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In today’s retail market, advertising is used to influence consumers on many levels. Companies have been known to play off the emotions of the public or take advantage of social trends to make brands seem more desirable. These strategies in many cases have proven to be quite successful. But in analyzing their effect on retail sales we note a common goal, getting customers of their brick-and-mortar locations to walk through the front door. To achieve prosperity, these companies need not only to gain the attention of the consumer, but they must convince them that they can enjoy a superior shopping experience coming to one of their stores as opposed to that of a competitor. Thus, these methods adapted over time, and as the science of market research advanced, so did the advertisements it produced. 

Recent technological developments in smart phones and other small mobile devices have created the next stage in this evolutionary process. The tool is called Geo-Fencing, and it is being rapidly adopted by companies across America. Geo-Fencing is a location-based advertising medium that has the ability to recognize a customer’s proximity to a storefront, thereby sending virtual ads or coupons to their mobile device. Indeed, an invisible fence, that when crossed acts as a reminder to consumers shopping in a casual mall environment, or an impulse buy instigator for someone at a convenience store. It  is compatible with approximately 92% of mobile phones operating in the U.S, does not require the consumer to download an app, and research has shown that 53% of shoppers who use the service make the decision to visit the given retailer after receiving an alert. Also, 50% of the products’ current users have stated that visits to stores prompted by a text or another method of geo-fencing, were originally unplanned. These metrics are extraordinary, as geo-fencing has, in fact, created incentive for shoppers to buy.

Some of the nation’s largest retailers have adopted the use of this tool. For example, Gap (GPS) and advertising company Titan recently joined forces to generate geo-fences at a number of transit locations. In bus stops and on railways, Titan was able to establish triggers around Gap’s existing advertisements to send virtual ads and coupons directly to customers’ phones. Alliance Data Systems (ADS) briefly tested the product’s usefulness on Black Friday in 2012, sending over 20,000 emails to select credit card members, asking them to test a pilot campaign at the Easton Town Center mall in Columbus, Ohio. Customers who responded spent on average 24% more than those cardholders who did not, sighting consumer willingness to respond to these ads.

Indeed, greater revenue generation is one of the premier benefits of using geo-fencing, but the product can yield other profitable outputs, too. Its presence on an individual’s mobile device has offered companies solid market research information in reference to time, location, and product preferences. Understanding and utilizing this data can be critical. Knowing the time of day your customers are more inclined to shop, or where they make their purchases, can help with operational decisions about staffing and inventory management. Moreover, it can enhance the effectiveness of ad campaigns and, in this case, geo-fencing plans. A company like American Eagle Outfitters (AEO) that uses geo-fencing to determine this information, now sends its special offers to customers at the time of day that they have the greatest opportunity to shop. It uses location services to recommend stores to shop in and can reference particular products in its ads that are popular in that given area. This information has helped drive purchasing behavior by 65%, and the company continues to learn about its customers in an effective, non-invasive way.

The future certainly seems bright for this new innovation. As more people adopt the use of smart phones and other mobile devices around the globe, companies will be further inclined to implement its services to generate revenue and attain information. Even now, in its earliest stages, one can already note its propensity for growth. Its applications will likely be pushed to the limit as it is further developed by companies like Google (GOOG), whose Google Glass product would represent a logical medium for geo-fenced offerings. We look for geo-fencing to influence marketing greatly in the years to come, and await the inevitable market saturation of its ads and offers that already flood our email accounts today.

At the time of this article’s writing, the author did not have any positions in any of the companies mentioned.