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What Marketers Need to Know About Location-Based Services

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What Marketers Need to Know About Location-Based Services 20110228-SUPP-WP1--0001-NAT-CCI-AA_-- 2/23/2011 11:21 AM Page 1 Mobile Marketing 2011/FIRST QUARTER TREND REPORT: WHAT MARKETERS NEED TO KNOW ABOUT LOCATION-BASED SERVICES In this issue: How location- based services and GPS-enabled apps on mobile devices are changing the way retailers and marketers connect with their best customers 20110228-SUPP-WP1--0002,0003-NAT-CCI-AA_-- 2/23/2011 11:02 AM Page 1 QUARTERLY TREND REPORT INTRODUCTION What Marketers Need To Know About Location-Based Services BY KATHRYN KOEGEL it’s march 2009, in a crowded bar in Austin, Texas, during South by Southwest (aka SXSW), the Naughts’ answer to Burning Man, with its integration of music, art and technology. Through a sea of swaying bodies and a narrow sliver of a view of the band Starf***er, iPhones eerily light the stubbled faces of twentysomething guys in plaid shirts. In another era, they would be finger- ing cigarettes, tipping bottles of Lone Star (and possibly even listening to the music). But here, they are connected by their apps, and their apps are doing something new. The users are checking in, letting their friends know where they are via GPS, claiming virtual badges, and vying for the “mayorship” of this hotter-that-hot spot. They were the first in, the chosen few, the cognoscenti. SXSW engendered Twitter in 2007, so natu- rally expectations ran high for Foursquare in 2009. Every festival long as I get something out of it, feel free to market to me” is tak- had to have its breakthrough techno-concept. For some in the ing the personalization of marketing to a whole new level. Is this the marketing sector,the coming of age of location-based services her- best thing since Tim Berners-Lee and the World Wide Web, or is it alded an age of marketing in which consumers volunteered their a flash in the marketing/social-media pan akin to Friendster, an location, broadcast it to their real and virtual friends, and bonded early social network that died a quick death as its trendier-than-thou with marketers with the hope of being “app-tly” rewarded. Any users moved on to the next thing? Therein lies the quandary for and every marketing cliché was applied to these services—“holy marketers: hop on a bandwagon moving at light speed and don’t get grail,” “one-to-one marketing,” “right place, right time”—and left behind, or sit it out, wait for the VC fairy dust to clear and decide each seemed to apply. which of these services will achieve the kind of scale and consumer Fast-forward 24 months and we find dozens of VC-backed, loca- connection that demand the attention of national brand marketers. tion-related companies all doing something terribly unique on For those considering LBS as a marketing tactic, the bad news is mobile devices. Foursquare boasts more than five million users, 200 that the train has already left the station, with companies including million “check-ins,” an additional $20 million in VC funding (as of Macy’s and Procter & Gamble having leapt onboard by last holiday June 2010), a $95 million pre-money valuation, and dozens of season. (And they have some remarkable stories to report.) The national marketers eager to engage consumers by whatever means good news: in a sector with super-gaseous levels of hot air, some of possible—especially if it promises to generate the elusive retail foot the smoke has already wafted, and clear winners with easy-to-adopt traffic they crave. services are already emerging. Best of all, those companies that are While using location to target one’s marketing efforts is nothing achieving marketer simplicity, consumer usage and scale all under- new (consider this a shout-out to spot cable and newspapers), the stand that in order to succeed, one cannot completely discard the idea of consumers saying “Yes—use my phone to locate me, and as past. Location can be used to increase the effectiveness of longtime 2 | February 28, 2011 | 20110228-SUPP-WP1--0002,0003-NAT-CCI-AA_-- 2/23/2011 11:02 AM Page 2 QUARTERLY TREND REPORT ➜ DOWNLOAD TABLE OF CONTENTS Key charts are available for INTRODUCTION 2 buyers of this white paper to WHERE DID IT COME FROM? 4 download as Power Point slides. - WHAT’S SO GREAT ABOUT LBS FOR MARKETERS? Use this link to access the slides: TRIANGULATION OF PLACE, TIME, MOBILITY 6 AdAge.com/whitepapers - ASK THE EXPERT: HOW DOES LOCATION WORK ON PHONES AND WHAT ARE PRIVACY IMPLICATIONS? 8 MARKET SIZING AND IN SEARCH OF THE ELUSIVE LBS USER 9 THE MOBILE MOM: MOBILE MARKETERS AND LBS COMPANIES OVERLOOK KEY USER 11 - THE REAL PEOPLE OF LBS LBS COMPANIES MARKETERS SHOULD KNOW 14 LOCATION WHEN YOU DON’T HAVE ONE, OR HOW LBS CAN WORK FOR PACKAGE GOODS 22 - EIGHT QUESTIONS MARKETERS SHOULD ASK ABOUT LBS tactics like couponing, ad targeting and loyalty marketing, and mar- THE FUTURE OF LBS 24 keters need to embrace the concept of the primary household shop- HIGHLY SUBJECTIVE DIRECTORY OF LBS COMPANIES 26 per—in other words, offer women something they want and make it convenient, and they will buy. CHARTS LBS DEFINED, AND REDEFINED 1 GPS CAPABILITIES ARE DRIVING GROWTH IN LOCATION-BASED SERVICES, comScore 4 LBS refers to location-based services delivered through mobile phones and has typically been associated with services like 2 SMARTPHONES WILL BE A MAJORITY IN THE U.S. 5 Foursquare, Gowalla and Loopt that involve a user “check-in” at a BY Q2 2012, Nielsen specific location. A lot of hoops are required to get people to sign 3 SMARTPHONES CHANGE EVERYTHING... on, however. First, he or she has to have a smartphone, has to have INCLUDING LBS USAGE, Nielsen 5 the LBS’ app on that phone, and typically has to find various 4 MOBILE PHONE USE WHILE IN STORE, friends who also use the service. But LBS as defined this narrowly Insight Express 6 is an artificial construct and should be seen as a broader play to use 5 HOW MUCH FUNDING FOR EACH ACTIVE LBS USER? the unique media functions of mobile devices, including location- AdAge Insights 9 based technology. Mobile phones are personal devices—typically 6 LBS IS STILL AN EARLY ADOPTER ACTIVTY, one to each consumer, and with that consumer wherever he or she Placecast/Harris Poll 10 goes. As such, they pose an extraordinary opportunity to reach 7 4% OF U.S. POPULATION USES LBS SERVICES, people in places crucial to marketers, including in-store, on the way Pew Research Center 10 to the mall, with friends and out on the town. 8 THE MARS AND VENUS OF MOBILE MARKETING, Location-based services also encompass a whole host of content Placecast/Harris Poll 12 delivered via both apps and WAP (Wireless Access Protocol) inter- 9 THE LBS LANDSCAPE, DR. PHIL HENDRIX, IMMR 14 faces enabling consumers to input their location in exchange for 10 IS TWO BUCK CHUCK DRIVING TRADER JOE’S personalized information such as store locations, product availabil- WEEKEND SALES? SuperData Research 15 ity, weather conditions, movie times and locations, and restaurant 11 LOCATION CAN IMPROVE RELEVANCE, Placecast 20 reviews and locations. Given this broader definition, LBS promise a unique ability to 12 WHO’S GOT REACH IN LBS? comScore 21 connect with a broad range of people who are displaying intent (to 13 REACH OF LBS APPS, comScore 22 purchase, attend, dine, travel, etc.), but with some very distinct parameters. It is the ultimate in permission-based marketing. Marketers who do not heed the lessons of the internet, now mired in privacy complaints, controversies and legislation, will do well to steer clear. This document and information contained therein are the copyrighted property of Crain Communications Inc. and Advertising Age (Copyright This Ad Age Insights trend report will give you an overview of 2011) and are for your personal, noncommercial use only. You may not how LBS is being used, what types of consumers use LBS, and reproduce, display on a website, distribute, sell or republish this document, or the information contained therein, without the prior written consent of which LBS companies have started to work successfully with mar- Advertising Age. Copyright 2011 by Crain Communications Inc. All rights keters on campaigns. reserved. | February 28, 2011 | 3 20110228-SUPP-WP1--0004,0005-NAT-CCI-AA_-- 2/23/2011 11:03 AM Page 1 QUARTERLY TREND REPORT Where Did It Come From? location-based services are by no means new. Dennis CHART 1 Crowley, the founder of Foursquare, though affecting a rumpled, just-fell-out-of-his-dorm-room-bed image, was actually an ana- GPS CAPABILITIES ARE DRIVING GROWTH IN LBS lyst at Jupiter from 1998 to 2000. He would build a service called Dodgeball in 2000, which brought game mechanics and location The proportion of GPS-enabled devices in the market grew sharing to mobile devices. Unfortunately, it arrived a bit too 17% year-on-year; LBS use grew by 40% early, before the iPhone and apps changed everything. The serv- Percent of U.S. mobile market: ice was sold to Google in 2005, which had already developed a SEPTEMBER 2009 competing service called Latitude. (Google shut down Dodgeball 69.1% SEPTEMBER 2010 in 2009, but to date, in its typical, “let-the-market-decide” fash- ion, has not aggressively marketed Latitude. No one interviewed 59.5% for this article even considered the product to be on the LBS radar.) As Di-Ann Eisnor, VP-business development for Waze, noted, “You’ve got to give Dennis credit.
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