BrainTrust Query: You Are Here … Like It or Not
Commentary by Doug Stephens, President, Retail Prophet
Through a special arrangement,
presented here for discussion is a summary of a current article from the Retail
Prophet Consulting blog. Retail Prophet Consulting sits as a current member
of the advisory board for the Location-Based Marketing Association of Canada.
A
recent study by Forrester Research concluded that, while location-based services
(LBS) such as Foursquare, Gowalla and Loopt are intriguing, they are still too
small for major marketers to spend much time on. While current LBS users are
very likely to be influencers within their social circles, they are also largely
male and, therefore, better suited to marketers targeting men. Forrester’s overall
advice to marketers was a resounding “wait-and-see” on LBS.
It’s
hard, however, to reconcile the Forrester report with a lot of what’s
happening in the marketplace.
Large players like Starbucks have been experimenting
with services like Foursquare since early 2010, giving in-store discounts and
rewards to users for checking-in to their stores.
The Gap recently launched
a one-day 25 percent off promotion to Foursquare users checking-in at Gap locations.
Recently
released LBS applications such as Shopkick tapped by Macy’s, Best Buy and American
Eagle are making news by taking shopper rewards to entirely new and location-specific
levels, literally allowing shoppers to earn rewards simply for moving through
various areas of a store.
And in what is perhaps the ultimate sign that LBS
has arrived, Facebook recently launched its own homegrown location service,
Facebook Places, allowing users to share not only what they’re doing
but also where they’re doing
it.
Indeed, Asif Khan, founder and president of the recently-formed Location-Based
Marketing Association of Canada, believes that those who “move to embrace
LBS early-on will reap enormous rewards from proximity marketing, including
attracting more first-time customers, encouraging more repeat business and
increasing sales. I also see huge opportunities for cross-brand promotion for
companies that have multiple brands like Gap and Old Navy.”
He believes
the Forrester study failed to recognize the recent explosive growth of such
services as Foursquare, the potential of Facebook Places to educate consumers
about LBS, as well as exponential smart phone adoption rates.
To that end,
he sees the use of LBS reaching critical mass in 18-24 months.
Mr. Khan agreed
with the often cited quote from techno-anthropologist Clay Shirky, “Communications
tools don’t get socially interesting until they get technologically boring.”
“I don’t think it’s about technology at all,” said
Mr. Khan. “At least, I don’t think people care about which app they
use. They only care about the size and relevance of the deal. Â For brands and
retailers engaging with these tools, the real measurement of success will not
only be ROI, but Return on Relationship (ROR).”
As for the future and the
continued evolution of location-based technologies, Mr. Khan suggests that
the very context in which we consider the term ‘location’ will also evolve.
“Today, we think of location as only the physical space,” he said. “But
I see a time where we will be in virtual spaces and augmented reality where
brands and content will live as well.”
Discussion Questions: How aggressive
should retailers be around investing in location-based services? What do you
see as the next evolution of LBS?
As long as consumers are more willing to indicate their location on their GPS-enabled smart phones–and less wary of the privacy implications–it will pay for retailers to take advantage of the trend and the technology. There is a great opportunity to reach the ultimate target market–consumers who are already in your store–with incentives to stay, to browse and to buy.
If stores can further discern the specific merchandise interests of customers in the store, the target marketing becomes that much more effective. I’m looking at this strictly for its marketing potential…again, the privacy issues involved are troubling but there has to be willingness to “opt-in” for the idea to work.
Always interesting to see the conversation about whether or not to jump into a new technology because most of the conversations tend to skip over the “why.” I’ve seen companies race into new technologies without clear objectives only to find themselves unsure whether their effort succeeded or failed. I’ve also seen a lot of companies use the unproven nature of many new technologies to sit on the sidelines missing opportunities.
Part of the problem continues to be the emphasis on shiny new toys as opposed to a broader look at where that technology points us to. Marketers can get dizzy trying to figure out whether to back Foursquare or Gowalla or trying to create platforms in each and every available service. Better to sit back and say, “why would my customer want to geolocate with me?” At Geomentum we believe that geolocation is the next frontier of the retailer customer relationship but it’s not just through LBS: it’s about customizing media & marketing to the neighborhood and being able to measure that result and replicate it over and over again in all the neighborhoods you sell in. In that context LBSs are one of the customer’s stops on the path to purchase which can be evaluated in the context of customer segmentation and overall promotional strategy.
I do believe geolocation is big and retailers are smart to start figuring it out now. Just don’t bet the farm on a single platform. Test, learn, integrate, measure, repeat but always ask “for whom?” and “why?”
I was stunned when I first read the Forrester report findings. As the author here states, it fails to take into account the current pace of technology change and consumer technology adoption.
Further, the argument that LBS “skew male” shows a complete lack of understanding; not just of what’s to come, but what has gone before.
In 1994, I was the CIO of the recently-departed furniture chain, Domain Home Fashions. Back then, statistics said that *internet* usage skewed 85% male. All I could envision was Christmas Day, and all these computers under consumer Christmas trees…and I wanted Domain to be a destination moms could find and use. Thanks to Bit Group in Boston, we got our site up–sure it was just eye candy, but it was meant to extend the brand…and extend it we did. And yes, it was up and available, and highlighted in our print ads just in time for Christmas.
I can only assume the authors of the Forrester report were trying to be “provocative” (it has certainly got them airplay)…because otherwise there’s not a whole lot of logic in it at all.
Retailers should experiment with location-based services to learn how they work and to see how consumers respond to various offers. The cost of participating is low and offers can constantly be changed to see which provoke the best consumer response. They are another way that retailers can interact with consumers.
Learning curve is where it’s at. The learning will include things like how much of an incentive is needed to elicit a behavior. Of course, later, as adoption happens, the price will go up. However, by then, smart companies will have some metrics in place to measure “price elasticity” which will morph into “behavioral elasticity.”
That’s interesting because behavior is now a currency.
This is clearly becoming a hot topic. The New York Times had an article on Location Based Services (LBS) just this morning. However, predicting when LBS participation will tip from early adopters to mainstream acceptance is tough.
As Mr. Kahn points out, the value of an LBS to a consumer is directly related to the value of the offers and rewards a user receives for using the service. And retailers’ interest in offering compelling discounts is directly related to the reach a particular LBS offers. So, this is a classic example of a network business: in the early days it will be more sparsely used by both retailers and consumers, but once there is critical mass, there will be huge value in participation by all parties.
So, when should a retail marketer hop on the bandwagon? Right now. Sure, you won’t get much reach, and you’ll make some rookie mistakes as everyone tries to figure out what works and what doesn’t. But someday, LBS marketing will be a key component of your marketing mix, and it’s far better to do your learning and make your mistakes when the costs are low and the stakes are small.
The ability to add location awareness to a marketing campaign is a powerful one, but I do agree that the market is confined, demographically, by the fact popular services cited only work on hi-power smartphones and realistically, are used by the more tech savvy among us. Progressive brands with money to spend are wisely testing the waters and participating in the LBS movement but retailers and brand managers alike are all about sales.
So the large market solution is the one which connects LBS with the biggest addressable audience along with the ability to target based on relevancy, history and other attributes. LBS essentially has to “cross the chasm.”
Consumers will be always divided on how they feel about the technology available to us for location-based-services and other possibilities and applications.
Many consumers will be excited, even delighted with the conveniences that technology can provide them for ease of shopping, targeted purchasing, time-savings, efficiencies, and even fun and amusement.
However, we also live in a culture where so many people are paranoid about new technologies and the invasion of their space and privacy.
Unfortunately, for those of us that love new technology I think the fearful minority will have the loudest voices.
Both sides are right.
Forrester is reading the reality of what is today and what will likely continue to substantially be true in the future. But that doesn’t mean a new social and technological craze isn’t sweeping the country that is going to soon be reporting quadruple digit percentage increases in adoption.
This discussion reminds me very much of similar ones we had about the viability of Redbox in a world that was “clearly going VOD (video on demand) via streaming web services within the next two years.” Those discussions were quite a few years and about 30,000 Redbox machines ago.
Clearly, for a time, there is a place for both. One will rise and the other will diminish in overall importance. The internet has not put newspapers out of business (yet, anyway). And magazines and books continue to be sold despite the web, Kindles and audio books downloads for MP3s. But the sales of physical newspapers, magazines and books are all on the decline.
The message for marketers is: don’t run too fast, either to or away from any one approach. Some of the people are using some of the media all of the time. And all of the people are using some of the media some of the time. Our job is still to pick the best shots for our business.
LBS will clearly only grow in importance over time and any forward-thinking retailer should be actively developing an LBS strategy. However, retailers need to be aware of increasing consumer privacy concerns and ensure any LBS plan is carefully explained and monitored and that the data is completely secure and never shared with a third party. Those who favor Orwellian conspiracy theories will have a field day with the notion of retailers tracking the whereabouts of customers.
I think this is a great idea, but I am limited to things like Foursquare because it is the only LBS that doesn’t need a smart phone. I know smart phones are the “it” phones, but a fair amount of the market does not have them and it seems unfair that we have to go out and get these phones to reap the benefits of these other apps. I just hope this does not hinder the progress of these apps, but I sure have my hands tied until it is remedied.
I always find it troubling that retailers (and their advisors 😉 are always looking for more efficient ways to “pay” shoppers to buy their stuff, rather than to actually target the stuff that shoppers mostly want, tell them where it is, and call out its value. “Social marketing” to me is telling the crowd what “the crowd” is buying, and assisting them to do that quickly. As long as cutting price is your only tool (or mostly your only tool,) you will rob yourselves of profits; and the shopper of an intelligent, efficient shopping experience.
There is stupendous potential in location based tools. However, the “mud on the wall” technique, such as paying people to buy–location based handing out free money–will in the end, only tap a tiny fraction of that potential.
Get involved now. Do not wait. It will evolve to become an integral part of most retail marketing plans. Now is the time to begin testing and learning, and creating a strategy.
LBS technology “wows” customers and the early adopters will be the winners.
Clearly, it’s all about the consumer. “What’s in it for ME?” The retailer has to be focused on the consumer’s reason to opt in. Applications like ShopKick are incenting opt-in consumers with points to participate. So, once the retailer figures out what the ME factor is for participation, interest and engagement will skyrocket. Until then, the consumer’s thought process is “What me worry”?
Based on the discussion we are hearing from merchants, banks, etc. This is going to be a bit down the road. There are so many other new “emerging” and “exciting” technologies out there that this one is going to have to wait a bit.
Some years ago I speculated that coffee cups were actually alien life forms that lead people around. Think about it; You and all of your co-workers walking around trailing behind handheld cups of coffee. The cups were in charge and navigating your course.
But there’s been a palace coup. Cups have been overthrown and handheld electronic devices are now in charge. The last time you walked through an airport concourse, how many fellow travelers did you see with their heads up while looking where they were going? None? Instead, their eyes and attention were buried downward to their smart phones and handheld games.
With LBS, we’re now facing the prospect of city streets populated with a sea of zombies gazing into their palms rather than their surroundings. And drivers, too. Do you want your fellow drivers looking at their LBS interfaces rather than the road ahead?
LBS is cool, no doubt about it. But at what cost? Along with the wonderfulness of LBS should be a system of LBS etiquette. Pull over or step aside out of traffic to conduct your electronic search. Every LBS search should be prefaced with a movie-like disclaimer: “FBI Notice. Operating your electronic device in both vehicular and foot traffic is a violation.”
These are really flawed examples since they include large incentives in promotions, in return for asking consumers to do something. Privacy issues quickly become secondary when we are considering 25% off GAP promotions. This makes other claims just as suspect and throws any conclusions which this research extrapolates from these, just as suspect. Consumers truly do not want to be tracked, and their purchasing habits are, and should be private.
Generally speaking, it is easier and safer to criticize rather than support new ideas and technologies. Only about 2 years ago, Twitter was in a similar stage of development as Foursquare is today. We know how Twitter has evolved and my instinct is that Foursquare and other location based services will evolve in a similar manner.
I view the inclusion of local merchants to rewards programs as the last mile (to use telco lingo) to be established in the value chain. Local merchants may be the solution to engage consumers who are bored with complicated rewards programs and point/mile accumulation over an extended time frame.
As the last mile is not easy to nail down, it also may have a proportionally higher value than other components in the value chain.
I have seen a great acceleration in promos on Foursquare in the past few weeks and think we are just at the beginning of the ramp up for location based services.