This article was in our December 2010 issue of the Parthenon Post. It was so popular that we thought we would reprint it here.
Understanding location-based services
The social media world changes quickly. Last year, all the hip kids were flocking to Twitter. This year, social media savvy souls are joining Facebook Places, Foursquare and Gowalla, so called “geoscocial” or location-based services.
Unfamiliar with how location-based services work? You are not alone. In November, the Pew Research Center found that only 4 percent of all online adults (9 million people) have used a location-based service. Yet marketing magazines, websites and blogs are all filled with articles about how location-based services can help marketers reach out and offer deals to people currently located in their immediate area.
The easiest way to participate is by downloading an app onto your smart phone. Once you have the app installed, you can click on the app at any time to see what businesses are in your area. If you actually enter one of the locations listed, then you can “check-in” and make it public that you are visiting Target on White Bridge Road or the Rainbow Room in New York or the Apple Store in Atlanta. If you use a service like Foursquare, you earn badges for various activities. If you are the most frequent visitor to a location, Foursquare will even make you the “mayor” of that location.
The marketing opportunities lie in the ability for retailers in the local area to alert nearby consumers to deals. For example, if I check into the Target on White Bridge Road, the Radio Shack across the street might have an alert in Foursquare that offers me a special deal. These geo-targeted advertisements and specials can – in theory – draw consumers to visit other retailers or try new services. According to Foursquare, as of October 2010, Foursquare had “tens of thousands of venues” offering special “check-in” offers to nearby consumers.
Popularity is Small Now, But Growth is Coming Soon
Location-based services are still in the early adopter stage. Until Facebook entered the market in August, there were only a few million people participating. (Gowalla claims 600,000 users and Foursquare hit 5 million users in early December.) But Facebook’s recent entrance into the market with Facebook Places may be just the jolt that location-based services need to jump into the mainstream – and yet another reason to pay attention to what is happening in this market now.
With 500 million users worldwide, Facebook is the Goliath on the location-based services playground. Facebook has not released any statistics, but the fact that they have chosen to enter into the market is an endorsement of the concept as a whole. Further, as more and more people switch to smart phones (the projection is that 50 percent of all phones will be “smart” by the end of 2011), the pool of consumers who can easily participate in location-based services will skyrocket.
Obstacles Still Exist
The services are not without their critics. Some consumers worry about privacy and security issues around announcing where they are located (which usually indicates they are not at home). Marketers worry that consumers, without clearly defined and tangible rewards, could develop “check-in fatigue.” AdAge columnist Kunur Patel, recently declared “as a self-admitted check-in cheerleader up until this point, I have to say, I’ve hit the wall. I’ve had enough.” Location-based services currently require you to manually check-in to a location, which users may tire of over time.
Despite all the possible problems, location-based services still hold a certain appeal to many. Leah Betancourt, a columnist for Mashable.com, points out that “For early adopters, though, the long-term promise of more value through targeted ads, coupons and deals, along with the game mechanics (i.e., badges and “mayor” competitions) instituted by some networks has made location-based services worth the potential privacy headaches.”
Impact for Business
Marketers and consumers are still trying to figure out how best to use location-based services. Should your marketing plan include an allocation of resources for location-based services? If you are a B2C company you may want to take a hard look at whether or not these services could work for you. B2C companies with multiple locations should really take notice since consumers have more opportunities to access your company and use location – services.
If you are working in a B2B environment, it may not be time to give location-based services a line on your budget, but they are well worth monitoring. As this market grows, so do the opportunities for you to reach your target audiences in new and creative ways.