Go Ahead, 'Fence' Me In

AT&T made news in February by becoming the first mobile carrier in the United States to try out geo-fencing, giving retailers and brand owners access to AT&T customers in four major markets who opted in to receive offers and information based on their location.Called ShopAlerts by AT&T, the pilot program used technology from location-based services provider Placecast, San Francisco. The program came to a close in June, and follow-up surveys suggest that privacy and personal-space concerns need not deter others from giving geo-fencing a whirl. "The big takeaway is if you deliver a compelling message at the right physical place, people are very receptive and don't think of it as a Big Brother type of thing," says Patrick Moorhead, senior vice president and group management director of mobile platforms at Draftfcb, a Chicago ad agency representing four of the brands that participated in the program.The survey found that 78% of subscribers were positive (41%) to very positive (37%) about the fact that ShopAlerts were sent to them as text messages based on their location. The latter group agreed with the statement, "It made them [texts] much more useful/relevant. I could use them right away."AT&T's partners included Kmart, SC Johnson, Del Monte pet brands, the California Milk Processor Board (of "got milk?" fame), Hewlett-Packard and JetBlue.Does this mean geo-fencing is poised to become the next big thing in location-based mobile marketing? It shows promise, but most brands don't appear ready to hop on board.Why? That depends on whom you ask.Right Message, Right Time, Right PlaceA geo-fence is a virtual perimeter around a real-world geographic area. When people enter the area, their mobile devices alert an application or service, which then sends back a notification – typically a promotional text message. "Geo-fencing enables advertisers to trigger the delivery of a message when [consumers are] in the proximity of a specific location," says Assaf Baciu, vice president of product management at Upstream, a mobile marketing technology provider with U.S. headquarters in Redwood City, Calif.The technology offers a powerful marketing triumvirate: Companies can target customers with the right message at the right time in the right place. Yet, "the sense I get is that there's not a lot of activity in this space right now, which is a little mind-boggling when you think of all the other location-based technologies that retailers and brands are testing and piloting," says Ethan Goodman, director of digital strategy at Arc Worldwide, the marketing services arm of Leo Burnett, based in Chicago.Geo-fencing vendors say the reason geo-fencing is not more widespread is because of its newness; Goodman thinks there's more to it but that retailers are being wrongheaded. To retailers, geo-fencing "is not as sexy" as some of the location-based apps, which typically ask shoppers to "check in" as well as touch base with their social network, he says. "What we're seeing is 'shiny object syndrome,'" he adds, and geo-fencing doesn't stack up."If you just think about mode of delivery, a text message as opposed to an app is literally just text on a screen. There's not much you can do to make that content more engaging," Goodman says. "The app experience is a little bit more visual, a little bit more social, a little bit more engaging."But there are real barriers besides geo-fencing's perceived lack of sexiness. "Brands see a lot of promise but stumble when they get to the scale question," Moorhead says. "The money and effort required to put geo-fencing in place don't always line up" with the potential audience reach.For Kraft Foods, the problem with geo-fencing is that it holds the promise of immediacy but, for consumer packaged goods, doesn't seem to deliver. "From an innovation standpoint, right now we're really focused on location-based marketing" in general, says Ed Kaczmarek, director of innovation-consumer experiences. It's the means by which Kraft brands can get "the closest to the consumer at the point of purchase." As for geo-fencing, "We love the idea," Kaczmarek says.Yet when Kraft was asked to participate in the AT&T pilot program, the company passed because the ShopAlerts seemed of limited value from a CPG standpoint as well as the shopper's standpoint. That's because CPG channels, for the most part, are not set up to redeem mobile coupons, Kaczmarek says. "We really had nothing to offer [consumers] that they could immediately redeem."Other retailers have closed POS systems that would allow store clerks to type in a special code, and some grocers like Safeway and Kroger have technology in place that would allow consumers to save an offer on their value cards. But there wasn't a way for Kraft to ping passersby with an "instant" offer.Goodman agrees: "The natural space for them [CPG brands] to play in is offers and deals."Kraft considered alternatives, says Kaczmarek: "Should we geo-fence [mass channels] and offer [consumers] a recipe? We didn't think that's what they wanted every time they went near one of those stores. We thought it would just turn into noise."Kaczmarek sees oversaturation as a potential problem: "If the consumer is walking down a very crowded retail area and every 20 feet they get a message, it gets to be annoying."Customization Is Key"The old saying 'location, location, location' – I think it's so applicable to what geo-fencing is all about, sending a targeted message to someone knowing exactly where they are," says Mark Evans, vice president-digital for Catapult Marketing in Westport, Conn.But knowing a consumer's location is not as important as understanding and addressing her wants. "We're definitely excited about the technology of geo-fencing, but to be successful it needs to be customized," Kaczmarek says.Indeed, new research released by Upstream in August suggests consumers prefer mobile advertising that is tailored to their "tastes and interests" over offers that are based on time, lifestyle or location. In a continuation of the company's North American Consumer Attitudes to Mobile Marketing research (conducted by Luth Research, San Diego, Calif.), survey respondents indicated that personalized messages significantly outperform time-, lifestyle- or location-based offers.The research polled more than 2,000 American adults and found that 59% of feature phone users preferred personalized offers over timing (18%), lifestyle (16%) or location (8%). Smartphone users responded in similar fashion, with 60% preferring personalized offers to timing (17%), lifestyle (10%) or location (14%).Bear in mind that mobile advertising is not the same as an opt-in geo-fencing program. And location may be more relevant to mobile device users who are on the run and likely to penetrate a geo-fence than to mobile users encountering ads while exploring online."Location works," Baciu says, "but it can work much better when combined with an intelligent understanding of consumers' interests and preferences."Baciu goes further, suggesting his firm's findings "mean that marketers must strongly consider working with the right mobile experts who have made the investment in new technologies and capabilities to gather and understand people's interests to ensure the ROI of their mobile ad spend."Key Findings From ShopAlertsThe survey of AT&T customers who opted in to receive ShopAlerts paints a different picture with regard to location. Among those who made a purchase because of a ShopAlert, 20% did so because of a discount. But all told, location reasons had the highest impact for 31% of purchasers, who agreed with one of these statements: "I was near a location of a retailer mentioned" (16%) or "The text mentioned a local store by name/location" (15%).Other key findings:ShopAlerts increased likelihood to purchase for 38% of survey respondents;17% made a purchase at a participating retailer due to a ShopAlerts message;41% reported a "very high future intent to purchase";22% of subscribers who received one of the CPG ShopAlerts made a purchase;24% of subscribers who received one of the CPG ShopAlerts intend to purchase.The pilot ran in New York, Los Angeles, Chicago and San Francisco. The program used technology by Placecast to create targeted marketing campaigns AT&T customers could opt into; 10,358 chose to do so and received location-based mobile messages from April through early June.The Technology and Its UsesMarketers can create a geo-fence around a defined geographic area, a retail location, or an event such as a concert or athletic tournament. The California Milk Processor Board geo-fenced athletic facilities to raise awareness and position milk as an alternative to sports drinks for "post-workout replenishment," Moorhead says.In addition to its retail stores, outdoor gear company The North Face last year geo-fenced brand-relevant points of interest such as trail heads as part of its Summit Signals program, powered by Placecast. Based on location, subscribers received messages about appropriate gear, local events and special offers.Besides local info and offers, messages can be used for friendly reminders ("Don't forget your coupon expires tomorrow") or the promise of VIP treatment ("Your personal shopper, Gwen, is standing by to show you our newest arrivals"), says Patrick Collins, chief executive officer of 5th Finger, a San Francisco-based mobile marketing company. However, "If you're going to message someone near your store, you have to ask yourself what behavior you're trying to drive. The most obvious tool for driving traffic in-store is the coupon."On the other hand, "I hope geo-fencing is not something that's only focused on coupons. There are many things of value we can give," including seasonal recipes and tips for entertaining, Kaczmarek says. "I don't think we're just looking at another way to distribute coupons."As with mobile technology in general, geo-fencing can find and communicate with consumers in a number of ways. Some methods require that the consumer have an app and that it be running; some only work with GPS-enabled phones; and some work with Bluetooth technology, which many consider dated.Instead of relying on GPS, Placecast's geo-fencing technology establishes a mobile user's location through the carrier's network. In some cases users can pick product categories and brands they like. Brands "buy access to the carrier's audience," says Placecast CEO Alistair Goodman, adding that his company offers another "white label" geo-fencing model for retailers.Uses of ShopAlerts so far have yielded some valuable insights:"In this environment, deals are the most effective thing to offer," Alistair Goodman says.Offers need not be limited to low-consideration or impulse purchases. Geo-fencing can also effectively move big-ticket items, but the purchase cycle is not as immediate.SMS messages regarding high-dollar purchases stick in people's minds and store easily on phones, so it's not unusual for buyers to mull the decision for a few hours or days and then take advantage of the offer."The prevailing view of proximity marketing is that a message is sent and the consumer walks in the store and makes a purchase," Alistair Goodman says, but in reality lag times are common.When Will It Gain Traction?As a location-based technology, geo-fencing seems futuristic in a "Minority Report" kind of way, yet it's remarkably simple at the same time. Its delivery system and accessibility are among its strongest selling points.But retailers and brands aren't buying. "It's a little bit shocking to us that retailers are not using it," Arc's Ethan Goodman says.According to Cambridge, Mass.-based Forrester Research, 5% of adults in the U.S. used a check-in service in the last year; among smartphone users, the figure is 11%. In contrast, says Ethan Goodman, 90% of adults have used text messaging. "There's a significantly bigger population using texting and who have the ability to interact with geo-fencing. Geo-fencing is a much easier, more accessible technology for shoppers, but there doesn't seem to be a lot of retail involvement in the space."It may be that retailers are suffering "shiny object syndrome" while consumers are more comfortable with the familiar. "Interestingly, despite more sophisticated forms of mobile marketing out there, opt-in text alerts or messages still score very high with regard to consumer responsiveness," Baciu says.What would it take to get Kraft on board? "Customization is the key to getting it right," Kaczmarek says. "We're closely watching the technology. We don't want to make predictions, but if consumers were able to customize the experience, it could open many doors."Ethan Goodman points to stores like Walgreens, which sends customers text alerts when their prescriptions are ready, as the likeliest to implement geo-fencing in the near future. It stands to reason that retailers with existing text message programs and robust customer databases to tap into would be the pioneers in this space, he says.Whether geo-fencing will gain traction "remains to be seen," he says, adding that the "sexier" location-based services favored by retailers might actually be inferior to geo-fencing when it comes to audience reach. "We are certainly, as an agency, talking to clients about geo-fencing being more accessible to shoppers," he says.

Go Ahead, 'Fence' Me In

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