Locating the Mobile Customer

A 36-year-old real estate attorney with two kids is sitting in the bleachers of a baseball field in central New Jersey on a cool weekday evening in spring. It’s only the third inning of her son’s Little League game and slate-colored clouds are massing on the horizon. She pulls out her iPhone to check The Weather Channel app for the hourly forecast. As she scrolls, a Ford auto ad appears at the bottom of the screen. She happens to be in the market for a new car and clicks. The message invites her to come to a nearby Ford dealership on U.S. Route 1 to test-drive the 2013 Explorer.

Chance had little to do with this well-timed, though fictional, appeal. While targeting on a designated marketing area (DMA) level has been common for TV and radio advertisers, the proliferation of smartphones adds another wrinkle to location-based advertising in that targeting now is much more granular. Brands can incorporate location-based services (LBS) to pinpoint specifically where a mobile consumer is at the moment. Geo-fencing solutions create a radius around a certain perimeter—like a local coffee shop—allowing companies to push out relevant offers or deals based on a consumer’s proximity to a specific venue. In the case of our real-estate attorney, a geo-aware solution incorporates personal and third-party demographic data to send an ad tailored to her interests.

“QSRs (quick service restaurants) are all over [geoaware solutions],” says Greg Hallinan, CMO at ad network Verve. “They were already using ZIP codes. When they combine that with the personal data [app users] have opted in to disclose, you get one-to-one marketing at scale.”

Even beyond QSRs, brand interest in LBS is increasing. This is a shift from last year when Forrester Research Senior Analyst Melissa Parrish told Direct Marketing News that LBS is “not a terribly high priority for most marketers across the board.” Brands like Sonic and The North Face piloted various elements of location-based marketing, which at the time was still a bit outside the norm.

But if 2012 was, according to many industry observers, the “Year of Mobile,” then incorporating LBS can no longer be considered abnormal. Consider: A Pew Research Center study conducted in May 2012 found that 74% of smartphone owners use LBS. This is a doubling of U.S. adults using LBS from the same period in 2011.

“I used to say that we were in the very early stages [of LBS],” says David Mitchell, director of business development and digital media at AccuWeather. “I’ve recently dropped the ‘very.’ We’re getting closer to the ultimate relationship with the customer.” As if to underscore the point, in March Apple acquired WiFiSLAM for a reported $20 million; its technology pinpoints a customer’s location while she’s physically in a store.

Increasingly, brands are incorporating LBS to push out offers to nearby customers or to tailor search results based on a customer’s location.

Hopping the geo-fence

Targeting mobile users by their demographics and purchase behaviors may be the draw that ultimately brings consumer companies of all stripes into location-based marketing, but it’s the national chain stores with far-flung locations paving the way. Their favored method is geo-fencing, or serving ads and offers to prospective customers who come within, say, a one-mile radius of a store. But even the relatively new practice of geo-fencing is being refined in the go-go world of mobile marketing.

Earlier this year, Quiznos ran a mobile marketing program in Portland, OR, that plucked customers not off of nearby streets, but out of nearby competitive restaurants. It’s more of a get-to-the-point approach to geo-fencing, according to David Peterson, CEO of Sense Networks, which ran the program for the sandwich shop chain.

“Mobile users aren’t impacted much by a message when they’re near a store. They already know there’s a Walmart there,” he says. Peterson’s modus operandi is hitting mobile users with offers when they’re in a store or, in the case of Quiznos, when they’d already visited a competitor’s store.

Last November and December Quiznos served up coupons via mobile ads to individuals ages 18 to 34 who had visited competitors, such as Subway or Jimmy John’s within the past 30 days and who were within a three-mile radius of a Quiznos in Portland. Sense Networks relies on personal data from apps running the ads, but also maintains a database linked to phone numbers that it integrates with census data and surveys. At program’s end, Quiznos reported that it had made nearly 3.7 million new impressions and had 20% incremental redemptions in the Portland area as compared to similar campaigns run elsewhere.

“We want to advertise to consumers as close to a location as possible, so that each dollar spent on [mobile] advertising has a direct effect on actual Quiznos locations,” says Quiznos’s Tim Kraus, senior interactive manager. “Plus, the cost of reaching the mobile consumer is economical at this time. There’s lots of inventory, and so you have the ability to maintain low bids.”

This, however, might be changing. In a January 2013 BIA/Kelsey report called “From National to Local: Mobile Advertising Zeros In,” Senior Analyst Michael Boland noted a watershed in location-based mobile ad adoption, as national advertisers evolve from running campaigns relevant primarily to desktop consumers to campaigns that appeal to mobile consumers. Moreover, the report speculates that mobile ad spending will increase to $5.8 billion by 2016, up from $664 million in 2011.

Of course, Quiznos is more interested in optimizing its current mobile strategies than it is in the proliferation of mobile ads. As with any relatively new channel, Kraus says refinements need to be made. Quiznos franchisees need training on how to interact with the mobile customer, and stores need upgraded POS systems able to scan mobile coupon codes and provide real-time reporting. “Franchise owners in Portland didn’t know if the program was successful or not, so we need improved reporting and employee training so owners who aren’t in stores on [a] daily basis know what’s going on.”

Forrester VP and Principal Analyst Sucharita Mulpuru acknowledges that few brick-and-mortar retailers are poised to make full use of the capabilities presented by mobile promotions. “Mobile conversion and sales is highly dependent on the type of website and whether you have stored payment info,” she says, “ so Amazon, eBay, Groupon, and Gilt have great mobile businesses. For most stores, transactions are not seamless on mobile devices.”

 

In-store search

Whether or not the claim made by Sense Networks’ Peterson that customers aren’t impacted that much by location-sensitive messages when they’re near a store are true, brick-and-mortar retailers like Walmart have been putting LBS to good use in their marketing strategies.

The retail empire that Sam Walton built on the premise of right product, right place, right time launched a branded mobile app in 2011. The development of the app was part of a greater effort by Walmart to future-proof its shopping experience, taking into account customers who would be browsing in-store, on mobile devices, and on desktop computers or laptops. “E-commerce pushed stores to the Web, and now mobile is bringing the Web to stores,” says Ravi Jariwala, spokesperson for Walmart’s mobile app team.

Last year Walmart added “in-store mode” to its mobile app, a feature that allows customers to check product prices and aisle locations for any of the 4,000-plus Walmarts, based on the shopper’s location. Just as companies like Google alter mobile search results based on a user’s general location, the retail giant, through its mobile app, alters search results down to the store level.

Walmart views this feature as a basket-builder for in-store shoppers—an opinion validated by recent research from Google. In a report released March 2013 called “Mobile Search Moments: Understanding How Mobile Drives Conversions,” the search giant found that two thirds of in-store searches are conducted to help make a purchase decision, and mobile shopping searches are twice as likely to be conducted in a store than a non-store location. Moreover, 55% of conversions from mobile searches happen within one hour because of closer proximity to the point of purchase and because the searcher is more mentally prepared to make a purchase.

Despite the anticipated benefits, Walmart is still stepping cautiously, letting customers essentially lead the way. “We’re not using a pull strategy with our geo-fencing efforts,” Jariwala says. “We will follow our customers’ lead. If they say they don’t want it, we won’t do it. If they do, we will.”

Walmart’s effort to tie in-store inventory with mobile search results is unusual. By contrast, most retailers are more interested in using location to deliver nearby customers to their doors—for instance by combining geo-fencing with paid search ads. Last Christmas a national big-box electronics retailer—whose identity Direct Marketing News does not have permission to divulge—used location and paid search to capture last-minute shoppers on the hunt within a few miles of its stores. If a shopper performed a mobile search for a Canon 100mm lens within a ZIP code of a store that had it in stock, he would be served an ad alerting him to that fact, perhaps offering a discount, and giving the option to purchase with a click and pick up the item at the store. If the nearest store didn’t have the lens, he would be served a map identifying the nearest locations that did.

The ad solution the chain used came from Retailigence, which had real-time access to inventory on hand in every chain in the store. “The maps that are provided for alternate locations for out-of-stock products send click-through rates [CTRs] up tremendously,” says Retailigence CEO Jeremy Geiger, who claims an 80% increase in CTRs for the holiday campaign. “This is real-time commerce thinking.”

A metrical moment of pause

Despite the enthusiasm around LBS from vendors and growing interest from brands, marketers are still advised to proceed with caution. True, LBS campaigns are showing triple-digit increases in usage—at least according to vendors and ad networks—but massive growth always occurs when solutions are so new. Going from one customer to three does not indicate rousing success, though it certainly looks impressive in terms of growth percentage.

National brands with deep pockets like Walmart have the resources—both in terms of in-house expertise and finances—to incorporate location into their mobile and Web assets. At this time, Walmart’s use of location to affect in-store search results is rare. Quiznos’s location-sensitive mobile ads are a more common use of LBS. Yet, the sandwich chain hasn’t fully rolled out this deployment across all of its locations nationally.

“In some ways, [location-based ads are] experimental,” says Di-Ann Eisnor, VP of platform and partnerships for Waze, a navigating app that draws advertisers such as American Eagle Outfitters, Nintendo, Ramada Worldwide Inc., and Taco Bell. “Are we actually able to increase turns and velocity at retail, and at what rate? We’re five or six months away from having good metrics,” Eisnor says.

The lack of metrics is primarily an issue for marketers who use LBS. There isn’t a standard metric for mobile campaigns and, of course, without metrics it’s difficult for brands to justify spend.

“Mobile is defined by heterogeneity,” Medialets CEO Eric Litman told the audience at the Interactive Advertising Bureau’s (IAB) Mobile Marketplace conference in April. “Every device has a different set of technologies that are required to be adapted to make sure an ad makes it to a device…consistently. Bringing technology to do counting at parity to the digital space means building from the ground up and not simply trying to adapt what we’ve done in display.” Litman also told the IAB attendees, the only way to ensure no discrepancies in mobile reporting is to not run mobile ads. However, there’s hope within the industry that location-based mobile campaigns can offer more opportunity to capture the data that marketers need to show ROI.

Some early adopters of location-based mobile marketing don’t want to tip their hands to competitors and don’t desire to raise prices in readily available mobile ad inventory. They’re also in the midst of the experiment, with few tangible results to share even with their own in-house accounting departments, let alone the world at large. As a result, the bulk of their geographically targeted mobile campaigns continue to be inexpensive add-ons to regional media buys on the DMA level. Operators of mobile ad networks, however, vow that is bound to change, and soon.

“A lot of national marketers still lean heavily toward standard DMA geo-targeting because they understand it. They’re taking what they know on the desktop and moving it over to the mobile area,” says Monica Ho, VP of marketing at xAd. “But our view is that geo-precision is the ultimate proxy for audience targeting in the mobile space. Where you are says a lot about who you are and what you’re doing. If you’re looking at a consumer who has just been to a hotel and an airport, that’s a better indicator of a traveler than someone who’s on a travel website. Someone who is inside a BMW dealership is a better indicator of a potential car buyer than someone checking out the BMW website.”

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