What is Geofencing and How to Know If You Need It

It's early in the morning. You're driving groggy and still wiping the sleep from your eyes. You have a few minutes before you're due in the office, and you want a pick-me-up — but you're not sure where to go. A promotion from a nearby coffee shop pops up on your phone; they are offering a 50% discount on your favorite latte. Without hesitation, you drive to the shop and place your order.

This scenario is geofencing, a location-based marketing technique.

What is Geofencing?

Geofencing is a technology that creates a virtual perimeter around a real-world geographical area. Geofencing is typically leveraged as part of a mobile marketing strategy and makes use of GPS data to trigger certain marketing actions. It stimulates interest and drives engagement within a predefined radius around a specific physical location. For example, when a prospect enters or exits a store, the store's app may deliver a targeted message to him triggered by geofencing parameters.

There is a difference between geofencing and the use of "beacons." Beacon marketing makes use of battery-operated Bluetooth devices that can typically trigger responses within 50 meters or less. Beacons are great for in-store marketing. For example, when a prospect enters a store, a beacon may enable a shopper to pull up product information on a nearby item, send special promotions to his phone, or even enable access to a product locator tool. On the other hand, geofencing is typically less precise as a proximity detector but has a much greater reach.

Marketing Uses of Geofencing

There are several possible marketing uses for geofencing technology. These include the following techniques:

  • Experiential marketing. Geofencing can be used to enhance the customer experience inside a store. For example, in 2014, Home Depot rolled out an app that automatically switched to "in-store mode" when customers entered the building. This app's in-store mode allowed customers to access helpful tools designed to enhance their shopping experience, such as a product locator tool.
  • Event marketing. A company can use Geofencing at events that it holds for prospects and customers. For instance, a company can send out surveys to event attendees, gamify certain aspects of the event, or offer special promotions to participants within a predefined radius.
  • Storefront advertising. Geofencing is also an excellent way to drive storefront advertising. For example, you can send out promotions to nearby customers via push notifications and change them daily.
  • Personalization. Geofencing also allows advertisers to bring a much greater level of personalization to their marketing efforts. As an example, advertisers can leverage location-based data to send out segmented emails to their customers. When the customer opens the email, he'll see special offers connected to a store in the local area.

Do You Need Geofencing?

No two businesses are indeed exactly alike. However, the answer to the question "Do you need geofencing" is a resounding Yes if one or more of the following conditions apply to your company:

  • You need to increase foot traffic. If you want to increase the number of visitors to your physical store, then geofencing is a must. Interestingly, one study found that 50% of shoppers who stopped by a store because of a text notification said the visit was unplanned. In other words, geofencing can bring people into your store that otherwise wouldn't come. Moreover, this applies across a wide range of industries: restaurants, clothing outlets, big-box retailers, etc.
  • You need to increase your return on ad spend (ROAS). Geofencing is also an excellent way to get a "bigger bang for your buck" in terms of ROAS. For instance, geofencing can increase the click-through rate of ads delivered through mobile. Prospects currently located within a specific geographic area are more likely to engage with tailored ads than those outside the predefined "geo-fence." 
  • You need to optimize your mobile marketing strategy. Finally, geofencing is a great way to take your mobile marketing strategy to the next level. Geofencing allows you the opportunity to segment your mobile audience in terms of real-time location. In turn, this segmentation enables you to personalize your ads on a deeper level and attract the "impulse-buying crowd.” This is an especially important consideration since almost half of all purchases carried out by the 18-24-year-old demographic in the United States are driven by impulse.

The Importance of Geofencing in Your Marketing Strategy

Geofencing can enhance the consumer's shopping experience, thus fostering customer satisfaction and brand loyalty. It can deepen the level of personalization in your marketing initiatives. It can also optimize your mobile marketing strategies and generate increased sales through unplanned and impulse purchases.

If you haven't already invested in geofencing, it's time to seriously consider doing so. Many businesses have found that location-based marketing is relatively cost-effective to implement and yields a high ROAS. If your business regularly engages in event marketing, has one or more physical storefronts, or makes liberal use of mobile marketing techniques, then geofencing should be your next big investment.

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