Location-Based Advertising: The Importance of Location to Advertising

Much has changed in location-based advertising (LBA) over the five years. As a member of a small team responsible to launch one of Singapore’s first LBA services for advertisers, we designed the service to place advertisements near an actionable location.

Many LBA service providers (e.g. mobile operators, app developers, mobile ad networks, etc) are likely to point to reach (number of users who received the ad message) as a means to justify the tool. However, I will argue that it is more important to develop the thought process that links location to customer needs. This will facilitate future innovative services on location services on mobile devices that are increasingly technically capable to take on sophisticated customer-centric tasks for users.

LBA allows wireless users to receive content relative to their geographic position. It is based on the fact that their needs may vary depending on where they are and when they are using their devices. Wireless marketing consists of the delivery of advertisements, coupons, and other forms of promotional and transaction-driven content to wireless devices. Invariably, this will require users to have network-enabled devices that are capable of receiving incoming messages from the sender (i.e. advertiser).

Indeed, the value proposition of a user’s location (sans mobile for now) is that this individual is proven to be physically present within an appropriate radius of a place of interest (for the brand owner). Using the mobile device, the brand owner can reach these identified users to make spontaneous decisions (it doesn’t have to be a purchase decision) near the place of interest. Mobile is a great response tool, and users are, at any point in time in any environment because the channel is mobile and freely accessible anywhere where there are wireless frequencies, take action on an instruction sent to their mobile handsets by the advertisers.

Accordingly, the target market, value proposition, and measure of success for LBA can be defined as follows:

Target Market

  • Consumer-focused advertisers with products and services that meet the needs to large number of customers.
  • Predominately sell homogenous and undifferentiated products.
  • Highly competitive industry force customers to acquire new customers to maintain market share while ensuring customer satisfaction with existing customers.
  • Low profit margin for industry members – price sensitive to choice of marketing strategy.

Some market segments that fit these descriptions include:

Market Segment Key Characteristics
Key Characteristics Promoting card spend – generate higher fee and interest income from increased purchases (presumably after being informed by LBA).
Shopping Malls Revenue of shopping malls is based on a percentage of tenant revenue – higher tenant revenue will represent higher revenue for mall owners.
Shopping Malls Retail outlets considered fixed assets and need to achieve high asset utilisation – measuring sales revenue per fixed asset.

Value Proposition for LBA Users

Advertisers see LBA as an opportunity to:

  • Announce new product and service offerings to customers within a proximate distance
  • Create incremental sales opportunities by reaching out to potential customers within a proximate distance
  • Establish direct customer relationship with their customers
  • Results-based advertising model with measurable outcomes

Advertising agencies see LBA as an opportunity to:

  • Decrease waste circulation – lowering printing costs from reduced paper based collateral print runs

Measures of Success

Customer traffic: comparing the average number of customers with customer traffic after launch of LBA campaign. An example as follow:

  • Advertiser sector: Multi retailer shopping centre
  • Promotional objective: To drive audience to five participating independent retailers
  • LBA message: “60 cinema tickets to be won today! Get 3 store stamps on a XX card. Fastest wins! Go to XX information desk to pick up ur card! (no charge for this msg).” – 122 characters

Advertisers are constantly searching for new mediums to offer personalised and focused communication channels with their customers. The contextual nature of LBA allows the users’ location to be linked to a possible action that could lead to a conversion (i.e. sales revenue). As a result, there is a clearly defined ROI behind this measurable marketing strategy to justify its investment cost.

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