Geofencing 101: What Is Geofence Marketing?

In order to harness the power of geofence marketing, you have to understand what it is! This location-based digital marketing method might change the game.

How can brands make sure they’re always in the right place at the right time for their customers?

If you run any kind of location-based businesses and want to grab people’s attention when it matters most, location-specific marketing techniques like geofencing are an obvious choice.

Customers respond well to these techniques and you won’t be wasting valuable money and resources on marketing to people who are miles away from where they need to be. You can also maximize your chances of success by combining with other tried-and-tested methods of marketing.

But exactly how does this work?

What are the pros and cons of geofence marketing?

What are some of the best practice tips to keep in mind when using location-based techniques?

In this guide, we’ll answer all of these questions and make sure you know how to harness this effective marketing tool for a strong ROI.

What Is Geofencing?

Geofencing is a type of location-based marketing that allows you to draw a virtual “fence” around a particular area. When customers enter the area, they’ll be targeted to receive your ads. These may be banner ads in apps or browsers, app notifications or SMS.

Although geofencing mobile marketing will probably be the main way customers see your ads, it's not just for mobile. It can work on a tablet, laptop or anything else with Web browsing capability.

How Effective Is Geofence Marketing?

Some key statistics about geofence marketing include:

  • Just over half of customers who received this type of ad for a nearby store responded by visiting the store

  • 72% of customers will follow through to make a purchase if a powerful CTA is included in the ad and they're near the location

  • 80% say that they are happy to receive location-based notifications

A great example of geofence marketing in practice is from Australian online auto exchange Cox Automotive. They geofenced approximately 3,500 car dealerships across the country. With this method, they could gather data about which lots customers visited, how long they spent there and whether they made a purchase.

They were able to improve their online marketing strategy significantly since they could attribute lot visits to searches on their website.

Pros And Cons Of Geofencing

Whilst this is an effective marketing strategy, there are some important pros and cons to keep in mind.

Pro: You Only Target Relevant Customers

Geofencing is a very lean way of marketing, as you're only going to be interacting with customers who are in a position to take immediate action.

Con: There Are Restrictions On How You Can Reach Customers 

Your customer needs to be actively using their phone (or other device) for you to be able to reach them. 

With this in mind, think about what your customers are likely to be doing when they're in the area you want to target. It's probably not going to be effective to send customers ads or notifications when they are, say, driving. However, if they're waiting, riding public transport or walking, they're more likely to see the notification.

Pro: You Can Target Your Competitors’ Location

This is known as geo-conquesting and it can be a good way to win over customers who might just be sticking with one brand because they don't know that you exist.

However, it helps not to be too obvious with this method. Don't geofence the competitor's actual store, for example, as this could come across as strange and "spammy" to the customer.

Con: Any Immediate Purchases Are Likely To Be Small

Nobody is going to buy something like a washer/dryer or a car just because they were in the area. That example from Cox Automotive shows how geofencing can be used as an effective data-gathering tool to improve an online marketplace.

However, for those impulse buys, location-based marketing usually works best for small purchases and consumables. For larger, more expensive purchases, the buyer journey is longer. In these cases, geofencing is best used to gather data to make the rest of your customer experience run smoothly.

Pro: You Can Measure Your Local Impact

If you have a physical store, you can’t usually gather data on why a customer has decided to visit. Sure, there are methods you can try (a survey on their receipt, say, with an incentive for completion), but it’s unlikely these are going to have a high uptake.

With geofencing, you can access clear data on your conversion rates, making it easy to see where improvements can be made.

Geofencing Best Practice

So now you know some of the pros and cons of geofencing, how can you use it in the most effective way?

Here are some of the best practice rules to keep in mind. 

Be Transparent And Reassuring

Transparency with how you use your customer's data builds trust in your brand. It's also a vital part of operating your advertising strategy in an ethical (and legal) way.

Make it obvious on your website or app that you are collecting customer data. Be positive about it - let them know that the purpose is to offer a tailored experience and relevant offers. Let them know that they're in control and can opt-out at any time.

Offer Incentives

70% say that they would share their location to receive something in return.

Offer your customers incentives like discounts and time-limited offers to push your CTA.

Don't Cast The Net Too Wide

Remember that you're mainly targeting people who are on foot, so making the geofenced area too large isn't going to be productive. Aim for a radius of about 5 minutes as a maximum.

Combine With Other Proven Techniques

Maximize your chances of success by using geofencing alongside other paid digital advertising and targeted advertising solutions.

Two of the most effective include retargeting and push notifications.

Retargeting is where you target customers who have clicked away from the checkout stage in your site. These may be new customers or they may have already made a purchase before (if so, you can upsell and even personalize your advertising).

Push notifications have a 90% opening rate, so use them with geofencing for great results!

Access The Full Potential Of Geofence Marketing

Geofence marketing is a hugely effective tool when used in the right way.

If you’re realistic about what it can achieve and put it to work in a way that complements other proven marketing methods, you can see an impressive ROI from location-based marketing.

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