The Pros and Cons of Geofencing

What Is Geofencing?

Geofencing is a location-based marketing service that uses a mobile device’s GPS or RFID (Radio-Frequency Identification) to trigger targeted advertising based around a pre-defined geographical location. Geofencing technology allows the advertiser to trigger ads on the user’s mobile device while they are in the defined geofenced area or once they leave the area.

While Geofencing can be a powerful tool to acquire your audience, it does have pros and cons to consider:

Geofencing Pros:

  1. Location-Based Ad Targeting:

Geofencing allows advertisers to target users with location-specific ads which can increase engagement and conversion rates. As an example, a customer approaching a business location may receive a targeted offer ad. Another example would be a business participating in a conference and reaching out to all the event attendees to visit their booth. Google and Meta both lack the ability to achieve such detailed granularity in advertising.

2. Personalize Customer Experience:

Geofencing allows advertisers to target users based on where their mobile device is located in real-time so they can deliver ads based on proximity. An example of this would be a “New Home Expo” where the attendees are looking at different new home builders. The advertiser would be able to target users attending the expo during the event and after the event with a relevant ad based on their interest. Geofencing enables businesses to offer personalized content based on a user’s location, leading to improved user experiences.

3. More accurate than IP targeting:

Geofencing, which is tied to the physical location of a mobile device, is generally more precise than IP targeting because it relies on GPS or RFID technology to determine a mobile device’s location. IP targeting is a technology based on the registered location of the IP address, like a data center or a proxy server. One way to illustrate the variation in IP targeting accuracy is by examining Ashburn, VA, known for its high concentration of data centers.The population of Ashburn, VA is around 40K+ but when you look at Google Ads location tool for advertisers to determine reach, Google says Ashburn is over 2M+. This is due to data centers that are located there.

4. Data Collection: 

Geofencing offers valuable insights into customer behavior, which can be used to make more informed decisions and more effective marketing strategies. For example, a new car dealership can geofence a competing car dealer’s lot and serve ads to mobile devices that are located within that defined area with a personalized message. The geofencing advertiser then can then target those mobile devices up to 30 days after the mobile device left the geofenced area.

5. Measure Offline Conversions:

Geofencing allows the advertiser to create a “conversion zone” in their campaign that registers an offline conversion every time a mobile device that was served a geofenced ad visits their conversion zone. Let’s use the above car dealership example to explain how offline conversions work. The car dealer who is deploying geofencing on his competitor’s lot will know if their campaign is successful if those mobile devices that were geofenced at his competitor’s lot enters their location (conversion zone).

6. Cost-Effective: 

Geofencing allows advertisers to serve ads based on the intended user’s physical location which makes these campaigns more likely to convert as compared to traditional campaigns that do not use location-based targeting. Geofencing can assist businesses in reducing marketing expenses by focusing on audiences with a higher likelihood of conversion, influenced by their interests and behaviors linked to a specific physical location. Google ads is based on “search intent” vs. Geofencing is based on actual customer behavior.

Geofencing Cons:

  1. Limited Ad Placement:  

Geofencing ads are delivered to a user’s mobile device via third-party apps. Users are only able to see the ads when the user opens an app on their smart phone. Similarly, even if a user is within a geofenced area, they won’t see the ad unless they open their smartphone and access an app. It’s important to note that this technology relies on mobile apps for its functionality. 

2. Multi-Level Buildings:

Addressable geofencing does not distinguish between single-level and multi-level fenced areas. For instance, if an advertiser wants to target a specific area within a multi-level building, every mobile device, regardless of which floor, will be targeted. This makes geofencing less targeted when dealing with multi-story buildings. 

3. Technical Issues: 

Geofencing accuracy depends on the quality of a mobile device’s GPS signal. Obstructions like buildings in a densely built-up area can negatively impact the reliability of geofencing.

4. Privacy Concerns:

Let’s face it, geofencing can be kind of creepy. You are targeting user’s mobile device based on their physical location. This does raise privacy concerns but what most people don’t realize is that they are already being targeted based on their physical location. For instance, if you have a Starbucks app and are walking/driving by a Starbucks location, you will get a push notification when you are in proximity. Starbucks is using geofencing technology to deliver this notification. Users are aleeady being trargeted by location based technology whether they know it or not.

See if Geofencing is right for your business. Schedule a consultation with one of our marketers. 

Michael Delpierre
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