With smartphones now the norm instead of the exception, location-based marketing has become an important piece of a company’s marketing strategy, and one of those marketing tools is geofencing.
What Does Geofencing Mean?
Geofencing, in this instance, pertains to mobile marketing.
With geofencing, the business sets up a small, invisible radius around a specific point. In most cases, the point is a brick-and-mortar store.
The store will then detect GPS signals or Bluetooth radio waves of the people who walk into the radius.
Think of this as a person crossing a fence line.
How Geofencing Marketing Works
Once those people cross into the geofence radius, the business can send an advertisement to the person’s mobile device.
For example, I walk into my local Michael’s craft store and immediately receive a notification from my app telling me that I can receive a coupon for 40% off the purchase of one regularly priced item.
That’s because my smartphone sent a signal to Michael’s telling the store that I’ve entered the geofencing radius. In this instance, I’ve walked into the store.
What is the Difference Between Geotargeting and Geofencing?
You might think that geofencing and geotargeting are interchangeable, but they’re not.
As outlined in a previous post, geotargeting is when a business advertises to a potential client based on where they live or where they are located.
For example, when I look for restaurants on Google Maps, I am offered a bevy of restaurant options located near me. There are top suggestions that the advertiser has paid for or sponsored. That’s geotargeting.
Conversely, geofencing is when I enter, or more specifically my smartphone enters, a perimeter created by a business. I have crossed into the fenced-in area and am receiving advertisements because I have entered that fenced-in area.
Oftentimes, geotargeting focuses on general locations, such as people living in Wichita, Kansas, or people who live within 50 miles of Baltimore, Maryland.
Whereas geofencing focuses on a very narrow location, such as people within 100 feet of a Starbucks store.
Is Geofencing Legal?
While it is currently legal, there are a lot of privacy and ethical concerns that go along with the marketing tactic.
First and foremost, people don’t like to know that someone is tracking them, and a discount may not assuage the feeling they get when they receive a text message the minute they walk into their favorite store.
Many businesses have found that it helps if they properly outline their procedures and receive a text confirmation that customers agree to them.
For example, the Michaels app includes Bluetooth technology but asks you to confirm if you will allow the app to use your Bluetooth connection. The app may ask you to enable the technology to work all the time or only when the app is open.
Be sure to consider the privacy and ethical concerns before using geofencing. While younger generations may be more accepting of the practice, older ones may not.
Is Geofencing Expensive?
According to WebFX, geofencing can be costly. The site says businesses will spend anywhere from $1,500 to $32,000 per month for geofencing advertising.
Some marketing companies also have a minimum buy when using this kind of marketing plan. That’s also something to consider when selecting a marketing company.
The cost of it is linked to several factors, such as the size of the geofence. A geofence with a one-block radius will cost much less than a geofence with a five-block radius.
The number of geofences will also affect your ad spend. For example, if you want three different geofences active at once, you’ll pay more than one geofence at a time.
Is Geofencing Effective?
According to Quickbooks, yes, it is effective.
“With geofencing for marketing, businesses can target consumers at events, colleges, trade shows, and more—all from a mobile device. And studies show that these geofencing alerts are effective. 53% of consumers say they have received a geofence alert containing a special offer or discount and have acted on it, according to a 2018 geofencing survey. Another 67% say mobile alerts are always or sometimes useful.”
When it comes to using it as an advertising method, consider the return on investment (ROI). Remember, geofencing is more costly than other forms of advertising, but the ROI is also higher.
One of the questions you need to ask yourself is whether the ROI for each sale makes up for the investment you make in geofencing.
Why Use Geofencing?
Since it is usually used for targeting specific clients that cross into a designated area, it is an excellent tool for drawing people into your store. Some businesses use geofencing to entice customers into the shop as they walk by. Others use it to personalize the shopping experience, suggesting an item the customer has previously purchased.
Geofencing is a good tool for attracting previous shoppers and encouraging spur-of-the-moment purchases.
It can also be used to develop data about your customers. You can get a good idea of how well your advertising works, how long a customer stays in your store, and how often that customer visits.
Geofencing is not the right tool for every business. If you’re working with a limited marketing budget, this may not be what you want to spend your entire budget on.
You also need to consider your target market. Younger shoppers such as Millennials and Generation Z are more likely to accept digital marketing like geofencing.
Meanwhile, older customers such as Baby Boomers and Generation X may be less comfortable with geofencing as a digital marketing tool.
Like most marketing tools, weighing the pros and cons before jumping into the deep end is crucial.
Miss our post on Geotargeting? Check it out here.
Written by Erika Towne