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It is no secret that both the online as well as brick-and-mortar stores will benefit from online marketing. However, a physical store has the upper hand when utilising location-based advertising, a technique that serves ads based on the geolocation of a customer.
With location-based advertising, 9 in 10 marketers saw an increase in customer base and engagement rates. And this advertising method will gain more prevalence in the coming years as 58% of Gen Z prefer the brick-and-mortar shopping experience.
Offline businesses, especially the small-to-medium ones (SMBs), benefit the most from location-based advertising. For marketers, location is one of the most best “worldly” parameters as it bridges the gap between a customer’s online and offline journey when settling on a brand or business.
Let’s take a look at what exactly location-based advertising is and why do marketers get so excited about it.
What Is Location-Based Advertising?
Location-based advertising (LBA) is a marketing strategy that utilises the location data of a customer. When a potential customer is within a specific geographic area (say a one-mile radius), businesses, especially SMBs, can send out their marketing message.
With the help of location-identification infrastructures such as the GPS, Wi-Fi, cell towers and beacons, marketers can pinpoint whether you are within a comfortable distance to visit a store. If so, they send you a message (probably with specialised discounts) to tempt you to visit the physical store.
Location-based marketing doesn’t only take into consideration the location of a customer. It also looks into the behavioural traits of a consumer, such as their shopping habits and preferences.
This will ensure that the ads are worthwhile for both parties – businesses get to show their ads to a highly-prospective customer and the customer gets notified of something they like. Companies can also utilise the weather and timing to make their marketing efforts more effective.
Another reason why businesses and marketers love location-based marketing is that it lets you add a customised CTA such as a “call” button to book tables or a “get direction” button. This can tempt customers to make impulsive decisions – something which all businesses crave for.
How Effective Is Location-Based Advertising?
There are three crucial reasons why the location-based advertising system works so well to drive sales and win customers.
1. It Is Personalised
59% of customers feel that personalisation influences their purchasing decisions. As location-based advertising extensively uses personalisation, engagement and open rates are higher.
2. It Is Targeted
Generic ads are a colossal waste of time and money. That is one of the reasons why app creators define their target audience before developing an app. As location-based advertising combines both location and preferences of customers to display ads, they are more likely to catch the target audience’s attention.
3. It Is Displayed at the Right Location, at the Right Time
The most significant advantage of location-based marketing is that it is performed at the right place, at the right time. These marketing messages are sent only when a customer is within the vicinity of a store and at a time when they are more likely to make a visit.
Suppose an ice cream lover sets out for lunch. On the way back, she sees an ad from an ice cream shop, just a block away from her location, offering ice creams at 50% off. Towards the bottom of the advertisement, there is a “call” button to pre-order as well.
In this case, the ice cream shop is running a location-based ad that targets the right customer (an ice cream lover) at the right time (most people have their lunch away from home). And an ice cream lover will most likely find the offer to be too good to resist.
This is how location-based advertising becomes highly effective to drive sales. Instead of showing ads to anyone, marketers target only the “ideal customer” by taking into multiple parameters, and most importantly, the location.
What Are the Types of Location-Based Advertising?
1. Hyper Contextual Targeting
This type of marketing uses hyper-local data to send contextual messages that are meaningful to a target group of audience. These ads are made to be relevant only to a target group and will be shown exclusively at specific times of a day, to make it more impactful.
Consider a locality which will be affected by a hurricane in the coming days. A business that performs roof reinforcement can run an ad which shows how beneficial it is to strengthen the roofs to negate the impact of the hurricane.
The ad can be displayed only in the particular locality, which is prone to hurricanes and only during the time it rains. Such a campaign utilises hyper-local data and location-based advertising for better sales.
Although this method is extensively used to drive the purchase intent and for increasing the conversion rates, it can also be used by organisations to send awareness messages within a specific radius.
Geo-targeting is a location-based marketing technique that utilises location data delivered by mobile service providers such as IP addresses. This method can be seen as the origin of location-based advertising and passes mobile ads to prospective customers, who are close to a particular place, determined using their IP addresses.
However, geotargeting isn’t very precise, which makes it ideal for a larger area, such as a city or a state. For example, ice cream shop owners can target ice cream lovers in a city and display ads to them. This means while utilising geo-targeting, marketers must be well aware of the behavioural aspects of potential customers.
Geo-fencing, also known as place or location-based targeting, allows you to set virtual boundaries to target customers. Such limits are set using the latitude and longitude, derived from a customer’s mobile device. This method uses a combination of GPS and radio frequency identification (RFID) to create a virtual fence.
Geofencing marketing is extensively used to drive foot traffic to stores inside a shopping mall. For example, an ice cream shop owner can use geofencing to send out specialised offers, say a 10% discount, within 500-meters of the shop.
Marketers can also utilise technology like iBeacons, which is a device that connects with iPhones via Bluetooth for location-based services. Such technologies allow marketers to pinpoint the exact location of the customers and further determine the timeframe within which the ads must be displayed.
This type of location-based advertising is coupled with vibrant creatives to tempt customers. Shop owners using geofencing will have the upper hand among the competitors as they are directly displaying their offers to prospective customers, even when they aren’t window shopping.
The methodology of geo-conquesting may seem too good to be true. This kind of location-based advertising targets and engages customers who are physically present in or around your competitor’s store. It’s almost like sending your business representatives to a competitor’s place and not getting caught for doing so.
In essence, geo-conquesting is an extension of geo-fencing. You can set up a geo-fence around the competitors’ store. Once a customer visits your competitor your store’s ad will pop-up on their device.
To pull off this feat, store owners will have to offer specialised discounts, which are impressive enough to lure the competitors’ customers to their stores. Sectors including restaurants, financial services and clothing stores are close beneficiaries of this technique. The key is to tap into the minds of the customers with specialised offerings and convincing ad content.
5. Beacon Marketing
Beacons are small objects, capable of receiving location data from nearby devices, via Bluetooth. Although it has a small and narrow range, it is beneficial in areas where the mobile reception is questionable.
As beacons consume less space, they are great tools for proximity marketing (marketing which involves sending specialised offers, depending on how close customers are to a specific location). However, the Bluetooth of your prospective customers’ devices must be turned on for beacons to receive location data.
6. Weather Targeting
As the name suggests, weather targeting involves creating and displaying ads, depending on the real-time weather conditions of a particular location. After all, the weather has the second biggest impact on customer behaviour.
Using this technique, shop owners can send out specialised offers for specific products, which are more likely to be sold during particular weather conditions. For example, a clothing store owner can advertise umbrellas when it’s pouring and wool jackets when it is cold.
7. Blueprints Location-Based Advertising
This method, also known as location-based behavioural targeting, is one of the most sophisticated forms advertising. It takes into account the point of interests and frequently visited locations of a customer to tailor marketing campaigns accordingly.
For example, a regular gymgoer will be interested in stopping by for a rejuvenating drink after a workout. Shop owners who sell such healthy foods can utilise location-powered behavioural marketing to target such customers, who have an established set of preferences or routines.
Benefits of Location-Based Advertising
1. Enhanced Targeting
By considering the location, preferences and shopping patterns of customers, marketers can run highly precise campaigns, which will reap better results than a generic one.
2. Cost Per Visit Model
Several marketing agencies offer a cost per visit pricing model in which you have to pay only if a customer makes a store visit. This will make sure you have a profitable experience while running ad campaigns.
3. Boost Business During Quiet Hours
With location-based marketing, shops can effectively utilise quiet hours. For example, if a coffee shop is typically quiet from 1 pm – 3 pm, shop owners can target a nearby business park and offer an irresistible discount.
4. Local Businesses Can Compete With Big Names
It is natural for customers to forget small stores when they get accustomed to big brands. With the help of location-based advertising, small businesses stand a chance to regain customers, with techniques like geo-conquesting. But again, these businesses have to make an offer customers can’t refuse.
Challenges of Location-Based Advertising
1. Opt-In Requirements
More users worldwide are becoming reluctant to share their location data in light of privacy concerns. This can be a significant setback for location-based advertising as these ads can be displayed only if the users opt-in for location sharing.
2. Use of VPN
Many users are known to rely on virtual private networks (VPNs) for security reasons. This can cause location-targeted marketing campaigns to wrongly target a user, who canl be virtually present at a particular location, but may be physically residing on the other side of the world.
3. Non-Smartphone Users
There will be several customers who adopted a minimalistic lifestyle and uses cellphones without GPS (also known as dumb phones) or may not own a mobile device in general. In the eyes of location-based advertising campaigns, such people are literally non-existent.
4. Marketing Products or Services That Are Available Everywhere
Imagine seeing an advertisement that says “milk available at ABC store”. And when you look up the directions to the store, it is two blocks away. As milk isn’t a precious commodity and is available in almost every store, you probably won’t take the effort to travel that far.
If a store sells ubiquitous items such as bread, soft drinks or bubble gum, the scope of location-based advertising narrows as customers may not find it worth the effort. This means establishments like supermarkets may not benefit much from LBA. However, if they have any limited stocks for sale, sending marketing messages will be profitable.
Which Businesses Benefit the Most With Location-Based Advertising
Restaurants can send out specialised food offers and gain a lot of foot traffic. For example, a restaurant at 12 noon can send out coupons that grant a 30% discount to the first 100 people who visit the place.
Even after the first 100 customers, more people will be pouring in with the coupon and will most likely eat at the place as they wouldn’t want to waste more time visiting another restaurant.
2. Clothing Stores
Clothing stores can use location-based advertising to convert window shoppers into loyal customers. While passing by a store, if a customer receives a personalised offer, they are more likely to visit the store, which further increases the chances of a sale.
3. Property Agents
Property agents can send out customised marketing messages when prospective clients are within the vicinity of a property. The banners can be coupled with a “Get Direction” and “Call Now” button that leads a customer right to the property.
Gyms can utilise geo-conquesting to lure customers from competitors. For example, if a customer visits your competitor’s gym, they might be looking at the monthly fees and contemplating whether that gym is the right place for them. At the very moment, you can send a jaw-dropping offer to that person and lure him to your gym.
5. Car Dealerships
For car enthusiasts, taking a test drive casually may be the turning point for their purchase decisions. Car dealerships can utilise this impulse and run location-based marketing campaigns to target nearby potential customers who are financially capable of making a purchase.
How to Perform Location-Based Advertising?
1. Plan the Mobile Advertising Campaign
The first step to performing location-based advertising is to plan your campaign. The basic idea behind this step is to understand your audience wholly and to utilise the data and technology at your disposal sufficiently. To plan effectively, here are some crucial measures to consider.
- Make sure you leverage technology and data to the fullest.
- Utilise the search history of customers for delivering personalised marketing messages.
- Make use of location-centric keywords such as “ice cream shop near me”.
- Set the radius by considering where your target customers will be at a given time.
- Be precise about the parameters of your campaign. This will include context, time, and the level of personalisation, to name a few.
- Make sure the ads aren’t intrusive in nature.
- Make sure you convey how the customers will benefit by following the advertisement.
- The ads must display precisely what you are offering. Otherwise, you may lose a valuable customer forever.
- Add CTA’s such as “call now”, “get direction” or “order now”. Make sure the ad prompts the customers to take immediate action.
- Work with designers and copywriters to craft compelling creatives.
- Set up metrics to evaluate the campaign’s effectiveness.
- Consider multiple options during media buying.
- Link your ad to your store’s Google My Business (GMB), if possible.
2. Perform Media Buying for Ad Space
Your ad can be presented in multiple places. For example, it can be displayed on an app that uses in-app advertising as a monetization strategy, or on search engines when a customer browses the Internet, or even on the mobile home screen (several manufacturers display ads on their devices).
More precisely, your ad needs a space to be displayed, just like the billboards you see, except online. For that reason, you need to buy ad spaces through a process known as media buying.
You can perform media buying with the help of Demand Side Platforms (DSPs) which is a software application that lets you access and choose from a wide variety of advertising inventory listed by publishers (the people who monetize their apps with in-app ads).
You can either request the assistance of an agency to buy and manage the ad inventory or opt for self-serve DSPs, which will require you to learn a little bit about how the platforms work. But on the bright side, with DIY DSPs, you can start as low as US$100.
To know more about DSPs and other crucial aspects of advertising, check out our comprehensive guide that covers all verticals of mobile advertising.
3. Plan and Produce Banner Creatives
Even if you buy the most promising ad space, it never guarantees that you will gain the best results. For that, you need to invest more in creating banners that compel customers to perform the desired action. Although static banners are reasonably efficient, interactive rich media ads are more capable in capturing customer’s attention.
While creating banners, keep in mind the following.
- Design creatives that are primed to tempt customers to make impulsive decisions.
- Include downloadable discount coupons which the customers can redeem in the store.
- Don’t forget to add CTAs such as “Call Now” or “Get Direction” to help customers to convert quickly without any second thoughts.
4. Manage, Track and Optimize the Campaigns
Once you have the required advertisement inventory and banner creatives in place, you need to run, manage and tweak your location-based advertising campaigns. And as expected, running your campaigns with the same formula, over and over, won’t reap the benefits you expect.
Instead, you need to continually tweak it by changing parameters such as timing, radius and even target groups, along with your creatives and ad inventory. Here are some useful measures to consider.
- Track your marketing progress using analytics tools by looking into key performance indicators (KPIs) such as views, clicks, and most importantly, sales. Monitoring KPIs will help you understand whether the campaigns are worthwhile.
- Utilise the data collected from your first campaign to streamline your efforts in subsequent campaigns. This will include information about the best timings, target groups and creatives.
- Perform A/B testing to pinpoint what works the best for a specific target audience.
If an agency assists you, make sure you base your contract on results (sales or foot traffic) and not on views. Otherwise, you may end up getting low-quality leads who are least likely to convert.
Also, while running campaigns, make sure you consider the life-time value (LTV) of your customers. LTV is essentially the total amount of revenue you can expect from a customer, during the entire duration of association with them. Calculating the LTV of customers is crucial to determine whether your marketing efforts are beneficial.
For example, if the LTV of a customer is US$100, and you spend US$150 to acquire the very person, your cost of acquisition exceeds the LTV, which means the campaigns aren’t profitable. Consider this metric before planning your strategies.
Location-Based Advertising Examples
Starbucks used customer’s location data and time preferences to invite customers to their shop with a buy one, get one free, offer. On opening the message, customers were redirected to maps, which showed the nearest store locations.
Yelp sends users personalised recommendations based on their locations.
Flipp collects customer location data to send coupons offered by nearby stores.
4. Coca Cola
In association with the VG app, Coca Cola used proximity marketing to send out coupons that could be redeemed for a free coca-cola on the counters of CAPA cinema.
Foursquare suggests nearby places such as restaurants or clothing stores to its users that they might find interesting. Foursquare licenses its user data for location-based targeting to generate revenue.
Nike utilised geofencing to send a “Shock Drop SNKRS Pass” to customers within a 25-mile radius of downtown Atlanta. By leveraging curiosity and demand, Nike urged customers to make impulsive purchase decisions.
7. Van Leeuwen
Van Leeuwen, an ice cream brand in the USA, uses geo-targeting advertisements to improve store visits. The brand tied hands with PayPal to track the locations of its customers and to send out marketing messages.
Sephora sends marketing messages to customers who are within a specific radius of the store. As their location-based advertising campaigns are incentivized, customers are more likely to visit.
Ritual, a food delivery app, uses customer locations and preferences data to suggest restaurants near them, that users may find interesting.
The Waze app, an alternative to Google Maps, follows a similar monetization model as Foursquare. The app displays sponsored ads of businesses on its map.
Things to Consider While Running LBA Campaigns
1. Put Effort Into Creating Compelling Banners
Invest more time in designing compelling creatives. Make sure you connect with the best-in-class designers and copywriting experts. Otherwise, your technical efforts may become futile.
2. Customer Location Data Must Be Accurate
Be accurate with the customer location data. Make sure you acquire data only from quality sources. You don’t want to display your advertisements to the wrong person in the wrong place. In general, you need to consider the following parameters for your campaigns to succeed.
- Accuracy – The distance between the actual and estimated location
- Precision – The degree of pinpointing a specific location. For example, latitude and longitude that measure up to two decimal places are precise within one kilometre (0.6 miles) radius. On the other hand, those that measure up to four decimal places can be precise within 10 meters of the device.
- Recency – It is the measure of time elapsed between collecting the location data and passing it on to the ad servers.
3. Think of Your Prospective Customers First
Your entire campaign must revolve around your customers. Focus on their pain points, suggest solutions and provide irresistible offers. Also, make sure you target the right customers. Pursuing the wrong customers (the ones with the lowest LTV) can ruin your marketing budget.
4. A/B Test
No marketing campaign is complete without A/B testing. You need to A/B test your strategies continually until you find the desired number of customers. Once that number starts falling, you need to streamline your efforts all over again.
5. LBA Must Align With Other Marketing Strategies of a Business
Businesses rarely depend on a single form of marketing. From social media marketing (SMM) to email marketing, there are a lot of things that can be done.
When formulating location-based marketing strategies, special care must be taken to ensure that it complements other marketing efforts. Businesses can offer downloadable coupons to customers, which will require them to opt-in for emails, thereby expanding the email list.
By 2022, marketers will spend around US$38.7 billion for location-based advertising in the US alone. As the havoc caused by the Covid-19 pandemic is slowly settling, more offline stores can embrace location-based advertising for better foot traffic. With 5G-enabled smartphones rolling out this year, marketers will get access to more precise location data.
One of the principal reasons why location-based advertising works is because people like to be referred to something relevant to them at the right time. If your campaigns are hyper-personalised, the better. Take time in planning and tweaking your strategies, and always remember – persistence is the key.
When walking down a street with countless shops, customers may fail to notice stores they are actually keen to shop at. Your location-based advertising campaigns can be a buzzer that captures the attention of the right people at the right time.