New Mobile Possibilities Force Marketers to Check Into Local

Location-Based Services Provide Digital Tools That Drive Consumers to the Point of Sale, Capture Campaign Data

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For at least a decade, the internet's "local opportunity" has been "emerging." But while it remains elusive and unrealized from an advertising standpoint, from the perspective of consumer behavior, "local" has been the most important but least understood phenomenon online.

Credit: Source: Opus Research, Valassis/NCH, Cellfire, Coupons.com, Valpak
Marketers haven't seen "local" clearly or known how to address it. But the rise of mobile and location-based services (LBS) is starting to reveal the importance of local and is helping marketers better understand -- and track -- the already existing online-offline connection.

Check-ins and mobile loyalty programs are giving marketers tracking tools they've lacked previously, and companies such as Foursquare, Gowalla and ShopKick are showing new possibilities to national and local businesses. But they by no means define the local-mobile opportunity.

Forrester Research recently published a survey that found "only 4% of U.S. online adults have used location-based applications." That kind of data argues that location-based "check-in" services are a sideshow in mobile -- an over-hyped phenomenon with limited reach and impact.

But the fact that most people aren't "checking in" obscures and distracts us from the larger online-offline consumer-behavior pattern at the heart of the local opportunity. Discussions that focus on local advertising are important, but they often obscure this profound consumer-buying pattern: Local is ultimately about the point of sale. And mobile brings the internet to the point of sale.

Marketers spend roughly $100 billion a year on traditional media to reach consumers in specific geographic markets through direct mail, newspapers, directories, cable and outdoor. That spending is dominated by "national-local" entities (e.g., retailers, franchise brands) and largely excludes the $50 billion that U.S. small businesses spend on marketing annually, per Magna Global. Meanwhile, consumers drop almost $4 trillion in retail spending each year, according to the U.S. Commerce Department, and more than 95% of it is offline. Between 80% and 90% of consumers routinely consult the web before making purchases in physical stores. All this varies by category, but the internet's influence over offline buying is unmistakable.

Where you at? (From top): Foursquare app on BlackBerry, Gowalla on Android and ShopKick on the iPhone.
Where you at? (From top): Foursquare app on BlackBerry, Gowalla on Android and ShopKick on the iPhone.
Mobile and LBS give marketers new digital tools that drive consumers, literally and figuratively, to the point of sale and capture data on the efficacy of campaigns. Retail check-ins (ShopKick, Loopt) and loyalty programs (Placecast, CardStar) take the traditional newspaper circular and provide a closed-loop tracking capability.

Local marketing online has really never had that "search to store" visibility.

Local-mobile ad networks such as Where, LocalAdXchange, Chitika and IAC's CityGrid report response metrics that exceed online and traditional media, sometimes dramatically. For example, coupon redemption rates in print hover around 1%, while online can often hit 10% or more. Mobile coupon redemption rates can exceed 20%.

Location adds relevance (and personalization) to advertising and especially mobile advertising, which is why response rates are much higher.

Chitika analyzed more than 5 million searches and found that local queries on the PC generate 38% more click-throughs than non-local queries. On mobile devices, local-search users clicked through 64% more often.

Part of this also has to do with the immediacy of mobile consumer needs. Microsoft reported earlier this year that 70% of users begin and complete a search-related task on the PC in about a week. On mobile devices, that time frame compresses to one hour.

Despite these compelling metrics, marketers are just starting to experiment and figure out where mobile fits in the mix. However, audience fragmentation and limited reach is a barrier to mobile adoption at the national level. And small businesses don't see mobile as a priority; they still haven't figured out online yet.

For the foreseeable future, there's little danger that mobile will "cannibalize" other media. Ultimately, mobile is a powerful complement to other marketing, not a substitute.

Location on mobile devices is about the point of sale. But will brands and local businesses recognize it? And, this time, will they do a better job of aligning their efforts with how consumers are actually behaving?

ABOUT THE AUTHOR
Greg Sterling is an analyst who covers the search, mobile and local marketplaces. He writes about all these topics on Internet2Go, Screenwerk and Search Engine Land.
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