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Location-based marketing is one of the newer marketing strategies, but it’s also one of the most effective for small businesses. With the use of online platforms and minimal investment, a simple startup can more accurately target their ideal customer. But since it is a relatively new concept, there’s still confusion around how it works.


What is location-based marketing?

Location-based marketing, also known as geo-targeting, is centered around creating personalized marketing strategies based on the target customer’s location. For example, a clothing store may want to show Atlanta-inspired clothing to its customers based in Atlanta. Because the content is more relevant to the customer’s unique experience, they are more likely to make that purchase.

The strategy itself has been around for quite some time (think of billboards that advertise local businesses) but has recently found new life thanks to the major advances in technology. Our mobile phones have become such a crucial source of information that an industry has grown specializing in this kind of marketing.

In order to use this type of strategy, a marketer must use a form of location-based service or LBS. This is a form of software service that uses geographic data and information to provide relevant services or information to users and consumers. An LBS is not necessarily a marketing tool as it is used in a variety of applications such as navigation software or social messaging applications.

One popular example is Pokemon Go, an augmented reality mobile game that became a viral trend in 2016. One of the core mechanics of the game is having the player be in the physical location in the real world to interact with creatures and objects in the game. Malls across the world capitalized on this as it welcomed “trainers” to come and catch virtual creatures in the establishments. Fortunate businesses that became hotspots for players saw a rise in traffic as the game reached its peak.

Location-based services can also be found in social networking sites such as Facebook, Twitter, or Reddit as it allows for targeted advertisements towards users based on their location. It essentially offers relevant information to users by using GPS-based or IP-based location information in order to suggest useful nearby services. This form of advertisement is called geolocation advertising.


How does location-based marketing work?

Location-based marketing uses the location data of a customer to provide more relevant product or service offerings.

First, the customer’s location is collected through the GPS system in their phone or mobile device, or in the unique IP address of their computer. In some cases, a service may analyze your browsing habits or Wi-Fi details to track your location, as is the case with Facebook.

The information collected is then parsed and analyzed by a combination of marketers, analysts, and artificial intelligence. Using your location and subjective elements such as your interests or purchase behavior, marketers can then suggest more relevant products, like restaurants near you or limited-time events in your area.

There are two types of approaches to location-based marketing. There is the national approach versus the local approach. The difference between a national marketing strategy versus a local marketing strategy is the intended amount of exposure. A national strategy aims to have a broader reach but will result in a reduced number of interactions. A local marketing strategy is essentially better for smaller businesses targeting customers in the immediate area or city. This obviously has a shorter reach but would result in more customer interactions as customers feel the messaging is more relevant to their lives.


Is an app needed to engage with location-based marketing?

Not necessarily. Small businesses with a tight budget can still find inexpensive ways to collect location data for marketing. The simplest and most straightforward way is to just ask, through a sign-up sheet or a survey. The upside is that you are doing it with customer consent, and it doesn’t require much effort.

Another and perhaps more effective way is using geofencing or beacons. Geofencing involves cellular towers and Wi-Fi to determine a person’s location, while beacons use a small Bluetooth device placed by a physical store to detect any smartphones that pass by. To learn more about these methods, visit Clutch’s page here.

Once you have data to work with, it’s time to pick an avenue or channel to reach out to customers. One of the best channels for location-based marketing is Google Ads. It’s arguably the most popular channel for advertisers with 5.6 billion searches on average per day. As customers search for products or topics they are interested in, your brand would pop up in the form of an ad.

Another contender is Waze Local. As a new competitor in the marketing space, this feature of Waze offers users a way to advertise to people based on their current location and destination. The app has enjoyed a growing user base due to its usefulness in navigating traffic which translates to an effective channel for businesses to be discovered by customers, both local and foreign.

Of course, you can’t ignore one of the largest social networking platforms out there. As of 2020, Facebook boasts a user base of over 1.69 billion users. Facebook has numerous ways to reach customers through either suggested ads or by creating pages for your business to interact with customers. Facebook’s advantage over other websites is that it is first and foremost a social networking site. This means that customers can leave comments or reviews and easily share brands through links which drive other users to check you out.

So depending on your audience and your approach, you won’t need an app, but it may make targeting that much easier.


The Benefits of Location-Based Marketing

Investing in a location-based marketing strategy brings numerous benefits for you as a business. Since this type of strategy is focused on channels visited daily by almost everyone in the world, marketers will experience increased engagement with their campaigns. Even if you’re not on a social network, you can build an email list and send relevant offers to a filtered list of customers residing in your area.

The first thing you will notice is improved turnaround times. Gone are the days of the need to stand out in the sun handing out flyers or going door-to-door pitching your business. With the power of the internet, you can spend 30 minutes creating a newsletter or generating a coupon code to send them out to a hundred thousand customers with a click of a button. You’ll get a response within minutes.

Brand-awareness is also heavily boosted as the rise of sharing sites like Twitter essentially gives you free advertising. This, in turn, lowers your CAC (Customer Acquisition Cost) as you simply need one satisfied customer in order for them to tweet or post about your brand to share with their friends. Soon, their friends will also share thus creating a sort of sharing cycle where the original customer will occasionally come across your brand again. A promotional post or ad is easily shared with hundreds of people by one person.

As location-based marketing is all about targeting a specific group of people, you will also experience far less competition. You will only be competing with brands within your area, as opposed to national or international brands. By controlling one dimension of the marketing mix (place/location), you can deliver a more coherent and resonant message to your intended audience.

By providing a service that’s easily accessible and relevant to customers, businesses will also experience higher conversion rates for their campaigns. A promotional offer sent out in the morning could bring an influx of customers to your store in the afternoon as your store location could be part of their daily routes. It also circles back to the instant gratification that consumers are used to, wherein they would naturally choose a product that is easier for them to receive, even if its price is a couple of dollars higher. They are essentially paying for the convenience.


The Challenges of Location-Based Marketing

An obvious challenge mentioned earlier is the decreased reach this type of strategy faces. As you are targeting a specific group of people, you are only able to reach those within a certain area. You may still attract users or customers from outside your targeted locations, but the message may not have as much of an impact.

Another issue in relevancy is your content. Making your message or content relevant is a must to attract paying customers. That might mean hiring more specialized writers or designers that have a more nuanced understanding of the local culture. Localization can be an additional expense that not all companies have the luxury of spending.

More recently, users have expressed concerns over their location privacy on the Internet. According to HERE technologies, around 80% of consumers do not fully trust services collecting their location data and a further 90% dislike the current privacy practices. If you aren’t upfront about your collection practices and a customer finds out, there’s a chance you could lose their respect forever.


Tips for location-based campaigns

Location-based marketing should be used as a starting point, not the ultimate tool. Finding out a user’s location is a major accomplishment, but then what? You must find ways to tailor products and services to people within those locations. That may mean opening new stores, rewording certain copy, or creating special/limited-edition product offerings.

Learn to track local trends and reviews. This complements the need to stay relevant within your space or industry. You’ll be able to create dynamic campaigns that stay relevant depending on what is happening around your city. Tracking reviews left by customers is already a free feedback tool provided by having a page on Google or Facebook. Use this free information given by customers to improve your business. Being able to communicate and interact with your community is key.

Most importantly, always be upfront with your clients and customers about location tracking. You may see a few drop-offs in terms of numbers, but that’s a minor pain compared to the stress of a public backlash or even legal action. Be honest and your customers may be more willing to give you the information you seek.


Examples of Location-Based Marketing

The biggest video sharing platform on the Internet offers geo-targeted ads. If you noticed, Youtube tends to play ads every 10 minutes or so of watch time. These ads are different for each Youtube account, and they take into consideration the location of the user to play more relevant ads.

Another service by Google is Google My Business campaigns. These campaigns are useful when users are searching with Google Maps. By having a campaign with Google My Business, you are legitimizing your business in the eyes of Google as well as having your business information pop up on one of the most popular map apps in the world.

Networking and local conferences are also a great way to conduct a location-based campaign without relying too much on the Internet. Being able to connect the old fashioned way not only gets your brand across to customers but also to potential business partners as well. You’ll be able to form local partnerships from other businesses where you can share customer information and revenue.

Location-based marketing is still in its infancy, but it will only grow more important as the Internet becomes increasingly expansive and noisy. Geo-targeting is just one of the ways marketers are staying relevant in the minds of their customers. But remember, it’s only a method. It’s what you do with the information you find that matters.