What’s the real deal with beacons?

Dec 04, 2014

It’s time for a reality check when it comes to beacons. That, somewhat to my surprise, was the position of many industry pros I met this week at the Location & Context World conference in San Francisco. Here’s some of what I heard:

Beacons are everywhere, sort of. By next year, more than half of retailers will be deploying beacons in stores. Sounds like a lot, right? What that figure doesn’t say is that most of the deployments are part of pilots. It also doesn’t say how many actual locations within chains with hundreds or thousands stores are going to be using the technology. Even with this, however, the glass half full crowd sees retailers expanding use of beacons and even going in full-boat in the near future. Apple, American Eagle, Lord & Taylor and Macy’s are some of the usual names dropped when beacon evangelists talk about the Bluetooth world that awaits us all.

Beacons drive sales, we’re pretty sure. What we’ve seen to date is that offering shoppers deals via beacons increases purchasing intent. A 10-market test earlier this year by Hillshire for its American Craft Link Sausages saw purchasing intent climb 20 percent among people receiving the deal through there mobile devices. While there is a very close correlation between intent and actual purchases, we don’t know the actual sales that were driven because beacons are not tied to legacy systems in pilots.

A number of people referenced research done by Swirl Networks, which found that 60 percent of shoppers open deals pushed to them through beacons and 30 percent redeemed offers.

Beacons are good for your business, but only in moderation. Right now, the technology is being used primarily to send discount deals to shoppers as they make their way around stores. There are also a relatively small number of alerts being pushed to consumers’ phones. But imagine deals popping up everywhere you walk around a big box store. As we’ve seen with e-mail and text offers, people may opt-out almost as quickly as they opted-in if they get annoyed. The people I spoke with said it doesn’t take more than a couple of unwanted offers for consumers to start rethinking their decision to opt-in.

Beacons are really reliable except when they aren’t. I heard numerous anecdotes from attendees at the show about walking into a particular store and being served a deal on their smartphones. I also heard a few of people walking around stores with beacons and … nada.

Beacons are the answer to retail’s localized marketing needs, sometimes. While it is understandable that retailers continue to seek a single answer to all of their location marketing challenges, there simply isn’t one. Beacons work great, down to an accuracy of a few meters, but are not intended to cover wider spaces more suitable for Wi-Fi (typically within a store) and GPS (outside).

Beacons are best handled in-house, or maybe not. The feeling among many is that when retailers eventually get around to fully embracing beacons, they’ll want to own the technology and the entire data gathering and analytical process. On the other hand, Macy’s has beacons in its 800-plus stores in the U.S. operated by Shopkick. Maybe third-party management will make sense for others.

What do you think are the biggest opportunities and obstacles facing the deployment of beacons in retail today? Do you expect to see widespread deployment of beacons in retail stores over the next three years?

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19 Comments on "What’s the real deal with beacons?"

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Paula Rosenblum

The biggest obstacle is the privacy issue—no doubt. This can be overcome by allowing the customer to either a.) opt in, or b.) pull deals, rather than have them pushed to them.

I do worry that this is a bit like RFID in the early years: A solution in search of a concrete problem, and one that raises the hackles on the necks of privacy advocates.

David Dorf

Think of beacons in stores like you think of cookies on the web. In some cases the consumer is identified, but in most they are not. Just as you might target advertising on web pages, you can do the same with the smartphone. And in both cases consumers may get annoyed with irrelevant content, so moderation is important.

And while target marketing has the highest potential return, just tracking consumers through the store similar to tracking web page traversals can be very valuable information.

I imagine beacon technology and best practices will mature slowly, similar to web cookies. The big nut to crack right now is connecting beacons and cookies so you can track across channels and provide more meaningful interactions.

Dr. Stephen Needel

Great article, George—and with only one mistake—the relationship between purchase intent and actual sales is not very good, with published data suggesting a correlation of about .52, which is low. I’m expecting to see widespread deployment and diminished returns per employment. I think the retailers will overdo it and people will tune out or turn it off.

Ken Lonyai

Beacons are the new retail panacea. Their providers have all the amazing facts and figures on how transformative they are or will be and yet as George points out, realities don’t necessarily bear out the claims. Of course it’s the early days and the technology needs to be refined, but there are two major considerations that must always be foremost:

  1. Using beacons to send offers is truly unimaginative. There are many other ways to leverage the technology for engagement and profitability in brick-and-mortar retail.
  2. Discounts and deals are the fastest ways to lower profitability. Training consumers in yet another way to avoid paying regular prices, especially as saturation and widespread adoption comes to be, will cause beacons to be more harmful than beneficial to the bottom line.
George Anderson

Thanks Stephen. I’ll leave it to those who told me there was a strong correlation between intent and actual purchases to offer their rebuttals here.

rebecca smith
rebecca smith
2 years 10 months ago

I do believe we will see a rise of beacons in retail stores in the future, but also widespread deployment in sectors such as entertainment venues, airports and shopping centres generally.

The biggest challenge will be how they are used by retailers, as many are bound to implement them incorrectly, which will create a negative view of how beacons work in the customer’s head and making them switch off against beacons in the future.

Gene Detroyer

Of course, this is a great new opportunity—maybe. In-store promotion is nothing new. If we hired a kid to walk up and down the aisles of a supermarket yelling “Hormel sausage,” the store would sell more Hormel sausage and more sausage overall. We could say the same for almost any product.

The challenge for the retailer is to be careful not to overload the messages so there are so many prompts that they get annoying and ignored. I do not have confidence that the retailers will be able to control themselves. They continue to think if one is good, then two is better—if 10 works, then 20 will be twice a successful. It won’t.

Peter Charness

I can’t wait for the beacon outtakes of absurd suggestions made to shoppers based on mismatched recognition or profile information. Perhaps we should wait for personal shopping drones that can hover overhead and act as shopping assistants directing me through the store, guiding me to my best deals and carrying home my purchases. But seriously, with all the information being accumulated about shopper histories and attributes, the magic linkage between that data and next best recommendation is still elusive. How does a retailer insure that the deal offer creates an incremental purchase, as opposed to just giving away margin on something that was on the shopping list anyways?

Ed Dunn
2 years 10 months ago

The biggest opportunity will be beacon-jacking where a third-party app can take the ID of a beacon transmission and use it to present counter-offers from the retailer across the street, show complaints or create a third-party promotion in a popular retailer or location transmitting a beacon signal.

At least a QR code can embed a specific data type such as a URL or phone number. Anybody can use a beacon transmission for their own purposes and the beacon owner is paying for everyone to enjoy it.

In addition, competitive intelligence gathering is a lot easier because beacons will only be placed where they are deemed important, and a Bluetooth scanner equipped with GPS can quickly collect beacon locations to know where the activity is, creating competitive intelligence.

Marge Laney
2 years 10 months ago

The biggest opportunity and obstacle for beacon technology is marketing. Opportunity because it offers the retailer a customer who has said “talk to me” by opting into a retailer’s app.

Obstacle because, as George points out, overly exuberant retailers may misunderstand this invitation and inundate the customer with endless offers and irrelevant jabber causing them to say “enough!” and opt-out.

Privacy is another issue. As consumers start putting together the pieces of the puzzle that, while they may be getting something, Big Brother is tracking their every move. Will they begin to turn off their Wi-Fi and Bluetooth in an effort to remain anonymous? Will they start demanding stricter opt-in laws as opposed to the current opt-out MAC address tracking laws from government?

Only time will tell.

Bill Davis

Beacons represent the first/second inning of in-store location-based services. It’s still early, so it’s not surprising that most efforts today are pilots/proofs of concept. Beacons are relatively inexpensive and prices should continue to come down, so I would expect to see widespread adoption over the next few years.

That being said, it has to be about more than just sending along a coupon. In-store location services need to aid in the discovery process along with inducing trial and growing basket size, as well other uses that haven’t yet been defined. Its early and while beacons have mind-share right now, likely due to well known names such as Apple, Macy’s, etc., think of this as like the early days of the Internet in that the best is yet to come.

Frank Beurskens
2 years 10 months ago

Beacons risk becoming noise when shopper relevancy is violated, again. Beyond the intrusion factor, present barriers to sustainable deployment include limited mobile phone capability due to multiple technologies involved: NFC, Bluetooth and GPS (not to mention battery drain). Beacons are another example of technology searching for a purpose. It’s a growing problem with cheap technology being thrown at retail today, particularly when applied to a legacy push mentality.

Zel Bianco

My reactions to both this article and the Amazon article are the same: When will we learn the sometimes enough is enough? Just because you can does not mean that you should.

Public concern over both privacy and all-powerful companies (Amazon, Google, Facebook) is growing. Companies need to take a step back and focus on using their information and power wisely—to gain trust and loyalty from customers—instead of trying to be the first or biggest. More information on your customer, more discounted offers and more services do not necessarily mean more long term growth. We need to start working smarter.

Kate Blake
Kate Blake
2 years 10 months ago

There is no value to a beacon study that isn’t tied to sales. Intent isn’t purchase. It’s like intending to brush your teeth—it doesn’t mean that you did!

Dan Farrell
Dan Farrell
2 years 10 months ago

Retail today struggles with its own vision. Big retailers talk a good show about reaching out to customers, but do little to dynamically engage and reward their customers where it counts…on the front line/in-store via smartphones.

We feel the biggest opportunities for retailers are around strategic deployment of iBeacons in-store, driving the following:

  • Driving in store sales of promotional items through contextual proximity marketing.
  • Building customer loyalty and return business through engagement surveys which generate immediate email reward coupons upon submission.
  • Increase store staffing efficiencies, define display effectiveness from metrics collected through the analytic dashboard of in-store ibeacons.

Obstacles? Retailers will most likely outsource deployment and installation of iBeacons. They are complicated, and take time to calibrate and install correctly. In addition, many iBeacons come with analytics, providing retailers never before available data point metrics for consumer in-store movement/traffic patterns.

Management challenge: Okay, the retailer now has all these BLE devices and great promotions on their web site. Who’s app SDK, API is used, who manages the creation/management of which beacon pushes, or initiates the process?

Consumers are ready, but are retailers?

Bill Hanifin

Another example to add to the list is HBC Department Store Group, which announced it has rolled out iBeacon technology to 50 Lord & Taylor stores in the U.S. and 90 Hudson’s Bay locations in Canada.

Working with iBeacon platform provider Swirl, HBC reported that it achieved a “higher than 50% engagement rate” after the initial push message which allowed customers to opt-in to its service.

Thinking about some of the cautions from the article here on RetailWire, HBC seems to have negotiated the tender balance between alienating and delighting customers, this done by limiting the number of in-store messages to three per consumer.

Interesting to consider is that beacon technology can deliver so much more than offer management. Triggering access and help from store associates, making payment to get out of the store more quickly, and asking for a new size in the fitting room could all be ways that beacons can improve the retail shopping experience in the future.

James Tenser

Glad you published this piece, George. Beacons are an intriguing technology that is being used with little imagination so far. (Ken’s observation is right on target.) The pilots I’ve heard about amount to wireless versions of the old instant coupon machine.

That said, I’d anticipate wider and more varied use of beacon devices in the retail environment. They can turn a paper sign, display or light-box into an interactive experience. They can trigger a recipe download (not just a discount). With permission, they can help capture useful data on shoppers in the store. They don’t cost a lot, so why wouldn’t in-store marketers try out a few alternatives?

Ralph Jacobson

Interestingly, consumers have to opt in to be tracked, of course, and we are finding that consumers are not refraining to join due to privacy concerns. The potential for this technology is virtually limitless. With widespread adoption across the globe over the next couple years, shoppers will become accustomed to the benefits of beacons (personalized offers, etc.) and will ultimately choose to shop at stores with them.

James Ransom
James Ransom
2 years 7 months ago
I’d say one of the largest obstacles is fragmentation. Privacy is also huge, but I think it’s starting to become obvious that consumers become much more comfortable with sharing their information when there is a value add involved. I think it’s up to marketers, retailers and brands to make sure their implementation truly lives up to creating a better experience for the shopper. I think iBeacon will absolutely be widespread in 3 years; this is not the QR code we’re talking about here, and if you’re comparing the two, then you’re way off base in terms of the technology and value, user experience, etc. involved. Think about this… A company famous for breaking down and rebuilding ENTIRE industries, shifting the technological landscape in a permanent fashion, and redefining how we think about things is responsible for creating this technology. It was built on the premise that the “app” famously coined by Steve Jobs, himself, is in fact, detrimental to its success. How successful has the “app” been? How far has it proliferated? How has it changed the way we live our lives? I believe iBeacon is the next “branch-out” in the evolution of the app. Furthermore, iBeacon has been in… Read more »

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