Proximity Marketing - What, How, Why?

March 23, 2016
Romet Kallas
Account Executive

In this blog post, you will learn about the history of proximity marketing, how it works, and why it has become a top priority for global marketers.

What is proximity marketing?

The definition of Proximity is nearness in space, time, or relationship. Therefore, proximity marketing is a form of advertising, where a marketer is able to initiate a communication with a consumer that is timely, relevant and personal. The engagement is made possible through a portable device (smartphone, tablet, wearable). Proximity marketing, as a term, got introduced to the public somewhere around 2008, when companies were able to send location-triggered text messages to cell phones that were in proximity to a Bluetooth network and had "discoverable" Bluetooth mode on.

Why didn't proximity marketing take off at that time?

Here are some reasons:

  1. It was just the beginning of the smartphone era, and there were only ~430 million "smartphones" sold between 2007-2009, setting a severe limitation to scale
  2. Technology was limited, as the smartphones capability was limited compared to today’s smartphones and the messages were just plain text
  3. Lack of privacy, as consumers didn't usually get to choose from whom they would like to receive messages as well as whether or not they wanted the message in the first place
  4. Bluetooth had immense effect on battery drainage at that time, and the hardware was expensive
  5. There was a lack of tools to set context for the interaction, as the message receiver was a complete stranger to the sender

Due to a fair amount of limitations, proximity marketing didn't find widespread usage. But it did open the eyes for many marketers, showing the potential of location-based advertising. Despite the limitations mentioned above, some trials still managed to show significant results and ROI compared to the good old paper coupons.

Enter QR codes

After a few years, around 2010/2011, proximity marketing resurfaced yet again. There was a new kid on the block; enter QR codes. A customer locates a QR sticker, scans it with an app in their smartphone and is then able to receive a URL leading to a web page. Since smartphone sales had skyrocketed to 772 million between 2010/ 2011, and QR codes were cheap to produce, the market had to be ripe for QR codes to take off, right? Wrong, while marketers believed that QR codes were going to change the world, consumers didn't. So why QR wasn't able to achieve what proximity marketing stands for?

Here are some reasons:

  1. Friction, friction, and friction. To locate a sticker, find the app, scan the code - it was just too complicated
  2. Lack of education. To locate the sticker, customers had to be aware of it. Yet, in 2012, two years after the launch, 97% of consumers still didn't know what QR codes were
  3. Difficulties measuring results and ROI (Return on investment)
  4. Similar to original Bluetooth marketing, it was not possible to set any context to the communication, when the consumer decided to interact with it

So was proximity marketing (timely, relevant and personal communication between a consumer and a marketer) just a myth? Absolutely not!

Beacons, geofencing, NFC and Wi-Fi to the rescue

1# Proximity marketing with Bluetooth Low Energy (BLE) Beacons

Beacons are currently one of the most widely used proximity marketing technologies. Leading brands and retailers are investing in this technology and according to Proxbook, there are already more than 5 million beacons worldwide. Beacons are a cheap piece of hardware that transmit a Bluetooth Low Energy signal, which the smartphones can detect. The value of beacons lies in leveraging accurate location data, especially indoors, to engage customers in a timely, relevant and personal communication. Thanks to the new Bluetooth Smart protocol, the impact on battery life is close to none.

There are two main beacon standards:

Apple's iBeacon - Transmits a signal (UUID) that can be picked up by an app. The interaction with the app can be used to determine the device's location, as well as trigger a location-based action on the device (push notification, check-in, etc.). iBeacon has been the most widely used beacon standard so far, as it was the only beacon standard able to personalize the beacon interaction. Then came Eddystone.

Google's Eddystone - Transmits a (UID) signal similar to iBeacons (UUID) signal to trigger push notifications or other actions in the app. If the customer doesn't have the desired app, Eddystone is also able to transmit a (URL). Chrome 49 supports Eddystone URL's, so when a consumer walks into proximity of a beacon, they will receive a passive, non-intrusive notification of a website. Last but not least, Eddystone can transmit Telemetry signal with data like temperature, sound levels, humidity and so forth. Such data will give companies a lot of opportunities for additional analysis.

Popular use cases for beacons are loyalty campaigns, indoor navigation, digital signage, OOH advertising and push notifications.

#2 Proximity marketing with NFC(Near Field Communication)

NFC is a passive proximity marketing technology when compared to beacons - they cannot be used to send push notifications. It has a very short range (20cm) and unlike beacons, it doesn't allow to measure the distance between the broadcasting hardware and receiving device. On the other hand, the RFID chip (antenna) doesn't require a battery or any power at all. So there is no maintenance issue, and the hardware is even cheaper when compared to beacons.

Popular use cases for NFC are mobile payments and providing additional product information in shops or exhibitions.

#3 Proximity marketing with Geofencing

Geofencing is a feature that uses GPS (global positioning system) to triggers an event when a device enters a virtual barrier. Geofencing is often used outdoors to engage customers in specific locations with a timely and relevant message. To initiate the engagement, there needs to be an app present or through a specific website. Geofencing falls short when it comes to indoors, and the accuracy might suffer in bad weather.

Popular use cases for geofencing is sending push notifications in an app or on a website, when a consumer walks into a specific geofence (virtual barrier).

#4 Proximity marketing with Wi-Fi

Everybody knows what Wi-Fi is, but companies can also use it for marketing purposes. How does it work? A company sets up several Wi-Fi hotspots and provides free internet access. In order to use it, a customer has to log in and provides their details. The company who hosts the Wi-Fi network can then send location-specific content to the consumer's’ browser. Wi-Fi networks can also be used to measure foot traffic and general consumer movement.

All of the technologies mentioned above are useful tools when engaging in communication that is timely, relevant and personal. The really powerful part is that all of these technologies can be used together for an even rich customer experience. For example, a customer is greeted by a geofence notifications once they are near a store, upon entering the communication continues with beacon messages or navigation, and finally, the customer can pay via NFC payments. All of these interactions generate valuable proximity data which can be used to further personalize future communication as well as used in online advertising for retargeting purposes.

All of these interactions generate valuable proximity data which can be used to further personalize future communication as well as used in online advertising for retargeting purposes.

2016, the start of a new era in proximity marketing

Mobile is much more than just an extra screen that brands can use for marketing and advertising purposes. It is a highly personal device, which we carry everywhere we go.

So why now? Eight years later. What has changed since the first trials of proximity marketing other than the technology itself?

  1. The market is finally ripe; we live in a world where 30% of the global population owns a smartphone; In the US alone, ⅔ of the population owns a smartphone
  2. Since mobile usage has skyrocketed, customers have become more aware and demanding; hence the need for a personalized experience
  3. 82% of smartphone users say they consult their phones on purchases they’re about to make in a store; making it vital for companies to identify and engage the consumer at the right time
  4. Already more than half of the searches done in Google are on mobile, and mobile is the fastest growing media channel in the history
  5. Location-based services like e.g. Uber and Tinder are winning customers over across the globe
  6. Customers increasingly expect to be pushed the right content at the right time based on the context, compared to the tedious process of diving into the phone to pull content out manually
  7. Brands that are not able to adapt to a timely, relevant and personal communication, will become obsolete over time
  8. Proximity interactions generate hyper-accurate location data, which is valuable for precise customers profiles and can be leveraged in online advertising

It is hard to say what is the next technology that will take the customer experience further and beyond. But one thing is for sure; it is going to be all about timely, relevant and personal communication - delivering the true potential of proximity marketing.