ADOTAS — Consumer mobile shopping habits are directly affecting the path to purchase, and retailers are taking note. In fact, mobile ad spend has increased by 80 percent, year over year. But just being mobile isn’t enough, which is why advertisers are exploring new technologies to target consumers.
As retailers and advertisers explore these new ways to target relevant local consumers on their mobile phones, geofencing can be perceived as a fairly popular strategy, even if it is limited. Geofencing is a method of advertising in which retailers deliver targeted mobile advertisements to shoppers when they’re located in the immediate area—typically within a set advertising perimeter of several blocks (or less) of a store. In short, when customers pass a store, the retailer sends them timely, relevant advertisements.
Although this sounds great in theory, geofencing is flawed when not part of a larger, robust hyperlocal strategy. Used on its own, geofencing has the following flaws:
- Consumers don’t like the idea of being tracked even after they grant an app permission to use their location for push notifications. Users often don’t know what they’re getting into; when they get their first geofenced message, they feel uncomfortable. They might think, “If they can track me here, do they track me everywhere?” This leads to lower app download rates and higher abandonment rates. Retailers can still pull in some consumers with a great offer, but the Big Brother–type tactics are just as likely to push people away.
- Geofencing holds no guarantees. Advertisers cannot guarantee they will target the right customer with the right offer. Just because a person passes by a store, does not mean he is the most interested, qualified shopper.
- The geofencing approach does not scale, making it hard to generate a real return. The approach might work in a dense urban environment, but it breaks down when confronted with suburban sprawl. Many qualified shoppers live within walking or driving distance of the store, even if they don’t fit within the one-mile geofencing radius. Relying on consumer walking patterns makes it nearly impossible to create long-term growth, marketing success, and customer return. Companies must use other methods, such as neighborhood-level targeting that uses offline and online data sources, to reach crowds of the right shoppers.
- The message is lost. Advertisers live for the moment when a consumer “gets” the brand—when the creative components of an offer click, turning a prospect into a buyer. For this to happen, the message must be targeted at a relevant audience. Geofencing relies on a consumer’s location, rather than her background, for relevancy. Truly effective hyperlocal targeting uses offline and online data sources, including purchase behavior, interest data, and demographic information, to paint a complete picture of the ideal customer’s background and location—so the ads reach crowds of the right shoppers in the right locations. If a retailer only uses geofencing, it will spread its message to shoppers based solely on location, whether or not the message is truly targeted. And if the message misses the mark, it can hurt the brand.
- Mobile is not enough. All companies want an advertising plan that maximizes ROI. Geofencing aside, it is simply not enough to just go mobile. A company must create a targeted, digital advertising campaign that drives shoppers to nearby stores to buy products, regardless of the device used. Research, legwork, and strategic technology partnerships all contribute to creating campaigns that are optimized to meet a retailer’s goals and that achieve the most return on marketing spend.
For those still not convinced, consider the following: Does a surfer in his early twenties want to be bombarded with ads for a local toy store? Not likely. Yet, many shopping centers have an eclectic mix of stores that cater to a wide range of customers. For example, a surf shop can be located in a shopping center along with toy stores, clothing stores, and upscale restaurants. The surf shop will draw a specific audience that might be annoyed by the advertisements for toys. Every time the toy store sends a geofenced message to one of the surfers, it spends money on a wasted impression and likely annoys the shopper. The truth is that two people in the same shopping center may be going to different stores and be part of vastly different audiences, but two people living in the same neighborhood likely share quite a bit in common.
As the location-based mobile advertising landscape shifts beyond the limitations of geofencing, advertisers must learn to leverage data to serve digital ads to only the most relevant consumers at the neighborhood level—whether they’re on a mobile device or working on a computer at home. By targeting shoppers at the neighborhood level, advertisers can reach crowds of ideal shoppers who live around the store location, rather than just a handful of people passing by a retail establishment at a given time. Geofencing has its place, but within a broader range of tactics. A hyperlocal strategy becomes stronger and more successful when supplemented by offline and online data used to deliver the right message to the right people.