David Kunzmann from Capgemini’s Marketing, Sales and Service team explains how new technology is improving the link between mobile marketing and physical stores…

Imagine walking down your local High Street and receiving a text message offering you a 15% discount at a leading music store, only for to realise that you are in fact standing just across the road from it. Tempted to make a purchase?

British shoppers will soon receive money-off offers from brands such Starbucks and L’Oreal over their mobile phones, the result of the deployment of new location-based wireless marketing technology. Both are launching promotions on the UK’s O2 mobile phone network, using a system of “geo-fences” to send targeted text messages to customers when they are in the proximity of stores, a concept known as “Ping Marketing”.

It raises a key question as to whether the need to meet a growing expectation among customers for personalised advertising outweighs and justifies the threat to personal privacy and the annoyance of tracking customer movements.

Geo-Fence Technology

Ping Marketing takes advantage of Global Positioning Satellite (GPS) tracking that mobile phone companies use to follow where their users are. When the customer moves within a set distance of the store, passing through a so-called “geo-fence”, they automatically receive a text message to their phone containing an electronic voucher.

Ping Marketing has been developed in partnership between O2, and Placecast, a US-based company that is already effectively using the technology. Their research indicates that approximately 65% of customers who were part of initial programmes (including clothing stores and restaurant chains) made a purchase as a result of an SMS and MMS, and 60% of participants found the location-based messages to be “cool and innovative”1. Placecast is intending to set up approximately 1,500 geo-fences across the UK, which would give marketers the ability to tie offers to specific locations should they choose.

Connecting with Customers

Both Starbucks and L’Oreal have signed up to a six month trial in the UK, with the potential for most stores on the High Street to eventually use such a system to lure customers in. Example offers include Starbucks offering 50p off a cup of Coffee, and L’Oréal promoting sales of its hair care products by utilising the geo-fences set up around Superdrug, the high street health and beauty retailer. For the customer, Ping Marketing will enable people to connect with brands and products at the right place in real-time, all through their mobile phones.

Intrusive and Annoying

The system has created concerns that personal privacy is threatened by stores tracking customer movements to try to boost sales. There is also a concern that it could irritate customers as they become inundated with texts as they walk down the high street. The counterargument is that customers must opt-in to the scheme before receiving such marketing messages. When O2 customers register for the scheme, they input information about their gender, age and interests such as rugby, cinema and theatre, and can also cap the number of messages received each week. This should ensure that unless it is their preference, customers are not bombarded with useless texts every time they walk down the high street.

Where next?

Location-based wireless marketing technology clearly has huge market potential, and has experienced considerable success in the US already. It presents an opportunity for firms to boost sales in physical stores by attracting customers to their outlets, while providing personalised advertising to customers based on their own individual interests and preferences. With so many ways for customers to be targeted by marketing messages, the question is whether Ping Marketing will take-off or will it be considered overly invasive and annoying? A social experiment outside a local Starbucks in the near future could be one way to find out.