Location-based marketing. At this point, nearly every marketer worth his or her salt knows the term. But not all have gotten their feet wet, and many still harbor misconceptions about this emerging opportunity.
For one, location-based marketing isn't the experimental testing ground many might perceive. In fact, it's being done at scale, says Alistair Goodman, CEO of Placecast. "Carriers like AT&T and O2 in the U.K. are deploying it for their subscribers, and marquis brands like Starbucks, L'Oreal, and The North Face are all now in the mix," he says.
Goodman, who will be discussing the state of location-based services at ad:tech San Francisco next month, notes that a brand can now execute a location marketing program without a lot of new work. And it can be done on any phone without an app -- reaching up to 268 million users in the U.S. today. In advance of his presentation, Goodman sat down with iMedia Connection to tell us more.
iMedia Connection: Location-based marketing has been an opportunity of growing interest to marketers over the past couple of years. At present, where on the adoption curve is the marketing industry? Who has jumped on the opportunity, and who has yet to follow?
Alistair Goodman: I believe that 2010 was the year of apps -- brands and users alike were fascinated with them, and they led to solid experimentation and insights. 2011 is the year of reach and scale in mobile, with location-based marketing being a primary vehicle.
Large retail brands like Best Buy and American Eagle have been early adopters, and now most mainstream brands will tell you that they are now increasing their spending on mobile. Facebook, Google, Groupon, and others are all changing the way consumers think about deals --and mobile is now a key component.
From my own experience at Placecast, 20 percent of the brands we talk to are on their second or third wave of mobile marketing initiatives and are all embracing location-based marketing -- the rest are just starting.
iMedia: Which brands are currently making the most of location-based opportunities? And how?
Goodman: Brands that make the most of location-based marketing are those that understand how to create an obvious relationship between offers, location, and value to the customer. Consumers need to understand why a brand is choosing a particular time and place to communicate with them. Starbucks in the U.K. is a great example of ShopAlerts at work; they have been running a program promoting the launch of their new Via coffee product. Hundreds of geo-fences were set around Starbucks locations, and consumers received discounts to try the product. This program has delivered a 34 percent response rate.
At the other end of the spectrum, brands like The North Face here in the U.S. are delivering experiential content -- not discounts -- to their best customers when they are near an event they sponsor like the X Games. White House Black Market is sending FashionAlerts -- personalized discounts and promotions for their most loyal customers when they are near a store. Kmart, JetBlue, and HP are all beginning to test customer acquisition using geo-fence marketing via the ShopAlerts by AT&T program. In the U.S., brands we are working with have seen increases in purchase behavior similar to the U.K. -- from 11 percent to 34 percent depending on the brand and the type of product or service.
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iMedia: What brands have you seen struggle with location-based marketing, and where did they stumble?
Goodman: If they struggle, it's usually in two areas. First, the quality of the offers: The more relevant they are, the better the response and the more positively consumers feel about the program. Second is the area of recruitment. We usually suggest that a brand offer an incentive to recruit consumers into a program. While this can add extra cost up front, we are seeing that shopping frequency, basket size, and the lifetime customer value of participants in these programs is increasing substantially.
iMedia: There's still a good deal of experimentation going on when it comes to the types of location-based deals that really connect with customers. Which approaches have you seen prove to be most successful to date?
Goodman: We are seeing three basic types of programs: acquisition, retention, and merchandising.
On the acquisition side, the deal companies like Groupon and Living Social are transforming the way consumers shop, and are doing a great job of generating new sales. Our ShopAlerts carrier program used by O2 in the U.K. and now AT&T in the States is another example -- subscribers opt in and indicate their preferences, then brands put geo-fences around their stores to trigger messages, gaining access to a carrier's users in a similar way to advertising through a portal model.
On the retention side, we're seeing brands use mobile as an extension of their loyalty programs and CRM systems, creating their own programs where they own the user and the data. Brand-specific apps like Daily Candy's, which is powered by Xtify, are one example, and The North Face and White House Black Market are two retailers using ShopAlerts this way.
Companies like ShopKick are focusing on merchandising -- essentially enabling the promotion when a consumer is in the store. All of these approaches are delivering results for retailers in both offline and online transactions -- though each essentially focuses on different client budgets.