10 Truths You Need to Know about Geolocation

Joe Skorupa
Editor at Large
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By Joe Skorupa

Retailers want to stop the bleeding from a multi-year decline in foot traffic and paltry gains in comparable-store sales. Fortunately, some have managed to increase conversion rates and market-basket sizes through a smart combination of process upgrades and new technologies. But the pressure keeps rising, so retailers are testing geolocation solutions to influence consumers in real-time and in the shopping moment. However, geolocation will not work for every retailer. Find out what you need to know before you invest.
  1. Which geolocation technology? Like many other names used by vendors for retail solutions and strategies (i.e. omnichannel, customer-centricity, personalization, big data), geolocation is an umbrella term for a host of technologies as opposed to a specific technology. It refers to a capability that allows retailers to identify the real-world geographic location of a shopper and then take an action. Location sensing can be done through WiFi, Bluetooth or cellular network infrastructure. It can be triggered by shoppers who opt-in and identify themselves though a mobile app. Or it can be triggered anonymously through mobile phones that send location-sensing signals – either global positioning system (GPS) or radio frequency identification signals (RFID) – with or without the shopper's geolocation services turned on.
  2. Triggers and geofencing. Retailers can detect and trigger messages to shoppers when they are standing in a specific location in a store (for example, in front of an end-cap promotion). Or they can trigger a message when a shopper walks in through any door. These types of location-based technologies are called geofencing. The radius of interest can be as tightly focused as an end cap or as broad as a shopping mall including the parking lot. When a trigger is activated, retailers can use geolocation technology and smart software to send targeted promotional messages and coupons to a specific shopper at a specific location, which is the equivalent of achieving the Holy Grail of one-to-one personalized marketing.
  3. Treasure trove of data. Because many retailers want to avoid the creepiness effect of letting customer know they are tracking them in real time, many retailers opt to simply collect the data and analyze it for useful patterns. This analysis can be used to help optimize product placement and redesign store layouts based on sales floor analytics and detailed heat maps. It can also be used to re-engineer shopper/associate interactions that can lead to more profitable engagements based on a broad data set as opposed to the small data sets collected during traditional observational samples.
  4. It's a real-time world. The ideal usage of geolocation technology is to help make better, faster, more frequent and more informed decisions. Gathering data is just the first phase. The Holy Grail is to enable real-time, personalized marketing at the moment of decision. To do this you need to be able to stream geolocation data in real-time and then have the software to identify the shopper (i.e. from an opt-in app or phone number from a loyalty program, etc.) and send an automated but targeted message. These elements are required to enable the triggering of real-time, personalized marketing actions. Without them, you will not be able to deliver targeted coupons to a specific customer.
  5. Cost is not a one-time spend. The cost of rolling out location-sensing technologies in stores for national chains or large regional chains is substantial. Retailers will need robust connectivity infrastructure optimized for real-time data streaming and load balancing. In some cases, batteries will be needed (for beacons). Retailers will also need geolocation management, CRM and specialized analytic software. Each of these tools and layers of software will need ongoing care and feeding.
  6. Traditional traffic analysis is dead. Traditionally, traffic analysis was done using a small sample through observational studies or cameras. The downside of this method is that the sample size is small and the margin of error high. Also, there is no way to remove unique factors at play during the period of observation. With geolocation technology the sample size can be large enough to remove factors that can skew results. Also, the observation period can run 365 days a year and 24 hours per day. This development will signal the death of traditional traffic and dwell-time analysis and usher in a new era of accuracy and A/B testing that can optimize best practices before chain-wide roll out.
  7. Beacons are not yet ready for prime time. Beacon technology has an immense amount of promise and will ultimately mature into a mainstream technology. However, the challenge that needs to be overcome is installing and maintaining beacons in the retail environment, which is a place where customers and store cleaners bang into them and move things around within the geofence radius. Battery maintenance and cost is another issue. Finally, the level of investment for infrastructure remodeling within an open store is high, partly due to the fact that optimal construction hours are between 11 pm and 6 am.
  8. Geofencing limitations. What retailers want to know from geolocation technology goes something like this: "I have a product placement in a particular aisle on a particular fixture and I want to draw a geolocation box around it so that when a shopper breaks the boundary I will know how long they are there." This is very difficult to do because of uncontrollable variables. Shoppers might step in and out of the boundary 40 times during a single visit. If there are nearby fixtures, the shopper may not be looking at the one you are focusing on. Also, shoppers may back into the boundary without looking at the target product. Software has the ability to cleanse the data, but not eliminate it completely.
  9. Location-based personalized marketing is highly complex. To push a message to a shopper using geolocation technology requires installing the infrastructure correctly, monitoring the data in real-time, cleansing the data to remove false positives, interpreting the data using analytical models, tying it to existing CRM and POS solutions, and creating a rules engine to optimize the customer engagement. To make this work, retailers will need active cooperation from multiple departments and cross-functional teams.
  10. Privacy is the elephant in the room. Will customers walking into a store want a retailer to track and interact with them? Will retailers be able to get shopper permission? Will retailers be able to encrypt geolocation data about customers? What is your organization's commitment to ensuring customer privacy and how will rolling out geolocation technology affect your commitment? The answers to these questions are critical to a retailer's geolocation strategy and projects should not proceed without a clear understanding of privacy concerns.
NOTE: Many of the above insights were derived from the RIS webinar "Driving Store Sales by Leveraging Location-Based Analytics," which feature the expert speakers Steven Keith Platt, director of the Platt Retail Institute and research director of the Retail Analytics Council at Northwestern University, and Carl Ceresoli, senior director infrastructure architecture and strategy for Microsoft. To view this webinar and get a comprehensive look at geolocation technology in retail click here.

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