Location data 101: A primer for marketers

In our hyper-connected digital world, an omnichannel marketing approach helps brands bridge the gap between online and offline consumer behavior. But driving an effective multi-touchpoint strategy has its unique challenges – and oftentimes, our strategies are only as effective as what we know about our customers.

In particular, customer location data has emerged over the last decade as a wealth of information for marketers, providing a digital footprint of where customers are spending time and how they interact with brands – both online and offline. From offline attribution to geo-targeting, location data can help marketers understand the bigger picture of the customer journey. But while location-based marketing can be a powerful strategy for marketers, it can also be a bit of a black box.

Here we dive into what location-based marketing is, how it works and what marketers need to consider, from privacy to targeting, to make it consumer-friendly and effective.

So, what exactly is location-based marketing?

In short, location-based marketing is targeting audiences based on where they are or have recently been.

“This can range from targeting users who live in particular zip codes, to targeting devices that tend to visit particular locations such as coffee shops, auto dealers, etc.,” said Frost Prioleau, CEO and co-founder of programmatic platform Simpli.fi.

Location data can reveal a trove of information about a customer’s daily travel routines (such as commutes), recurring shopping habits (like grocery shopping or gas station stops), restaurant preferences, and even online-to-storefront purchasing behavior. The data allows for more personalized targeting for the products and services customers might care about and enables more efficient ad targeting and budget allocation for marketers.

Location-based marketing tactics

There are several ways to use location data in ad targeting.

Geofencing. Geofencing refers to the mechanism through which location data is collected in real-time. In geotargeting, a virtual perimeter is constructed around a location to enable real-time data collection or targeting within that geographic area. Typically, geofencing uses a combination of latitude and longitude coordinates, radio frequency identification (RFID), Bluetooth technology, and location beacons to determine the specified area. Marketers can use geofencing as a vehicle for geotargeting or proximity marketing.

This technology isn’t necessarily new, but its increasing accessibility and application in digital targeting have ushered in more opportunities for real-time location-based marketing.

When a customer enters a geofenced area and shares their location with an app or browser, they might be served with local content in the form of push notifications, photo geo-filters, text messages, or in-app ads.

Geotargeting. Similar to geofencing, geotargeting is used to deliver ads to customers in a location – but unlike geofencing, geotargeting often combines past location data with particular audience attributes. Advertisers can specify the desired location in conjunction with defined criteria (such as demographics, behavior, interests, etc.) to target customers who meet the exact requirements.

Geotargeting with historical data enables marketers to reach more defined audience segments with campaigns that are informed by behavioral or shopping trends at a given location.

Conquesting. In his column Getting back to basics with location-based marketing Brian Handly explained that geoconquesting is used to help brands reach audiences that visit their competitors’ locations. “For example,” he wrote, “Burger King utilized geoconquesting to run a campaign offering the one cent whopper to audiences that had their app open when they visited a McDonald’s location.”

Geoconquesting is best served as a tactic for audiences who are local in real-time, but can also be applied to reach historical audiences.

Proximity marketing. A more granular form of location-based marketing, proximity marketing often uses geofencing to deliver customers with timely ads in a specific location, in real-time. Marketers can use proximity marketing for things like local events or recurring store visits with the aim of serving the most relevant content in that given moment (i.e. a nearby restaurant chain, gas station, etc.).

For example, navigation app Waze uses proximity marketing in its ad platform by delivering ads when a driver is near a promoted location or billboard and the car is stopped. Advertisers can then leverage information about the customer’s location, frequent routes, weather, and time of day to provide local suggestions based on what it knows about the customer in that moment.

How location data is used in marketing

Browsers, search engines, apps, and social platforms all collect data to deliver both organic and paid content relevant to the consumer based on their location. Jeff White, founder of location data provider Gravy Analytics, explained that location data collection is nothing new – but only in the last decade has it proven to be a lucrative asset to marketers.

“Early adopters of location data info came through ecommerce and large enterprises. Early on, it was big for large retailers and hotels,” he said. But now, location data has lent itself to much broader use cases that provide valuable insights about the behavior of consumers.

Location data and the customer journey. To identify how location data can be effective in marketing, it’s important to understand the location experiences that are most valuable to the consumer – and, by extension, to the advertiser.

“A visit to a convenience store doesn’t have the same significance to a consumer as a visit to a wine-tasting festival, for example,” said White. Location data provides a toolset that marketers can use to fill in the gaps of a consumer’s profile – where valuable location-based experiences are the missing pieces.

Industry segments. Retailers or service providers with physical storefronts are best positioned for location-based marketing.  Local business marketers can employ geotargeting campaigns to reach audiences based on real-world visits, rather than on digital engagements alone.

Prioleau of Simpli.fi explained that location-based targeting can be used by businesses to “drive foot-traffic to their stores or locations (like QSR, retail, automotive, etc.), and by advertisers who want to increase traffic to their websites or apps (ecommerce providers, direct-to-consumer brands, insurance, other service providers).”

Likewise, niche industries like real estate, education, and transportation are apt to benefit from location-based marketing given the nature of their businesses. By understanding the level of intent and time investment from audiences based on their location behavior, marketers in niche industries can paint a holistic picture of likely buyers.

“Location data is the next frontier of understanding consumer behavior,” said Jeff White. “Things like collecting and geofencing open houses helps marketers get an advanced view of who might be a highly-qualified lead.”

Online to offline attribution. In addition to enabling a more highly targeted ad experience, location intelligence can be used to help close the gap between online and offline purchasing behavior. For businesses with storefronts, real-time location data can help fill in the holes of the customer journey by shedding light on the relationship between an online touchpoint and an in-person transaction.

How location data is collected

The process of data collection and the ethics surrounding it are increasingly under fire, as evidenced by growing concerns over user privacy and the regulatory legislature aimed at protecting it.

While the extensive push for data regulations creates challenges for marketers, it also provides an opportunity for businesses to build a foundation of trust with customers. By obtaining user consent and offering visibility into how location data is being used, marketers can maintain customer trust and deliver meaningful content in the path to purchase.

The location data collection process involves several steps, including anonymization, said Jeff White from Gravy Analytics.

1. Users consent to sharing their location data by opting-in when prompted in an app or browser.
2. SDKs then gather and transmit information about a user’s location, including geographic coordinates and the time spent.
3. The location data is then cleaned, anonymized, and aggregated into a database to build specific consumer profiles.
4. All of this information can then be used by the marketer to target customers using programmatic (through a DSP) or direct advertising.

User data can be collected via IP addresses or mobile device ID when users are browsing on public WiFi networks or when they explicitly share their location during a search. A unique ID connected to a users’ device (desktop or mobile) is gathered during the process to provide advertisers with a retargeting identifier.

Privacy concerns and the marketer’s responsibility

Data breaches and mismanaged data by ad tech giants has provoked a groundswell of concerns from users, bringing heightened awareness to how data is collected and used. Consumers are worried – and rightfully so.

The challenges raised from regulatory legislation such as GDPR in the EU and the California Consumer Privacy Act (CCPA), which takes effect next year, could significantly impact how marketers use location data in campaigns. However, the move also creates an opening for increased transparency for marketers.

“When initiating location-based marketing, advertisers should use platforms that are compliant with GDPR and other privacy standards, and focused on using data which has been collected based on these standards,” said Prioleau.

By taking measures to ensure privacy is top-of-mind, marketers and businesses alike are better positioned to achieve the location-based marketing outcomes desired. Marketers should approach user privacy as a facet of both their own and their customers’ best interests to build a foundation of transparency. This approach should include:

• Understanding and auditing the location-based insights that are most important to the business and the customers.
• Building an airtight strategy on how personal data is handled, processed, and used for campaigns – in line with the strictest privacy regulations.
• Determining a course of action for disposing of unused, irrelevant, and outdated user data.
• Facilitating internal education and procedures for managing location data requests and disclosure inquiries.
• Adhering to strict regulatory procedures in preparation of a potential data breach, with a clear operations process.
• Review and analyze all contracts from vendors and third-party providers of user data to ensure regulatory compliance.

When businesses and marketers are able to manage and use location data responsibly, it can empower rich and impactful marketing outcomes. From understanding how consumers engage with retailers to identifying untapped opportunities for product localization, consumer location data is a potent tool for the digital marketer.

But the duty lies with the marketer to embrace privacy standards which, in turn, creates a trusting environment for users. From the rich location data that consumers willingly provide, marketers can derive meaningful insights and start to connect online touchpoints to real-world applications.

Related reading:

• Location-based marketing: What works and what doesn’t in a campaign
• How location data and analytics are revolutionizing JCDecaux’s OOH business
• Survey finds 89% of marketers seeing increased sales using location data
• Gravy’s ‘location data forensics’ seeks to identify, minimize fraud in programmatic bidstreams