This is the first installment of a two-part series on geofencing. Stay tuned to Mobile Demystified for part two. 

Recently, AdWeek published an informative infographic explaining the concept of location-based marketing through geofencing. Here it is:

The Real Story Behind Geofencing

I think this resource does an excellent job of unpacking how to combine SMS marketing with that which makes marketers salivate: a “virtual fence” that triggers a direct message to a customer cellphone once that customer enters into the fenced area. What makes this concept so powerful is the elegance of the use case: grabbing a customer’s attention the minute he or she is looking to make a purchase for instant ROI. One example:

  • It’s the 15th, so I’m out shopping on a Saturday in my favorite neighborhood
  • All of a sudden (because I’m in a geofence) I get a text message informing me of a can’t miss deal at a nearby store
  • I immediately walk to the store, enter to check out the deal and buy a ton of merchandise

However, what this infographic does not do is provide enough detail between the lines. To get the real story behind geofencing, we’re going to examine each of the ten steps (1-5 in this article, 6-10 in part 2) mentioned in the infographic using the following two points:

  1. Between the lines: any relevant information about that particular step not detailed in the infographic
  2. Result: the implications of this additional information for marketers thinking about implementing a geofence campaign

After examining each of the 10 steps, we’ll wrap up by analyzing geofencing as a whole. Any questions? Please hit us up by posting to the comments.

Step 1: Consumer receives text message to opt in to the campaign

Between the lines: The opt-in to a geofence campaign has to be separate from the opt-in for a standard mobile marketing campaign. Effectively, companies interested in geofencing need to build two lists: one for marketing and a separate one for geofencing.

Result: With two lists, marketers need sufficient software to execute dual list management, including opt-ins, opt-outs and customer metadata, in order to remain in compliance and earn maximum ROI.

Step 2: Consumer added to campaign database

Between the lines: As stated above, “campaign” is the geofence campaign only.

Result: a geofence campaign, due to its more personal nature, will see less opt-ins than a standard mobile marketing campaign. Companies that build a marketing list first in order to upsell their geofence campaign do much better than those that focus on geofencing first.

Step 3: Cellular numbers and target location data provided to carriers

Between the lines: “Carriers” doesn’t automatically mean “all carriers.”

Result: Marketers need to make sure that they are working with a provider or have connections to all the carriers relevant for their target audience.

Step 4: Cellular carrier pings cell phones of consumers in the campaign database

Between the lines: Note that the carrier has to seek out the location of the consumer. The consumer does not alert the carrier once he or she enters the geofence. Carriers designed pinging technology to locate a person at a single point in time (for example if a child went missing), not to monitor a person’s location constantly.

Result: As such, the only way to approximate a consumer’s real-time location is to request carrier “pings” with greater and greater frequency. The rub is that  each one of these pings comes with an associated variable cost. Based on conversations with a few providers in the space, this ranges from $0.02-$0.06 per ping, depending on volume.

Using $0.02, 1,000 customers and assuming that the marketer only does one ping per minute between the hours of 9-5 when a store is open:

($0.02) X (1000 customers) X (480 lookups) = $9,600

Expensive right? To reduce cost, maybe a business like a lunch spot only runs deals during a two hour window. At $2,400 per day, and assuming $10/customer, that business still needs 240 customers to enter its store during the 2-hour window to break even. Maybe pinging less often? Well, the store still runs the risk of customers entering and leaving the geofence without receiving the message. So you increase the size of the geofence? That introduces the risk of upsetting customers who only want to receive a message within a reasonable distance of the store. Reducing the number of customers perhaps? Well, maybe, assuming the marketer can target only the highest value customers.

All in all, it’s a tricky game. But those are the only levers geofence marketers have at their disposal.

Step 5: Cellular triangulation locates the consumer within the geofence

Between the lines: That’s pretty much all you need to know for this step. The cellular triangulation accuracy isn’t “needle in a haystack”, but good enough for geofence marketing purposes.

Result: Note that a ping gets location at a specific point in time. Thus, depending on the time it takes to process a text message and traveling speed of the consumer, it’s conceivable that a consumer could exit the geofence in the time it took to deliver the text. This might be relevant for huge customer lists, or fast-moving consumers (maybe driving in a car), but for practical purposes not enough to make a significant difference.

Stay tuned for Part 2 of “The Real Story Behind Geofencing,” coming next week. We’ll cover steps 6-10, as well as some alternative methods of location-based mobile marketing.

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One Response to The Real Story Behind Geofencing

  1. […] by asking consumers to consent when they download a company’s mobile app or by sending an initial text message asking for an opt in. Customers may also opt out at any time, so your marketing messages must be carefully crafted to […]

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