Skip to main content Skip to Footer

LATEST THINKING

Beacons transform
how retail does business

Overview

Location-based technology is here, and we’re currently witnessing the emergence of the missing piece of the puzzle—a shift in the consumer mind set. For this reason, retailers need to be considering the use of location-based technology to improve their customers’ experiences, drive revenue and increase operational efficiency.

Retailers need to understand what value for their consumers, their employees and their organization can be unlocked through using location services, and then incrementally introduce the change over the coming years.

The table below provides a snapshot on the main types of location-based technology and their relative merits.

DOWNLOAD CHART [PDF]

Background

In 1999, Palm Computing launched the first consumer device featuring location services, and at the same time helped to launch one of the first apps using location data—the Weather.com app from The Weather Channel.

In some respects, the adoption of location services by consumers and businesses since then has been strong. It’s estimated that over 75 percent of smartphone owners use their devices to get real-time location information, and over a fifth for geo-social check-ins. In other respects, however, the adoption of location services has been underwhelming, in particular when it comes to marketing. The use of location services by marketing practitioners, whilst increasing, is still not customary and as of 2014, less than 3 percent of US retailers were set up to simply recognize a customer walking in to a store [1] .

So why has the use of location-based technology for marketing been relatively low to date? Well, as Hall and Khan aptly put it in 2002, adoption results from “a series of individual decisions to begin using the new technology, decisions which are often the result of a comparison of the uncertain benefits of the new invention with the uncertain costs of adopting it”[2].

We’re undergoing a shift in the perceived cost-benefit balance for both consumers and retailers.

Key Findings

So what does this mean for retailers?

It’s easier and more accessible for consumers than ever before

  • More people are walking around with location service enabled devices in their pockets than ever before, driven by the global proliferation of smartphones, predicted to hit over 2.5 billion users worldwide in 2019 [3].

  • More people have access to data via their mobile device as global 4G LTE and Wi-Fi coverage increases year-on-year [4].

  • Location service technology is becoming standard functionality on people’s smartphones. A leading Internet search and technology company has already announced it will allow marketers to send out dynamic offers to consumers based on their location via its native mobile wallet solution, and it is expected that leading smartphone manufacturers will follow suit.

Consumers are more open to engaging with retailers based on their location

  • As demonstrated by a recent survey on personalization by Accenture, 57 percent of consumers said they would find it cool to be sent promotions, recommendations or reviews for a product they’re browsing in store, and 54 percent would like to receive suggestions of complementary items for a product they’re currently browsing in a store [5].

  • Marketing campaigns, when inevitably launched by major players in the location service space, such as the leading smartphone manufacturers and social networking sites, will continue to increase consumer perceptions of value, trust and willingness to engage with retailers based on their location.

Early adopters are paving the way for retailers

  • Early adopters are seeing promising results. Some brands have witnessed up to a 19-fold increase in interactions with advertised products for consumers who receive a location-based notification, versus those who do not [6].

  • And this is encouraging others to join in. It is estimated that over 50 percent of the top 100 retailers in the United States have, or are trialling, beacons.

  • Consequently, the infrastructure is emerging. It’s predicted there will be 4.5 million active beacons by the end of 2018, with 3.5 million being used by retailers, up from <250,000 in 2014/15 [7].

At a macro level, this means that we’re going to see an increase in the use of location services for marketing and advertising. It’s predicted that the location-based services market will grow from between $8-12 billion in 2014 to between $40-43.3 billion in 2019 [8], with over two thirds of this revenue increase driven through highly targeted and contextually aware ad-supported apps [9].

Analysis

You should take action by first identifying where the value lies, both for your customers and your organization. There are countless applications, but to list a few examples you may want to consider:

Location-based offers and vouchers
Location-based offers and vouchers: one of the most talked about use cases for location services. Some brands claim to have seen a 16.5-fold increase in app usage for users who received a beacon-trigger message.
In-store navigation
In-store navigation: particularly suited to larger store formats, for example supermarkets, where a number of players have already trialled in this space.
Mobile checkout
Mobile checkout: a leading Internet search and technology company, with their hands-free payment offering, amongst others are trialling in this space.
Dwell time insight and customer management
Dwell time insight and customer management: Take the example of a leading theme park that is able to send a voucher for a free ice cream to a park visitor who is wearing a special wristband and has been queuing for an extended period of time.
image
"Checking-in" in store: using location services that allow customers to let the store know they’re coming to collect a parcel before they’re even in the store.

Recommendations

Retailers need to understand what value for their consumers, their employees and their organization can be unlocked through using location services, and then incrementally introduce the change over the coming years.

And finally, it's important to note that there's not a one size fits all approach. As you embark on this journey, these are some technical questions to consider:

  • Do you partner or build in house? If you partner, who do you partner with?

  • Should you be pushing these new services through your own app, a 3rd party app or a native mobile wallet?

  • What logic controls the events and notifications that consumers receive so as to be "cool," not "creepy?"

  • And, of course, should you use beacons, geo-fencing, Wi-Fi, NFC or a combination of these? A summary of these technologies can be accessed here.

 

[1] Boston Retail Partners Unified Commerce Benchmark Survey, 2014. https://bostonretailpartners.com/resources/2014-crmunified-commerce-benchmark-survey/

[2] Hall B.H., Khan, B, 2002. Adoption of New Technology. New Economy Handbook: Hall and Khan. https://eml.berkeley.edu/~bhhall/papers/HallKhan03%20diffusion.pdf

[3] “Number of smartphone users* worldwide from 2014 to 2019 (in millions)”, Statista Inc., 2014. http://www.statista.com/statistics/330695/number-of-smartphone-users-worldwide/

[4] “The State of LTE.”, OpenSignal, 2015. http://opensignal.com/reports/2015/09/state-of-lte-q3-2015/

[5] Accenture Personalization Survey, October 2014.

[6] “How Proximity Marketing Is Driving Retail Sales”, by Greg Petro, Forbes, 2014. http://www.forbes.com/sites/gregpetro/2014/10/08/how-proximity-marketing-is-driving-retail-sales/#594006a53ff5.

[7] “THE BEACONS REPORT: Growth Forecasts For The Most Important Retail Technology Since The Mobile Credit Card Reader.” by Cooper Smith, Business Insider, 2014.http://uk.businessinsider.com/beacons-and-the-retail-industry-2014-11?r=US&IR=T.

[8] “Location Based Services (LBS) and Real-Time Location Systems (RTLS) Market by Location (Indoor & Outdoor), Technology (context-aware, UWB, BT/BLE, beacons, & A-GPS, and others), Software, Hardware, Se.”, marketsandmarkets, 2015. http://www.marketsandmarkets.com/Market-Reports/location-based-service-market-96994431.html.

[9] “Location Based Services Market to Reach $43.3Bn by 2019, Driven by Context Aware Mobile Services”, Juniper Research, 2014. http://www.juniperresearch.com/press-release/context-and-location-based-services-pr2