Location-Based Marketing: The Revolution

We recently hosted an event for Social Media Week LA called "Location-Based Marketing: To Check-in or Not to Check-in?" Six different companies presented, which were followed by a panel discussion. We also previewed our location-based analytics solution (LEA), which was just released into alpha. We'll recap the event in a series of blog posts. First, the setup.

What is Location-Based Marketing?

Location-based marketing is as old as marketing itself. It takes many forms from billboards and in-store promotions to digital out-of-home and the guy on the corner dancing wildly in a chicken suit with a sign shaped like an arrow. Location is one of the most relevant forms of advertising because, by definition, you're present. The cutting edge in location-based marketing is smartphones. And while they account for a small piece of the location-based marketing pie today, they are revolutionizing the whole of it.

Shift Happens

All great disruptions in media and advertising are driven by one thing: shifts in consumer attention. It shifted abruptly from radio to TV. It shifted from print to digital. We're now shifting from the static web to the mobile web and from static location-based channels to more dynamic ones.

We're in the era of consumer's choice advertising. Whether it's DVRs, the web, or the Do Not Call list, consumers have unprecedented control over the advertising they receive and consume. With smartphones, we can consume the media, entertainment, and advertising that is relevant to who we are and what we like ...wherever we happen to be. This is truly a first, and it will disrupt all forms of traditional location-based marketing. Here are three examples:

#1: Pre-movie advertising i.e. the ads that show in theaters before a movie starts.

This industry has seen rapid growth for years and for good reason. Consumers can control advertising at home, but if they arrived to a movie on time, they were trapped. What else are they going to do while waiting for a movie to start than look at the ads on that monsterous screen? Plus, these ads can be targeted by zip code and segmented by movie genre. Thanks to smartphones, it's easy to ignore pre-movie ads and even the movie itself if you so desired. This channel will become less effective relative to the rate of smartphone adoption.

#2: Digital out-of-home: Let's take the classic example of digital screens on fuel pumps at gas stations.

The pitch goes like this: What else are you going to do while waiting for your tank to fill? You're just standing there. Why not look at the video content and advertising on the pump? For starters, it's probably not that relevant to who you are and what you like. Instead, you walk around the other side of the car (partly to avoid the fumes) or get back in your car (partly to stay warm) and engage on your smartphone until you hear the pump shut off.

#3: In-store promotions: Branded merchandise at restaurants and fast casual stores

After placing your order at Starbucks, there may have been a time when you browsed the store and looked at the assorted mugs and barista gear. You did this simply to pass the time, but it can also trigger a need that wasn't top of mind. Maybe you could use a new travel mug. Today, however, there is no such chance because you're on your smartphone. So if Starbucks wants to sell you a mug that's less than 10 feet away, they now have to figure out a way to make it part of your smartphone experience.

The Smartphone + Location-Aware Apps

According to recent reports, smartphones account for 19% of the mobile handset market. This represents a 50% increase from a year ago, and we heard a stat from one of the presenters that we're projected to reach 51% by this time next year (Q3 2011). The implications of this really speak for themselves. When consumers are out and about, they'll have tremendous control over the media and advertising they consume. The days of having consumers trapped and subject to advertising that isn't 100% permission based are numbered.

In addition to the hardware, we're also seeing rapid adoption of relevant software in the form of location-aware applications like Foursquare, Gowalla, Whrrl, Twitter, and most recently Facebook. What's so compelling about these is that they enable what we refer to as "location-based engagements."

The web enabled consumers to engage with brands online through corporate websites, ecommerce sites, and social media like Twitter and Facebook. And while these engagements are valuable, they occur in a virtual place. Most often there is a disconnect— a distance — between engagement and meaningful action, such as a purchase. With smartphones, consumers can engage with a brand in the same way when they are present in an actual store or while holding an actual product. In some cases, the purchase itself is the engagement.

The most common type of location-based engagement is the check-in, which was made popular by Foursquare, but there are hundreds of ways to engage with a place. These can include photos, tips, reviews, likes, and an assortment of games. Regardless of the mechanics, we view each and every location-based engagement as a moment. Because every moment is unique and each has two things in common: time and place.

If you think about the greatest moments in sports or the greatest moments of your childhood, the basic coordinates of each are time and place i.e. when and where. As consumers, we also have thousands of everyday moments when we go shopping, grab a cup of coffee, or go to the movies. With a smartphone and location-aware application, we can capture and chronicle these moments. We can choose to share them with our friends, family, or whomever happens to be listening. These moments represent an unparalleled opportunity for relevant marketers.

When we engage with a location and capture a moment, there is an opportunity for a relevant marketer to reciprocate and become a meaningful part of that moment. Because it's not enough that we're present. Presence is what all other types of location-based marketing have in common. Just because I'm driving by the guy in the chicken suit doesn't mean I'm hungry or that I even like chicken. Engagement is what sets this revolutionary new breed of LBM apart from all others that have come before. Consumers are both present and engaged in real time.

This is marketing in the moment.