In the world of Social Local Mobile (SoLoMo), the name of the game is proximity and relevance. Local businesses can tap into the proximity of nearby mobile consumers to provide relevant, targeted coupons, promotions, and other offers and that drive conversion actions. Today’s mobile consumers are ready and willing: 67% of mobile users agree that location-based coupons are “very convenient and useful.” This number is expected to rise as the SoLoMo paradigm becomes more deeply ingrained in the mindset of consumers and businesses alike.

Of all the proximity-based marketing options available to businesses, geofencing has become one of the most popular, so much so that it is used in 55% of location-based advertising campaigns.

With geofencing, a business can use customer location as a data point to send customized offers that are more relevant to the customer, and therefore more likely to convert for the business.

But how does it all work? Simply put, a geofence is a virtual perimeter or “fence” established around any physical space. Businesses use geofencing to trigger an action within this geographic boundary.

Generally speaking, there are three types of geofencing action triggers:

Static – based on a user’s position relative to a fixed area

Dynamic – based on a user’s position relative to changing data stream

Peer-to-Peer – based in a user’s position relative to other users

An example of a static action trigger would be a special offer sent by SMS text message to opt-in users as they enter a shopping mall; a dynamic action trigger would be an “open parking space” notification sent to nearby mobile app users driving in a downtown area; a peer-to-peer action trigger would be a check-in notification of nearby friends on a social mobile app like Yelp, Facebook, or Foursquare.

Businesses considering geofencing must first decide whether to go with an app-based or network-based solution. Following is a brief summary of each option.

App-Based Geofence

As the name suggests, the centerpiece of an app-based geofence solution is a mobile app that accesses mobile user locational data via GPS. Businesses going this route must first build the mobile app and then get it listed in the major app stores (or contract with company that provides these services) where customers can download it. For the app-based geofence to work, the business’ app has to be running and have its location services enabled when the customer crosses the designed boundary of the geofence perimeter. Also, the constant accessing of GPS data by the app puts a strain on smartphone battery life.

Network-Based Geofence

In contrast to app-based solutions, network-based geofences use data from local cellphone towers to send targeted messages to mobile users connected to the network on an opt-in basis. Even though no app is required, businesses still must get users to opt-in to the service by having them scan a QR code, fill out a subscription form on a webpage, text a keyword, etc.

Without a need to create an app, network-based solutions carry fewer upfront costs than their app-based counterparts; ongoing running costs are determined on a per-location lookup basis, and therefore can be scaled up or down as needed. This also means network systems can target the potentially broad audience of feature phone users who haven’t yet made the move to smartphones.

A Comparision of App-Based and Network-Based Geofencing

 

Image Source: http://www.thumbvista.com/2013/05/geofencing-services-for-sms-app-vs-non-app-geofencing/

Once you choose a geofencing solution, you can begin to set up geofencing campaigns by converting existing SMS text, email, and loyalty member subscribers or by putting together in-store opt-in initiatives.

To track results, make sure to link offers to webpage or mobile landing pages and include social sharing features within each campaign offer. In particular, you want to capture data on which specific locations or times of day are receiving the most opt-in conversions and which geofences are triggering the most actions.

Beacons vs Geofences

Before you take the plunge app or network based geofence solution, you may want to check out how Apple fares with its new iBeacon technology. But first, a few general word on beacons.

Whereas geofences rely on GPS satellites and cellphone towers to estimate user proximity, beacons use Bluetooth Low Energy (BLE) technology to pinpoint user location.

Beacons work by broadcasting a signal in a sphere that has a range of approximately 50-150+ yards, depending on the device. Because BLU uses so little energy, beacons don’t put a strain on smartphone batteries.

Beacons are also small (smaller than a deck of cards), which means they can be put virtually anywhere. Moreover, because beacons transmit a unique signal, multiple beacons can be used simultaneously. It’s important to note that, unlike app or network-based geofences, beacons don’t transmit data to your device. Rather, it’s up to your mobile app to trigger a pre-programed action when it senses a beacon’s signal. Businesses can build location aware apps and use beacons to pinpoint users with great accuracy and send them customized offers.

For a clear summary of beacons and their relation to geofencing, check out this video.

The iBeacon Cometh

Here’s where things get interesting. Apple has integrated its own iBeacon technology is into the iOS7 smartphone. In September of 2014, Macy’s department store announced its shopBeacon program, which integrates Apple’s iBeacon technology with the Shopkick app to deliver personalized discounts, product recommendations, and rewards to shopkick app users via their smartphones. At first, Macy’s shoppers will receive general promotions. However, the department store committed to begin offering tailored discounts to users in the spring of 2015.

Industry insiders are already heralding iBeacon as the next level of geolocation. Only time will tell, although if things work out as planned, iBeacon could be a real game changer for retail and beyond.

As a final note, those interested in reviewing actual-use case study examples of geofencing in business should check out this white paper from iab.