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Your Questions Answered

Digital Marketing Guide: Location-Based Services

By Published on . 4

What is a "check-in," anyway?

A "check-in" is when a mobile user whips out his smartphone, launches an app like Facebook, Foursquare or Gowalla, and taps a button to tell his friends: "I'm here!" You can check in to virtually anything from bars and restaurants to TV shows and snowstorms.

The check-in is officially ubiquitous; however, only about 33 million people in the U.S. used a location-based service in 2010, according to eMarketer. Users are often rewarded for check-ins with discounts or deals that pop up when they're at a certain location or nearby. Location-based apps are also means for users to discover new restaurants, retailers or activities -- or simply to just brag to your friends about the cool places you go.

Do marketers need to partner with third-party apps for location? Or should they build their own services?

While most brands until now have run location-based programs in location apps, some marketers have built location services into their own mobile properties. On the simplest level, banks often include ATM locators in apps. On the other end, CKE Restaurants built its own loyalty app, Happy Star Rewards, which doles out points for prizes to customers who check in to Carl's Jr. and Hardee's fast-food chains.

When does it make sense to turn to an app? When you're looking for scale, says Alexandre Mars, CEO of Publicis Groupe's mobile unit PhoneValley. "It's easier to tap into a broader platform," he said. More than 200 million users access Facebook on mobile devices and this set is twice as active as non-mobile users.

So which apps should marketers work with?

That question is becoming more and more difficult to answer. While, Facebook has scale, other apps are beginning to carve out specialties. Gowalla aims for travelers, while a newer app, Foodspotting, is tailored to foodies looking for new dishes. Another app still in early stages, RedRover, is for parents scheduling activities for their kids. There are also apps for shopping, such as ShopKick for retailers and Checkpoints for grocery stores. "Now the problem with location is fragmentation," said Stephen Burke, VP-mobile practice for Resource Interactive. "There are lots of different location providers with consumers that run the gamut from college students to retirees."

How big is the market now?

About $200 million was spent in U.S. proximity marketing in 2010, according to Borrell Associates. But spending is expected to spike to $5.8 billion in 2015.

What do customers really want from location-based services?

At this point, getting a deal seems to be the main draw for mobile location apps, while sharing with friends is a close second, according to a survey from JiWire. Facebook Places, which launched last year, much to the chagrin of smaller startups, serves deals to users that check in to participating retailers. Gap, one of Facebook's first advertisers to run a deal, gave away free jeans to the first 10,000 customers to check in to its stores. Users can also get discounts for local businesses when they check in on Foursquare. But with so many deals on so many apps, Soraya Darabi, co-founder of Foodspotting, sees a new question on the horizon: "Will people expect discounts wherever they go?"

Outside of deals, how else have marketers used location apps?

Like CKE Restaurants' loyalty app, other marketers have turned to apps for rewards programs. Starbucks worked with Foursquare to reward customers for checking in, and ShopKick has built a system that doles out points when customers walk into stores, or pick up and scan barcodes of certain items. Another type of program is what Ms. Darabi calls "action-based marketing," where customers get some reward for doing things like snapping photos or tweeting. In a small program, Whole Foods offered $10 off a grocery bill and a $10 donation to charity to customers that uploaded pictures of a featured food to Foodspotting.

Shopper Marketing
MOBILE MARKETING TREND REPORT
Ad Age Insights’ latest trend report, "Mobile Marketing: What Marketers Need to Know About Location Based Services," is the first in a quarterly series on Mobile Marketing. Ad Age Insights is also updating our primer, "What You Need to Know About Mobile Marketing 2011," available March 14. Buy both at AdAge.com/whitepapers.
What do marketers get out of location-based deals?

Outside of potentially driving new foot traffic into stores, some check-in apps provide demographic data on user check-ins. Foursquare launched a dashboard and analytics tool for businesses last year, so businesses can track times and frequency of check-ins, who's visited and how often.

Is there more to location-based services than just the check-in?

Yes, targeting consumers based on their locations can include a number of different mobile technologies. There's "geo-fencing" from companies like Placecast, which lets retailers send text-message discounts or coupons to shoppers when they're in proximity of a store. There's also local search in mobile browsers -- Google says a third of mobile searches have local intent. "In 2010, we saw a lot of emphasis on the check-in," said Noah Elkin, mobile analyst for eMarketer. "I think what we'll see differently this year and into the future is that more marketers will see check-in as just one point in a relationship between generating awareness on one side and loyalty on the other."

Do location-based services make sense for marketers with no physical locations?

Definitely. Check-in apps have sprung up around packaged goods and grocery stores. One such app, Checkpoints, serves customers deals and offers for specific products when they check in to a grocery store. Entertainment brands have created location programs even though they have no physical locations. TV networks MTV, Bravo and the History Channel were among the most popular brands on Foursquare in 2010 for creating programs that tied their content and TV personalities to real-world locales.

Do consumers really want location-based services? Or are there privacy concerns?

The answer depends on the demographic, says Resource's Mr. Burke. Millennials raised on Facebook don't seem to mind forking over personal info like where they are. "For 13- to 30-year-olds, [sharing location] doesn't appear to be a third rail at all, as long as there is a compelling reward that brings tangible value," he said.

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