Deep Dives
Dispelling the Hype Around Geofencing
Geofencing isn’t a silver bullet. It is, however, a shiny new object that agencies have been getting really excited about lately. More specifically, they’re out pushing geofencing on clients as a miracle cure to their marketing woes.
Sound familiar? Have you been thinking about (or told to think about) geofencing?
The truth is, geofencing is not that new and it is not the answer to all your sales problems. As a smart marketer, you should understand what it is and what it isn’t, before getting caught up in the hype. You should also know when geofencing may be the wrong strategy for your business.
In this article, we answer all the nitty-gritty questions that agencies don’t want you to ask. Plus, we’ll demystify geofencing technology, explain how apps gain access to personal information, show you real results from local geofencing campaigns that garnered near-zero returns, and explain what you should be doing instead.
What exactly is geofencing?
Geofencing is a marketing tool that is used to serve targeted advertising to consumers within a designated geographical boundary (or geofence).
Think of a geofence as an invisible barrier that can be created around any location you choose, such as an office building, shopping mall, or neighbourhood. Of course, instead of building walls or burying wires, a geofence is set up virtually within geofencing software.
Consumers are then tracked by geofencing software when they (and their mobile devices) cross into the barrier. This is done by accessing the location data on your mobile device. Android and iOS devices track location data for their own advertising platforms, but it can also be obtained through various third-party apps that you may have installed.
Sounds creepy right? It is—and it’s probably worse than you know (we’ll get to that later). Once the location has been set and a person has been tracked entering a location, geofencing software can start showing them targeted advertising or send them notifications.
Which apps do geofencing platforms use?
Naturally, the next question people ask is what apps do they use? Unfortunately, that’s not an easy question to answer. Geofencing platforms claim to have access to thousands of apps—usually games and low-quality utilities.
Examples of popular apps that are thought to provide geofencing platforms with consumer data include Angry Birds, Words with Friends, ESPN, and Weather.com. [1]
Many of these apps track your location data (often for no apparent reason) and sell (or share) that data to geofencing platforms. Enabling location data within any of these apps will enable geofencing platforms to track you.
What gives them the right to track you?
Do companies have the right to access your location and then use it to advertise to you? Yes, they do—depending on your phone’s settings. Who gives them this right? Well, you do—when you enable location settings for advertising or within a particular app.
By now you’ve probably heard the expression that “if you’re not paying for it, you are the product.” This is equally true with mobile apps, particularly free games and low-quality utilities.
Once your device is tracked entering a geofence, you’ll begin to see ads pop up. They have the ability to serve you with ads while you’re in the location and even after you’ve left (ads will often display up to 30 days after you have left the area).
How do you create a geofence?
Geofences are designed virtually within the geofencing platform of your choice. As you’re setting up your campaign, you’ll need to draw or specify a region on a map that is similar to (and likely, powered by) Google Maps.
Keep in mind that when you’re drawing a geofence on the screen, the size you create will affect the cost and the effectiveness of your campaign. Larger geofences will cost more to run and will often increase the number of people captured who are not interested in your products and services.
One best practice for geofencing is to limit your geofence to the exact building that you’re targeting only. Occasionally, you may want to widen the geofence to reach nearby customers. This could be an area representing a 5-minute walk from your location. This is helpful when targeting nearby consumers that might be enticed to make an impulse purchase.
Geofencing sounds really familiar.
Geofencing is confusingly similar to geo-targeting, which, if you’ve been advertising online for any length of time, you should be familiar with. Major ad platforms including Google, Bing, and Facebook have long had the ability to target consumers based on the location of their IP address.
Known as geo-targeting or location-targeting on these platforms, this allows advertisers to limit their ads to users within specific postal codes or a specified radius around a location. This is done in conjunction with other targeting such as behaviour, demographics, and interests and it’s a component of any properly defined advertising campaign.
Geofencing by comparison, uses GPS data to identify an audience as they enter a specific location. This is good for businesses that cater to a broader demographic, such as bars and restaurants.
A word on Beacon technology.
Similar to geofencing, some apps have the ability to send you ads and push notifications about a deal they’re currently having through the use of beacons.
Beacons can be set up in a chosen location and transmit small amounts of data up to 100 meters via Bluetooth Low Energy technology. This data can be used to send mobile push notifications to someone’s phone when paired with geofencing technology.
Beacons don’t deliver offers or content directly, but the broadcasted identifiers trigger actions within a beacon-enabled application.
Also unlike geofencing, beacons are incapable of pinpointing the location of a mobile user on a map. Instead, it’s an estimate of where the mobile user is, whether they’re within the range of signal, and if so, how close.
A store like Best Buy could use beacons to identify customers who spent time browsing new TVs within their store and then follow up by sending those customers ads specifically for TVs.
While beacons and geofencing are different, companies often use them to complement each other.
Thoughts, feelings and concerns.
As a marketing professional, geofencing marketing may sound like a powerful tool and, to be clear, it is. But, the nerd in me likes to point out that with great power comes great responsibility and this is true with your marketing.
Geofencing (and, to a lesser extent, any location-targeting) raises plenty of concerns among consumers. What does the average person think about being sold to based on their personal information and on where they’ve been?
1. Invading their privacy.
The first main concern is the lack of privacy people have. As this technology gains popularity and agencies sell businesses on it, more and more people are expressing their concerns around the violation of privacy.
A survey by AYTM asked respondents if they’d ever sign up to receive geofencing alerts. Only 2% said they’ve already signed up and 26% said they would probably sign up. More than 50% said they would not sign up for alerts due to privacy.
Geofencing rules and regulations are different across the globe. In Europe, geofencing may only be permitted when users opt-in and agree to use the service prior to being advertised to. The General Data Protection Regulation (GDPR) is the core of Europe’s digital privacy legislation. Those who collect a person’s data and manages it are obligated to protect it from misuse and exploitation – or face the penalties for not doing so.
In the United States, there are two major laws governing the use of location data. These acts were created in 1934 and 1986 and a lot has changed when it comes to data usage, advertising and technology in the last 85 years. In California, the new Consumer Privacy Act was released on January 1, 2020. This gives residents the ability to demand companies to disclose what information is collected on them and request a copy of that information. Companies will be focused to delete consumer data if requested and they’ll be prohibited from selling information if someone instructs them to via a “do not sell” link on the company’s site.
In 2018, the Massachusetts Attorney General reached a settlement with an advertising firm related to geofencing and the Consumer Protection act. The firm worked with a religious organization that used geofencing to target reproductive clinics in New York, Ohio, Virginia, Missouri and Pennsylvania and the people inside those clinics. According to laws in the United States, the agency was in the wrong to target these people who were in a vulnerable state.
Since the laws in the United States haven’t been updated in years, industry self-regulation is an attempt to bridge the gap left by lack of legislation. The Federal Trade Commission’s Behavioral Advertising Principles suggests that an app should seek to obtain consent before using location data. But, this is just best practice and not a law developers have to follow.
In Canada, a 2011 OPO public opinion survey revealed that nearly 65% of Canadians agreed that protecting personal information was one of the most important issues facing Canada in the next decade. Nine out of ten Canadians were concerned with businesses not keeping information secure or selling it to other organizations. As you read earlier, this is essentially the definition of geofencing marketing.
When asked if they feel comfortable with the idea of location being tracked, 3% said they’re “very comfortable” while 42% of people said they were very uncomfortable. Walking into a store and receiving a text that acknowledged that you’re in the store could be seen as invasive and very disturbing. Those are two traits you don’t want associated with your brand.
A couple of years later, in 2014, 75% of Canadians said they decided not to install or have uninstalled an app because they were concerned about the personal information they had to provide.
The takeaway here is that geofence marketing relies on user participation to be successful. With people around the world being worried about their privacy being breached, they’re more than likely to opt-out of geofencing notifications. App users are able to turn off the application’s geofencing feature whenever they wish. If the feature is not turned on, it will not produce any results. And, if this is the case, your marketing dollars are being digitally dragged to the trash bin.
2. Draining the life out of you.
The second major concern people have surrounding geofencing is around data strain and battery drain. Geofencing technology normally requires the app that has access to your location and personal information to be on constantly and checking where you are. This requires a large amount of data usage.
Huge amounts of data means extra-large bills and no one wants those. There’s nothing quite as infuriating as paying to be advertised too. On top of overage charges, a person’s phone battery life is also likely to diminish through the constant location tracking and the app always being on in the background.
The geofencing agencies that use GPS for their location findings acknowledge that this can drain the battery faster. But, agencies that use cellular and wifi technology claim that there’s no significant battery drainage.
Mobile phone users want to be in control of what drains their battery and what doesn’t. They want to be aware of the apps they use and whether or not they they partner with geofencing companies to track and target. This is becoming a priority for device manufacturers who now force new apps to request this type of access, helping consumers identify when this information is being tracked.
You can uninstall apps that partner with geofencing agencies. You can also turn on airplane mode on your phone, eliminate data or only use wifi when using an app. Just keep in mind that it only takes one enabled app to provide this data to a geofencing platform.
3. Marketing to the wrong people.
The third main concern and one of the most important complaints of online advertising, is being the targets of irrelevant ads.
83% of people agree that not all ads are bad, but they do want to filter out the really obnoxious ones. And 77% agree with the statement “I wish there was a way to ad-filter instead of ad-block.”
It’s easy to understand why people would feel overwhelmed, interrupted and stalked by intrusive and irrelevant ads. 91% of the people surveyed say ads are more intrusive today than 2-3 years ago. With the boom of digital ads, remarketing and geofencing, the concern is valid.
Users don’t know when they’ve entered into a geofenced area and could be subject to ads that mean absolutely nothing to them. For example, a vegetarian walks into a geofenced radius and begins getting ads for a butcher. The money the butcher spends advertising to this prospect (who will never be turned into a customer) could be spent on high-quality prospects who are in fact looking for their next cut of meat.
It’s time to consider where your marketing money is going and who you’re marketing to. Consider your ideal buyer and question if you’re currently marketing to them.
4. Remember the five stages of selling.
Agencies also love to push the fact that you can create a geofence location around your competitor. This means that when someone walks into a competitor’s storefront, they will begin to start seeing ads for your company. Dunkin Donuts is hailed as a champion in geofencing for exactly that.
But do you really want to market to someone who is already far down the sales funnel of a different company? Remember all the fun acronyms and marketing systems back in business school? We’re going to talk about the five major stages of the sales funnel: Awareness, Interest, Decision, Action and Loyalty.
When you use geofencing to target a competitor’s storefront, the majority of these people are likely in the decision or action stage of the funnel. They’ve heard about your competitor, done their research, became interested and travelled to their store to purchase. To think that they’d then change their mind once they saw your ad is at best a shot in the dark.
Plus, targeting your competitors can create a bad image for your company. It shows that your company goes low when your competitors go high. If you geofence a competitor, it means you’re trying to enter a conversation you’re not a part of. And who likes to be interrupted? Plus, you’ll end up showing a significant portion of your ads to their employees.
Either way, for small- to medium-sized businesses, the competitor strategy is more often than not, ineffective. 88% of consumers pre-research their buys online before making a purchase either in-store or online. In order to change these people’s minds, they would have to be on an app that partners with a geofencing agency while they’re in the store about to make their purchase. And if they didn’t see your ad and made their purchase, that money spent targeting them was wasted as they passed through the action stage of the sales funnel and purchased from your competitor.
Continuing to target them with ads for 30 days becomes even more of a waste of money. But, that’s a big part of geofencing and one of the main places your ad dollars goes to. All of these concerns and research leaves one major question.
Is geofencing an effective way to advertise?
Geofencing should be used if—and only if—it’s right for your marketing strategy. With everything you spend your company’s money on, you need to consider the return on investment geofencing offers.
If you have a large marketing budget and see geofencing as an important addition to that mix, then it’s a great solution. But far too often, marketers introduce exciting new tactics while failing to execute on or maximize their return on the basics.
Companies should spend money on marketing that works, provides clicks, and targets the correct people for your business. More importantly, pay attention to what works and what doesn’t.
When geofencing isn’t done properly, it can be a terrible waste of money. Take this account for example:
As you can see this business has dedicated part of their monthly budget to Simpli.fi, which is a geofencing platform. Simpli.fi claims to be the most advanced location-based mobile advertising technology. They also say their performance is unmatched. This may be so, but advanced technology isn’t a replacement for a properly designed ad campaign.
When you look at these statistics, it shows that 5,816 people found this company in Google’s organic search results (SEO). That equals to 45% of their clicks within 3 months. They also spent money on Google Ads (CPC), which equalled out to 565 people who spent more than one minute on the website once they clicked on an ad.
And, 7 users converted by completing a form submission.
When you look at Simpli.fi’s contribution, 71 visitors arrived from geofencing. But, those users only spent between 1-7 seconds on the website. It’s not surprising that not a single visit leads to a conversion.
It’s clear that this client is wasting money on geofencing. Instead, they could and should reallocate their geofencing budget on SEO or PPC Ads—both of which are clearly working for them.
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Beware of agency motives.
Every agency (and business) has (or should have) goals. More often than not, to make money and grow their business. That’s great when the path to growth helps their clients grow as well. Since the beginning, our focus has been on earning referrals through word of mouth and our growing portfolio.
But that may not always be the case with all agencies. What happens when your agency is more concerned with meeting sales quotas than achieving results?
According to Propellant Media, a geofencing agency, Simpli.fi requires a minimum of $10,000 a month in ad spend to use their platform. That’s above and beyond any fees charged for managing the campaign on top of the ad spend itself.
After reaching out to Simpli.fi to confirm this cost structure, we haven’t received a confirmation of price at this time.
If your business is working with a marketing agency on geofencing, the $10,000 is the agency’s responsibility. That is the amount of ad spend they need to sell just to use the platform. That’s big money and an even bigger reason why agencies are currently pushing geofencing like it’s the best thing since sliced bread.
Why should anyone advertise using geofencing?
From a marketer’s standpoint, geofencing has a lot of potential. Geofencing increases ad relevance in a variety of ways and like other forms of display advertising, it can be a great way to generate demand for your products and services. By advertising to people that have visited a chosen location, you can make assumptions about their interests and needs.
While geofencing isn’t right for all businesses, it does work very well for some. Assuming there’s a good correlation between the ads and the location, geofencing can be a powerful advertising tool for the savvy marketer.
Consider an ice cream shop in downtown Kelowna for example. Who can resist a frozen treat at the end of a hot summer day spent at the beach? Those customers aren’t searching for an ice cream shop on their way back to the car, but they might check their phones for texts, emails, and the time before packing up their spot. What a great time to showcase your flavours. Geofencing around the beach could be a great opportunity to build demand at a key time.
Another example may be an insurance company advertising last-minute travel insurance to travellers who’ve just arrived at an airport. These are things that people forget to consider but would get a lot of value and peace of mind out of a last-minute reminder.
If you haven’t mastered the basics—we’re talking Google Ads (AdWords) and Search Engine Optimization (SEO)—then geofencing may not be for you. If nothing else, you should have a benchmark from some proven strategies for which you can compare the results of your geofencing campaign.
With a robust marketing budget and clear strategy, geofencing can be an extremely powerful tool. Companies such as Uber and The North Face have helped build that excitement.
Do you need a car? Or a rain jacket?
Uber has started to implement geofencing around airports, so when you step off the plane, you don’t have to worry about finding a way home. Uber will send you a notification informing you about how many available cars are currently at the airport and how to easily book one.
Uber is thinking ahead of the consumer and attempting to meet their needs before they have considered what mode of transportation they’ll take home. They’re not targeting a direct competitor. Instead, they’re targeting a location where their customers go.
North Face uses geofencing to create meaningful ads based on a user’s current weather location. When the weather isn’t summertime sunshine and one of their app users enters into a geofenced location, they send a push notification about a product to protect them from the bad weather.
Geofencing works for these international companies because they’re killing all their other marketing strategies. They have the money to spend on a geofence campaign to see if the return is there. For many small to medium-sized businesses, that extra cash just isn’t there to play around with.
Don’t get caught up in the hype.
The investment in geofencing should be a critical decision. It’s not the marketing promise land or miracle marketing solution marketers say it is. It’s not a strategy that will take your business from start-up to enterprise.
Geofencing and marketing agencies that sell this tactic promise it’s the chance to micro-target your core demographic and reduce the waste in your ad spend. Be cautious because Google Ads and Facebook ads also have the direct ability to micro-target people. They also have the ability to target specifics in order for the ad to only show for relevant people. Unlike geofencing where it uses a broad radius and targets everyone who has locations turned on and one of the partnering apps.
While you spend time and become critical in your decision whether you want to use geofencing technologies or not, consider the agency you’re going to work with too.
Consider the marketing agency and the ties they have with other platforms, apps and companies. While you want to consider where your money goes, you also want to find a marketing partner that aligns with your company’s ethos.
Focus on your low hanging fruit.
When you focus on your low hanging fruit, your marketing dollars are going to go further. By putting money into Google Ads, your ad will show up for people who are already searching for your company, service or product. You’re not spending money trying to win over everyone that walks into a geofenced location. You’re working to win over highly-qualified prospects who are already showing their interest and need.
If the company in the data above eliminated their geofencing budget and put that money towards Google Ads, they’d most likely garner more form submissions. The Google Analytics show that Google Ads are working for this company while geofencing is not. Google Ads are their low hanging fruit. Instead of creating new demand, they would be servicing existing purchase intent by putting their ads in front of people who are already searching for their products and services.
The right hype.
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