Matthew Egol, Richard Schweiger, Zameer Baber, William Grenis
May 16, 2017
Proximity marketing is emerging as a key strategy for marketers to connect with consumers through their mobile devices. By sending customized messages triggered by consumers' precise geographic location or factors such as weather, time of day, user preferences, and prior purchase history, proximity marketing has tremendous potential to deepen consumer engagement, build brand equity, strengthen customer loyalty, and boost revenue across a broad range of enterprises, including retailers, hotels and casinos, airports, and entertainment parks.
Responding to this promise, close to half (46 percent) of retailers in the U.S. launched proximity marketing programs or pilots in 2015, up from 15 percent in 2014, according to B2B magazine Retail TouchPoints. Some 39 percent expect to implement them within the next three years.
However, realizing the promise of proximity marketing isn't a given when consumers can, with a simple swipe on their mobile device, choose whether to engage with marketers or shut them out forever. An effective strategy depends on marketers simultaneously addressing three important considerations: defining their business goals; designing an effective customer experience; and understanding the technology needed to enable their strategy and realize their goals.
As proximity marketing evolves, it is clear that a successful deployment is more complex than most retailers initially imagined. Marketers must determine the right balance of content, communications method, technological sophistication, and financial investment to deliver a rich and seamless consumer experience.
How does proximity marketing work? Consider these real-life scenarios:
As you walk past a large department store, your phone vibrates. No, it is not a text message from a friend or an email from a coworker. Instead, it is a notification from the store alerting you that your favorite shoe brand is being offered at 20 percent off for today only. You had not intended to enter the store, but the discount draws you in. The result: You walk out with a new pair of shoes, and perhaps some other items in your bag as well.
Or maybe you're wandering the aisles of a home improvement store, trying to find a specific product that you researched online before coming in, and you're getting more frustrated every minute. The nearest employees receive an alert on their mobile device that a consumer in aisle 9 might need help, with information about your previous online search. Within seconds, one of them is at your side, ready to assist you.
Perhaps you and your family have just started your vacation. You've landed in a new city and everyone is exhausted from traveling all day. As your taxi gets closer to your hotel, your phone buzzes. It's the hotel app, asking if you'd like to check in using your rewards number and credit card on file. After you oblige, you realize the kids are hungry. You message room service from the hotel app and order dinner. Within minutes of the taxi pulling up to the hotel, you're heading to your room, where your food is ready and waiting. The next day, you receive a message with personalized recommendations for things to do in the area that appeal to the whole family, with discounts on local attractions.
Proximity marketing works better than traditional marketing approaches because its content can be customized down to the level of the individual consumer (see Exhibit). However, this bonus can also be a barrier.
Proximity marketing is effective only if the consumer agrees to give advertisers access to his or her personal devices via SMS, app notification, mobile wallet, Web browser, or even email. These channels have innate disadvantages for marketers. Mobile operating system guidelines stipulate a double opt-in from the consumer: Consumers must first download the app or permit the marketer’s message to be delivered through SMS or email, and then agree to share their location with the marketer. In addition, consumers must be able to easily opt out of future messages, such as by texting “STOP” or deleting an app. Though the double opt-in ensures that the consumer wants to hear from you, the ease of opting out enables him or her to block your messages on a whim.
Apps are an especially popular approach at present, but trends show that consumers are increasingly picky about seeking out and downloading new apps from among the tens of thousands available. As marketers realize that creating an app that stands out from the competition and functions efficiently is difficult and costs a lot of money, they’re increasingly looking at other ways to reach consumers. Non-app approaches include strategies to utilize digital wallet cards, which can easily be added to a device’s built-in mobile wallet, and Google’s Nearby. Nearby uses push technology to alert consumers to the existence of a geographically relevant app, which they can then choose to download.
For now, though, consumers control whether a message can even appear on their locked screen. Consequently, the greatest challenge in any proximity marketing campaign is designing a compelling experience where consumers want to be part of the engagement strategy.
As a natural evolution in the trend toward targeting consumers with personalized, timely, and geographically precise messages, proximity marketing can significantly enhance a company’s overall direct-to-consumer engagement strategy. By using mobile communication as the bridge between physical and digital experiences, proximity marketing is a valuable and effective tool to deepen the connection with consumers and generate higher ROI for marketers.
However, it is clear that its deployment is more complex than initially imagined. Success requires fusing multiple perspectives across business, experience, and technology, rather than treating these as discrete challenges managed separately or sequentially. When companies evaluate their proximity marketing strategy through these three interlocked lenses, they will progress out of doing ad hoc promotional campaigns that don’t fully scale and into building market-leading capabilities that will pay off at every point of the consumer–marketer relationship.