Businesses often offer discounts, hoping to attract new buyers for whom the extra 10% or 15% off might be a sufficient incentive to try out a new product or service. If they like the first experience and keep coming back, this is money well spent. A key factor that determines the success of this strategy is being able to capture data about these first-time buyers, so that they can be targeted again and induced to return. The frequency with which one encounters advertisements for discounts and promotions in the local press would lead one to expect that local businesses have mastered the art of using promotions to move excess stock, bring in business during off-peak hours and capture customer data.
However, the current practice seems quite different. Most discount campaigns are run in collaboration with bank credit card divisions. Some discount coupons are sold through third-party deal sites. Discounts are promoted via expensive press and TV ads, or spam email and SMS marketing. The only advantage to the brand ultimately is one-off sales. Very few campaigns are structured to gather customer data that can be used to drive repeat business.
Location-based marketing, a direct marketing strategy whereby consumers’ mobile device locations are used by businesses to pitch targeted offers, may offer a solution. Typically, location-based alerts are delivered to smartphones through SMS or push notifications. An alert may include information about a local business’ deal of the day and a purchasing incentive such as a discount coupon code. Location-based marketing requires the end user to opt-in. The opt-in process usually takes place when the end user downloads a mobile app and allows the app to use the device’s current location. Such location-based apps can be used to track a user’s macro or micro location using a combination of mobile geo-fencing and iBeacon or RFID technology.
For a brand, this means being able to target consumers passing by or in close proximity to their premises. This makes location-based marketing apps a perfect fit for service businesses such as restaurants and salons, to target their marketing efforts specifically. One example could be a restaurant offering mobile coupons providing discounts on their executive lunch for workers in offices close by. Obviously, this type of marketing effort requires the brand to develop a mobile app with location sensing capabilities and offer some incentive to end users to download it, in the form of discounts or coupons provided over the app.
[pullquote]Location-based apps can be used to track a user’s macro or micro location using a combination of mobile geofencing and iBeacon or RFID technology[/pullquote]
While this may be a sizable up-front investment, the long-term benefits will be significant. To use the previous example: once a consumer downloads the restaurant’s app, it can be used to send a personalized greeting every time the consumer comes back and push new promotions continually at an extremely low marginal cost. The app can also keep track of which mobile coupons get redeemed, and use that data to build up a profile of the consumer’s preferences and purchasing habits, enabling the business to push personalized offers.
If the business is willing to invest further on hardware that can be used to detect the user’s micro location, such as which shelf the potential buyer is browsing, the benefits can be extended further. A retail store, for example, can use this technology to detect if a buyer has been browsing a particular section of the store for a significant length of time – an indication of strong interest – to send them a mobile coupon discount for that particular section of goods.
Location can be a valuable piece of information for a brand to know the right place and time to target a customer. For example, a brand can place a geo-fence around a competitor’s store and push discounts to consumer’s entering that zone (i.e – ambush marketing). Location is a good proxy for purchasing intent. Targeting a consumer with an offer as they are walking into a shopping mall is very likely to yield better results than reaching them at work. Location is a useful filter, particularly for neighborhood service businesses, to figure out who they should target with promotions. A general discount offered during a certain period might attract bargain hunters hopping across Colombo to seize the opportunity, but they are unlikely to repeat the trip. However, those who live or work in close proximity are much more likely to become repeat buyers.
Despite the benefits, most small businesses are unlikely to invest in their own proprietary mobile app for location-based offers. Such businesses can opt to join a location-based deal aggregator. Several such mobile apps have launched recently, but are yet to gain mass market appeal. Curiously, the sectors that most actively offer discounts and promotions in the local market have been consumer durables and electronics. One would expect such purchases to display a low level of responsiveness to time-bound discounts. If location-based marketing becomes a thing locally, particularly with a widely used deal aggregator app, services businesses too may join the bandwagon.