What Is Geofencing? Everything You Need to Know About Location-Based Marketing

By now, any good marketer will have gone through processes to ensure that their websites are mobile-first optimized. But have you given much thought to optimizing your other marketing assets, such as your paid search or social ads? 

Let’s talk geofencing.

Geofencing can be an incredibly powerful way to harness the capabilities of location-based marketing. As of 2022, 6.64 billion people (or 83 percent of the world’s population) are smartphone users. As the number of cell phone owners has grown, mobile marketing has also been growing by leaps and bounds to keep up! This includes the use of geofencing. While using geofencing for advertising is not a new concept, nor is it simply limited to mobile (more on that later), its popularity has grown along with the rise of smartphone users.

What Exactly Is Geofencing?

Geofencing is a location-based service by which an app or other software program uses radio frequency identification (RFID), Wi-Fi, GPS, or cellular data to trigger a targeted marketing action (such as a text, email, social media advertisement, or app notification) when a mobile device or RFID tag enters or exits a virtual geographic boundary, known as a geofence. 

A simple example of using geofencing in geotargeted marketing is when someone walks near a Starbucks at the mall and receives an app notification that says: “Get a free cake pop with the purchase of a venti drink. Today only!” 

3 Ways to Utilize Location-Based Technology

You can track a consumer’s location through GPS, Bluetooth, and beacons, and there are three ways to utilize this technology for targeting consumers: 

1. Geotargeting - geotargeting is focused on delivering targeted advertising to users based on their location and interest or intent.
2. Beaconing - beaconing is focused on transmitting targeted messages and information to nearby mobile devices.
3. Geofencing - geofencing is focused on the virtual perimeter you build around a specific geographic location to deliver targeted messaging.

There are many types of alerts you can send when a user enters a geofence. The most popular types include text messages, in-app notifications, and social media ads.

Geofences can be set up on mobile, tablet, and even desktop devices anywhere in the world. Geofencing can be configured to target a certain place (e.g., the mall mentioned above), a demographic market area, a business category (e.g., restaurants), a brand location (e.g., all the Sephoras worldwide), a city, or a state.

Geofencing Statistics 

For obvious reasons, geofencing can produce incredible results for marketers looking to roll out hyper-targeted, location-based marketing. But don’t just take our word for it:

• Almost 9o percent of surveyed marketers have experienced increased sales, more customer engagement, and a deeper understanding of their audience from using location-based marketing.
• Mobile ads with geofencing have double the click-through rate of the industry average.
• Geofencing is compatible with 92 percent of smartphones.
• Most people will check their phones an average of 58 times a day.
• More than three-quarters of consumers expect a personalized experience, including ad experiences.
• Geofencing campaigns have been found up to 10x more effective than other marketing strategies, such as email.

5 Main Benefits of Geofencing

What is it about geofencing that gets marketers excited, and how can it help your marketing efforts? Here are the five major benefits:

1. Better Targeting

With the ability to hyper-target prospects, you’ll not only be able to reach folks at the right time and place but also be able to engage them with messaging that is relevant and timely. 

By targeting folks in a specific geographic area and filtering that area by specific targeting criteria, you’re much more likely to engage your prospects. Using the Starbucks example above, a marketer would not send out the “cake pop” messaging to any Jane or John Doe that walked by; they would instead target that ad to a specific user demographic.

2. Spend Effectiveness

When your advertising is hyper-targeted and sent at the right time and right place, your engagement numbers go up. With geofencing, you’re spending marketing dollars on prospects who are most likely to take action and spending less money on those who are not.

3. Improved Data Collection

Once geofencing is implemented, you’ll get access to a ton of insightful data metrics, such as insights on which brick-and-mortars are performing better and which target segment has the highest engagement. You can also analyze traffic patterns (when people are in/near your locations), stay durations, and messaging effectiveness.

By combining this collected information with online activity, purchase information, and web browsing behaviors, a business can improve the user experience, increase engagement, and better understand user behavior. This same information can also be used to target folks who have previously visited certain locations to create customized follow-up messaging.

4. Personalized Customer Experience

Geofencing allows you to personalize the customer experience. If you’re marketing to a specific area, you can review the demographics of that local population and customize your promotions accordingly.

For example, if a popular local high school basketball team is doing really well this year, you could use that information to create some customized promotions (for example, one free coffee every time the Panthers win!).

5. Competitive Advantage

When thinking about where to put your virtual fence, consider not just your physical location but also where your customers are likely to be. Pro tip: These may not always be the same.

This tactic has proven hugely successful for many big brands. Why? Because geofencing provides the ability to draw prospects away from the competition.

Many big chains have used this tactic. Dunkin Donuts famously used geofencing technology to lure customers away from the competition by creating geofences around other coffee shops in the area and sending targeted ads to those prospects. Of the 36 percent of people who clicked on the offer (a coupon), 18 percent saved the coupon, and 3.6 percent returned to redeem their coupon. Burger King also mobilized a geofencing campaign to reroute customers from McDonald’s.

5 Common Uses of Geofencing by Marketers

There are many ways to use geofencing in your marketing. Below, we go through five of the most common ways that marketers are using geofencing.

1. Brand Application

If you are one of the many businesses that have developed their own app, the most ideal use of geofencing is to send in-app notifications when users enter your designated geofenced area. Have you ever wondered, “How did Target know I was here to pick up my order?” It’s because Target is using geofencing. 

2. Third-Party App

If you don’t have an app, have no fear; you can still use geofencing in your marketing plan. You can use third-party applications to send your own notifications. For example, a restaurant can use a map app, such as Waze, to send coupons once a consumer enters a geofenced area.

3. Text Engagement

We’ve all seen the “terms and conditions” required when we’re asking for something from a business (e.g., a coupon, an email or newsletter subscription, or a new account setup). Often, we leave that little box checked that says something along the lines of “It’s OK to send me text messages,” and the business is then free to text us with their promotions. But no business is going to want to waste valuable marketing dollars sending text messages every day. In comes geofencing—text messages are only sent when a consumer enters a geofenced area.  

4. Social Media Advertising

All the major social media platforms (Facebook, Instagram, Snapchat, Twitter) have geofencing capabilities. Through these platforms, you define your radius, and ads are sent to consumers when they enter that geofenced area.

5. Web Advertising

Similar to social media ads, web ads are served to consumers once they’ve crossed into a predefined geographic area via web search platforms such as Google. After all, if you have a locally based business in Houston, Texas, you don’t want to serve those valuable Google Ads to someone in Portland, Maine. 

Note: Google Ads, Facebook, and Instagram all support geofencing at no additional charge.

Before You Begin Implementing Geofencing into Your Marketing Strategy

First and foremost, you’ll want to know—really know—your target demographic. Because this is highly targeted, location-based marketing, you’ll want to understand your customers thoroughly and use language that will appeal to them. A product or service advertisement in Brighton, New York, should feel different from an advertisement for that same product or service in Fulton, California. Here are a few key considerations for businesses considering geofencing.

Limited Scope

You’ll want to limit your geographic scope because a geofence that is too large will lose its effectiveness. 

The general rule is to keep your geofencing to a four- or five-minute travel radius (walking or driving). That might seem terribly small, but remember: The magic of the geofence is that it is targeted to prospects who are literally minutes away from your place of business. This will, of course, vary depending on average drive times in your area.

Clear Call to Action

You’ll need to have a clear call to action that requires immediate action.

The reason geofencing is so effective is that you’re targeting people currently in your demographic area—so give them a clear and immediate reason to walk through your front doors.

Geofencing doesn’t work if it’s simply marketing messaging that amounts to a general announcement, such as a grand opening or a long-term promotion like “25 percent off all week.” Be more succinct and create urgency with your messaging when geofencing (e.g., “Last day to get 75 percent off storewide!”).

Multiple Marketing Techniques

Make sure to utilize multiple target marketing techniques for the best results. 

As with any marketing plan, it is best to mix and match multiple different marketing strategies to crush your SMART goals. Mix geofencing with content marketing, remarketing, search engine advertising, display advertising, and video advertising (just to name a few) in order to customize and target multiple, specific audiences.

Don’t Be Scared to Get Started!

I find that many people are scared of geotargeting because it seems overwhelming. Don’t let the fear of failing keep you from getting started. 

Geotargeting can be affordable for a variety of marketing budgets and a relatively easy lift once you get it started. If you are already working with an inbound marketing agency, bring the idea of geofencing to your next meeting. If you aren’t already working with an agency familiar with geofencing, there is no better time to start investing in a partnership with an Intelligent Inbound^® marketing agency!

This blog was originally published in January 2020 and has been updated since.