Location, Location, Location: A Real Estate Catchphrase Moves to Marketing
Through a special arrangement, presented here for discussion is a summary of a current article from Applied Predictive Technologies' Retailing With Confidence blog.
Location-based marketing is here. From Chili's to Target, leading restaurants and retailers are showing an enthusiasm for piloting offerings from a range of hot New York and Silicon Valley start-ups including Foursquare, Shopkick, and Gowalla.
While each location-based service (LBS) is unique, they are all oriented around a core principal: offers and coupons are most effective when restaurants and brands can target consumers at a specific time and place.
For example: General Mills would have the opportunity to target a two-for-one coupon for its Nature Valley granola bars to the iPhone of a consumer standing in the middle of the snack aisle. A 50-cents off a fountain drink deal could be broadcast to the smartphone of anyone walking within a block of a 7-Eleven.
Redemption statistics, along with location data tracked by smartphone applications, could then be used to arrive at the holy grail of marketing: targeting the right offer to the right consumer at the right time to most effectively drive purchases.
Many of Silicon Valley's most vaunted venture capital firms have invested tens of millions of dollars in LBS companies at astronomical valuations, believing that these services will displace more traditional couponing channels, including newspaper inserts and shared mail.
LBS start-ups have been using this cash to incentivize consumers to download iPhone and Android apps enabling their tracking and couponing technology.
Foursquare recently offered consumers discounted beverages based on the number of times they used Foursquare's app to "check-in" at Starbucks locations. Similarly, Shopkick offers loyalty points to shoppers for simply walking into a Macy's or Best Buy location and additional points for scanning products they like. These points can then be redeemed for gift cards.
Such promotions have been popular with consumers, who are downloading LBS apps in record numbers. Foursquare is leading the charge, registering almost seven million users and logging roughly 25,000 new users per day, with Gowalla following behind.
And competition from bigger and more established players is coming. Facebook recently released its integrated location offering, "Places." Google recently announced a full roll-out of check-in functionality associated with its Latitude service.
Similarly, Groupon and LivingSocial are also looking to expand their offerings into the location-based space, allowing restaurateurs greater refinement in targeting offers to users at a specific time.
Supporters and detractors aside, the market for location-based services is far from mature. Through the rapid iterations the industry will face, the core questions location-based services pose for retailers remain remarkably consistent with those posed by more traditional coupons: namely, are consumers redeeming coupons actually incremental or are they existing customers who are cutting into retailer margins? Only time, and rigorous testing, will tell.