Daily Dose of iQ: Are Hyper-local Deals Worthwhile or Just a Passing Fad?

May 09, 2012 — Brayden Gervan

Dana Mattioli and Miguel Bustillo of the Wall Street Journal wrote an article yesterday on how some retailers are hoping "geo-fencing" -- sending promotions to people's phones as they come within a few hundred yards of their stores --can help win them new and repeat business.

Offering hyper-local deals and promos through geo-fencing technology seems to be a novel way at getting “impulse buys.”

  • For retailers, it's a great tool for need creation. And with the ability to target hot spots (e.g. The North Face geofencing ski resorts) retailers can raise brand awareness within a specific consumer niche. 
  • Meanwhile, for consumers this service is great because it can satisfy an immediate need or impulse. Sort of like putting batteries and chocolate bars near the till. Customers don't realize they need or want those items until they happen upon them.

However, Mattioli and Bustillo write, "adoption has been spotty." Drawbacks include:

  • Significant effort is required to get customers to sign up. People generally don't want to be spammed, so additional marketing dollars must be spent on advertising and incentives build a user base. It's proven to be a slow process. After two years, The North Face has only onboarded 8,000 users. Consumer adoption requires the engagement of the store staff as well: salespeople need to reinforce the behavior if it's going to stick.
  • The risk of overwhelming consumers is high. Location-based alerts could become more of an annoyance than a benefit. How can retailers determine where to draw the line?

Foursquare is also looking to incorporate mobile coupons to its “check-in” app, connecting deals to that localized behavior. (See the WSJ article Foursquare Joins the Coupon Craze.)

Based on Groupon's recent fall from grace, it's hard to tell whether Foursquare's plans will be any better.

In theory, check-in coupons seem like a good idea, assuming consumers continue to check in using Foursquare. That being said, it may be easier to just opt into geo-fencing alerts (as described above) than be required to check in to get the deal.

As previously stated, one of the benefits of geofencing is need creation: I can be alerted to buy something I didn’t even know I needed, at that moment, like an umbrella when it’s raining. It just seems more personal. And it's less work too.

Topics: Retail Operations, Mobile Industry, Customer Experience, e-Commerce, Retail Marketing

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