The 2002 science-fiction movie Minority Report is set in a dystopian future where people routinely have their retinas scanned while walking through shopping malls, prompting virtual salespeople to pop up and greet or cajole them with personalised offers and promotions. Change ‘retinas’ to ‘smartphones’ and this is a pretty accurate description of the kind of IT services being touted today to the retail sector and others by some location-based marketing and customer relationship management (CRM) solution providers.
The pitch generally goes like this. By using technologies such as Bluetooth beacons (for example, Apple’s much touted iBeacons), Wi-Fi positioning and the built-in GPS location-sharing capabilities of smart mobile devices, it is possible to pinpoint consumers’ whereabouts with varying degrees of accuracy – for example, when they are in a particular shopping centre, walking past a specific shop, or even standing next to a particular product in a store.
More advanced systems, integrated with CRM data, can query historical customer data to see what the person has browsed or bought from a particular retailer in the past, perhaps correlate it with some active data like the time of day and weather conditions, and then do some nifty analysis to target people on the fly with appropriate personalised promotions and offers.
Advocates claim this is a win-win for retailers and customers. Sellers can improve their conversion rates by targeting the right people with the right offers at the right time. And buyers benefit because they’ll see only promotions that are strictly relevant to them, giving them a warm feeling that the retailer really understands them, thus cementing their loyalty.
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So goes the theory. Unfortunately for the proponents of location-based marketing, to most consumers the idea sounds invasive, intrusive and intimidating. According to a survey of more than 1,000 US consumers conducted in March 2014 by research organisation OpinionLab, eight out of 10 people do not want stores to track their movements via their smartphone. Only 4% trusted mass chains to keep their data secure, and 44% said they would refuse to shop at stores with a location-tracking programme. The figures were consistent across age groups, scuppering the idea that young, mobile-savvy consumers are more open to the technology.
Some evangelists remain undaunted by such findings.
Nonetheless, Fleming agrees these services have to be implemented in a way that does not result in customers being bombarded with annoying or unwanted messages. “If you’re just sending inane messages to individuals saying they might be interested in a pair of trousers, that’s going to fail. But if I’m in-store and I get a message saying that the jeans I looked at on its website last Tuesday are in stock in my size, on floor two, and by the way here’s a 5% discount coupon, that’s where the real value is going to be.”
If I’m in-store and I get a message saying that the jeans I looked at on its website last Tuesday are in stock in my size, on floor two, and by the way here’s a 5% discount coupon, that’s where the real value is going to be
The fact that location tracking has been available on mobiles for some years without any explosion in its use for personalised marketing by big-name retailers is not only a result of the market’s lack of commercial maturity. Many retail businesses are also keenly attuned to the potential downsides and are thinking very carefully about how best to take advantage of the technology.
Jeremy Cox, a principal analyst at Ovum specialising in customer engagement, says: “Modern CRM systems usually have some location-based capability, but it’s generally being used for operational work rather than marketing – for example, to plot the best route for sales staff visiting a series of clients, or for tracking delivery drivers and accurately notifying customers when their package will arrive so they don’t have to wait in all day.
“From a retail marketing perspective, I’ve not really seen much. There’s talk from the suppliers about things like aisle-by-aisle promotional notifications, but it’s still early days.”
Alex Fovargue, a retail consultant at business analytics specialist SAS, has worked in the sector for 20 years and was previously heavily involved in the development of Tesco’s Clubcard loyalty scheme while at data analytics business Dunnhumby. Although he thinks there are many opportunities to use the technology to deliver compelling services for customers, he agrees that retailers are being sensibly cautious.
“Tesco, for instance, has been trialling things like iBeacons, but it doesn’t want to be invasive to people,” he says. “It knows this won’t succeed unless it can get people to opt in to the scheme and restricts offers to one or two every time they go into a store.”
European retailers are no doubt also keeping a close eye on the experiences of their US counterparts, where adoption is slightly ahead.
“The first implementations of this I’ve seen in the US have been pretty catastrophic – bombarding people with 200 to 300 messages whenever they go into a shopping centre,” says Fovargue. “So now you’re starting to see retailers getting together and using a single app to run all their loyalty schemes, so people can select what they’re interested in beforehand and receive only offers that interest them.”
Paul Coby, IT director at John Lewis, says that while part of the company’s current IT transformation programme is about gaining greater visibility of customer data so it can better understand them (“and only with their permission”), he agrees that implementing location-based marketing and personalisation requires extreme care.
Any feeling on the part of customers that they’re being stalked is going to be an enormous turn-off
He says: “Any feeling on the part of customers that they’re being stalked is going to be an enormous turn-off and I think you have to be very, very careful with this technology. Understanding customer trends is important, but people will be extremely fed up if you suddenly start pushing things at them that they don’t want.
“Our stores are designed to be an interactive, positive and pleasant experience. Having your phone bleeping at you all the time certainly isn’t that. If you want to use this technology effectively, listening to your customers is going to be key.”
Many retailers are already doing basic tracking of customers who log in to their in-store Wi-Fi hotspots, welcoming them by name on the landing page and highlighting offers. However, they can glean far more detailed, up-to-the-minute information about customers if they can persuade them to download a mobile app and share their identity, location and other personal information. But customers are unlikely to do this unless they feel they’re getting a valuable service in return.
People are happy to use location-tracking technology when they’re in control of what’s shared and providing they gain tangible, useful benefits. Successful apps abound, both from tech giants like Google and Apple, as well as from smaller niche players, startups and social ventures.
Popular apps embrace navigation and route-tracking, socialising and dating, finding goods and services in the vicinity, reporting potholes to the council, sharing geo-tagged photographs and even (in what could prove a far more compelling use of the technology for shoppers than the prospect of a few targeted discounts) price comparison apps that let them scan a barcode and instantly see a list of nearby retailers selling the same item more cheaply.
Finding your way
Fovargue says some retailers are similarly thinking about more innovative ways to add value for customers using location-based services.
“The things I know about are just being prototyped and I can’t talk about them at this stage,” he says, “but we’re already starting to see applications being built where, for example, you can upload a grocery shopping list and the app works out and guides you round the optimal route through the store. That’s clearly providing customers with real value because it saves them time, especially when they’re in an unfamiliar store.”
The big retailers, of course, all want to glean as much information about their customers as possible. Their IT departments are busy joining up silos of historical data and streaming data, integrating disparate sales channels, putting in place analytical systems to uncover fresh customer insights, and building big data platforms to process masses of unstructured data in real-time. But since they’re all doing the same, the key to gaining an edge over competitors lies in persuading customers to share more of their data, including things like their location.
As an absolute baseline, companies that want customers to share their data need to obtain full and clear user consent, ensure that they never misuse it, and demonstrate that it will be adequately secured.
But beyond this, just as Google gives people an extensive suite of productivity software and gigabytes of online storage in return for their personal data, so smarter retailers know they need to offer people more compelling enticements than a handful of targeted offers. Any retail businesses that shoot for the future as depicted by Minority Report, meanwhile, will most likely find themselves with an increasingly minority share of the market.