some coupons or sales. You’ve got to dig deep into your analytics to develop a strategy that answers:

  • What types of communications do our customer segments respond to?
  • How do they prefer to receive those messages?
  • How often should we send those messages when they enter the geofence?
  • What products or offers are most appealing to them?

The data doesn’t lie. The key is to measure the right metrics and optimize once you have the results.

It is important to note that geofencing is an emerging technology. Retailers are still getting their footing, and there aren’t a lot of players in the game. Yet. However, all signs point to the fact that customers who opt-in to geofencing expect relevant communications, and as long as they find the information useful, they will stay opted in. There’s great potential here for retailers to be able to capture business that was previously out of reach.