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The Near Team

8 mins read

What is Geofencing Marketing and How Does it Work?

Geofencing marketing has become an increasingly popular tactic for marketers. In fact, Boston Consulting Group found that nearly 4 in 5 retailers using location data said they use geo-targeted marketing, including geofencing. It’s a popular tactic for good reason – geofencing is a powerful tool that can help marketers deliver the right message to the right audience at the right time, maximizing marketing efficiency and effectiveness.

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What is Geodata?

Before we look at how Geofencing Marketing works, it’s important to understand what Geodata is and how it can be used. Geodata or Geospatial data is data that contains location information or geographical information and is accessible in a digital format. This information is usually stored in a geographic information system (GIS). Geodata can be accessed and visualized in various ways. Below are the different types of geodata:

1. Vector Data: Vector data is represented mainly as vertices or paths. Vector points are XY coordinates and the vector path connects multiple coordinates creating polygons.

2. Raster Data: Raster data is represented using pixels or grid cells, which can also have a value attached. For example, Raster files can be used to illustrate changing geographical values such as elevations or changing temperatures.

3. Geographical Database: Geographical databases store geodata (vectors and rasters) in a structured format and this can be used to create mosaics, do versioning, etc. Esri databases are a popular example of a geographical database.

4. Web Files: Geodata used to serve geographical and location information over the internet can be accessed through services such as GeoJSN, GeoRSS, and Web Mapping Services (WMS).

5. Multi-temporal data: Multi-temporal data not only has a geographical component to it, but also has an attached time value. For example, weather and temperature data track changes over time and for specific geographies. Other use cases for multi-temporal data are demographic trends, land use patterns, traffic, and more. 

What is Geofencing Marketing?

Geofencing marketing targets people with internet-enabled devices in a pre-defined physical area. It’s a form of online advertising where marketers can target location-based delivery of ads and content. Geofencing marketing is one type of location-based marketing or location-based advertising. 

Geofencing marketing often leverages SMS marketing and programmatic advertising. Push notifications are one popular medium for geofencing marketing, triggering a pop-up message that a potential customer receives when he enters a geofenced location.  

Ads in geofencing marketing can include text messages, social media ads, and in-app notifications. Geofencing can also be used for marketing strategies such as retargeting and building a large audience base.

How Does Geofencing Marketing Work?

A virtual geofence is created around a particular location such as an event, shopping mall, marketplace, or neighborhood as scheduled to build an audience. People who enter the geofenced location with their smartphone with Bluetooth turned on can be targeted right then or retargeted later when they browse the internet on their mobile phones. It is possible because GPS technology captures the mobile device ID of the user. They see the ads from the advertiser for as long as the advertiser has booked the geofencing advertising with a service provider.

While it seems to be a complicated and technology-heavy solution, it is a straightforward exercise while working with an experienced service provider. The following is the step-by-step process to set up a geofenced advertisement:

  1. Your company sets up a geofence in a set and predefined physical area and sets off a geofence ad campaign.
  2. When people enter the geofence, the IDs of their mobile devices are captured via GPS technologies.
  3. Using these IDs, your company starts delivering advertising messages in the form of push notifications, search or display ads, and in-app ads.

What do Geofenced Ads Look Like? 

Geofenced display ads can be in varying sizes, and can appear on mobile apps and websites. Advertisers can also deliver video ads of 6, 15, 30, or 60 seconds or use OTT advertising. Geofencing is an effective solution for advertisers that wish to extend the reach of their ads beyond zip codes, to allow citywide targeting of the people attending a specific event. 

What Technologies Does Geofencing Use?

Geofencing uses the Bluetooth feature in a smartphone to connect with the devices and send ads, messages, or notifications. It uses WiFi for internet connectivity, enabling the advertisers to send their messages to the devices in the geofenced area. GPS and RFID (radio frequency identification) are used to create a virtual boundary around a physical area such as a marketplace, event, or competitor’s outlet.

Users can be targeted using both IP address targeting and GPS targeting. However, targeting based on latitude and longitudinal coordinates is considered to be the most precise method for geofencing marketing. Irrespective of the type, geofencing marketing utilizes the physical location of an audience to target an ad or message.

Benefits of Geofencing Marketing

Geofencing allows advertisers to target people with display ads in a very precise area, offering hyper-localized results for local businesses such as restaurants and stores. It enables shopping malls, retail stores, event, and convention center organizers to precisely target potential customers in the vicinity, thereby improving ROI and conversion rates. It eliminates the inefficiencies of other forms of marketing that do not offer the same level of hyper-localized targeting. Additional benefits of geofencing marketing include:

1. Create customized content: Geofencing allows you to customize your content as you know the potential customer and what will appeal to them. For example, a beverage shop can advertise its products on a hot summer day at a bustling event and target consumers present within the event location. Geofencing advertising enables you to craft content and messages that resonate with the audience in your area. Geofencing also allows advertisers to create separate campaigns for different demographics. For example, in the same neighborhood, geofencing can target different audiences such as students, parents, professionals, and so on with different messages.

2. Improve cost-effectiveness: Geofencing allows you to work with the right content at the right time for a limited target audience. The rate of lead generation and conversion is quite high in this case. Compared to Google AdWords or Facebook, geofencing marketing allows you to spend your ad money to target your potential customers or engage the existing ones close to the location of your business. It makes content more effective and the campaign more cost-effective, eliminating unnecessary spending common with other forms of advertising campaigns.

3. Reach customers more easily: One of the key features of geofencing marketing is that your potential customers are physically close to your business. The prompt that your geofencing marketing campaign delivers on their smartphone can lead them to walk into your store or office as they are already nearby, making the offer/discount more appealing. This makes it ideal for restaurants and retailers in a marketplace to use geofencing marketing and target consumers in the vicinity with attractive offers or discounts on their mobile phones with relative ease.

4. Increase engagement: Geofencing marketing helps brands engage with the customers in a personalized and hyper-local manner, resulting in increased engagement. The customized messaging and relevancy for potential customers makes it appealing to customers, usually resulting in higher engagement when compared to other forms of marketing. Even if they don’t purchase the product or service being offered, they are more likely to remember the brand and its offers in the future.

5. Target competitors’ customers: Geofencing can be targeted at visitors at the competitor’s outlet. At the hyper-local level, an irresistible offer can make the customers change their minds. For example, some customers going to McDonald’s may change their plans and visit a Burger King or Subway outlet if they are prompted by an ad with an appealing offer/discount. Competitor stores in the same neighborhood may use geofencing marketing to beat one another. 

How are Geofencing Ads Set Up?

There are several ways in which geofencing can be set up. Here are some of the most popular ways it is done: 

  • Radius geofencing: It is a standard feature in all geofencing software and helps create a circular fenced-in area and can be used to geofence a particular address or business location. The problem with this option is that business locations are usually not circular. The radius approach might miss capturing potential customers who are slightly out of the geofenced circle, or could include unlikely customers, like people driving through on a busy road. 
  • Parcel map geofencing: In this case, parcel maps are tapped for geofencing. It is a more effective geofencing option, particularly for some industries such as real estate. One of the drawbacks is the presence of some unrelated businesses within the geofenced area.
  • Polygon map geofencing: It is by far the most precise way of creating a geofence. It establishes a geofence precisely around a point of interest, such as a store. You will need additional programming for both Parcel Map and Polygon Map geofencing.

What Software is Used for Geofencing?

Geofencing setup is done with the help of geofencing software that comes with a complete range of processes and solutions to set up geofencing, collect data, and provide analytics. These software products are also available in in-app formats to set up a geofence with just the smartphone. To set up a geofence, some basic information is required that includes the following:

  • Latitude and longitude
  • Radius
  • ID (to keep your geofence uniquely identifiable) 

Geofencing Set Up Tips

Keeping the geofence close to the advertiser’s business makes geofencing marketing more effective. Keeping the area small for the fence is the right way to go.  

If your customers are mostly going to walk in, targeting a few blocks from your business should be enough. However, if you expect your potential customers to drive in, the geofence can be set up for a wider area.

The question that a business needs to answer is how far the geofence should extend. Geofencing marketing targets a local audience, but cannot be used to target visitors at a competitor’s store located a long drive away. They are unlikely to visit your store the same day even if your offer is irresistible. 

Summing up, geofencing marketing is location-based online advertising where GPS, RFID, WiFi, and Bluetooth technologies collect users’ data. Setting up the geofence is simple as most of the features needed for this purpose are available in the geofencing software. GPS and RFID technologies are used to set up the virtual boundary, and the software has the necessary features to activate these technologies. 

Geofencing marketing is a highly effective tactic that allows for high customization and precise targeting, and thus drives high engagement and conversions. Because it is so targeted, it does not need to be expensive to get started. Marketers looking to drive footfall and purchases in-store and at events should consider geofencing as a critical tool in their marketing tool belt.

Interested to learn more? Explore our resources page for insightful e-books, case studies and more!
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