Location-Based Marketing – Definitions

copyrights:Aleksander Buczkowski 2011-2012

To discuss the term Location-Based Marketing it is necessary to fully understand it’s two components: ‘location-based’ and ‘marketing’. ‘Location-based’ part refers of course to Location-Based Services which I’ve extensively described in the previous chapter. So let us concentrate on the term ‘marketing’ itself.

Marketing was defined by Philip Kotler (marketing academics guru) as “the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return” in other words it is a process through which goods and services move from concept to the customer. Following Kotler marketing process includes several steps:

  • market analysis,
  • designing a marketing strategy,
  • choosing so-called marketing mix,
  • managing customer relationship,
  • implementation and control.

It is crucial to differentiate between marketing and advertising. While marketing is the overall process, advertising is linked only with promotion of product or service through various communication channels intended to inform or persuade members of a particular audience. Advertising is a part of marketing mix within the marketing process.

Marketing mix however can be described as a set of tools by which marketers can influence the market. The first marketing mix concept described back in 60s is known as the ‘Four Ps’: product, price, place and promotion. There were many variations including 7 Ps… I even heard about 17 Ps. There are 4 Cs : customer value, cost, convenience, communication, and there are as well 7C… But for purposes of this discussion let’s stay with the traditional 4 Ps…

Mobile Marketing Association defines Location Based Marketing as: “any application, service, or campaign that incorporates the use of geographic location to deliver or enhance marketing message/service”. This definition is limiting LBM to a one-way, enhanced communication channel used by marketers to reach customers based on their geographic location.

This is the case of LBM based on sms or mms model which will be discussed further. The definition is however discounting the value of new LBM channels that are integrating Location-Based Services with social media creating a different possibilities for user interaction. Nowadays LBM allows and encourages users to an interactive, two-way communication. In fact effective location-based marketing strategy not only delivers the marketing message or service to the customer but allows to gather consumer insights. One of the most important functions of marketing is not only to communicate the value of a product or service to the market but as well to monitor and control if the campaign target was met as well as the competitors.

Users of LBS and especially Location Based Social Networks like Facebook Places, Foursquare, Twitter or Flickr produce enormous number of social, spatial and temporal data which analysed might answer critical questions for marketers about the customers: Who? Where? When? Why? Providing this information is crucial for solving marketing intelligence issues: determining market opportunities, market penetration strategies, development metrics, investment risks and many others. Further chapters will discuss the whole range of possibilities provided by Location Based Marketing.

Location-based marketing is not geomarketing!!!

Some people confuse Location-Base Marketing with the concept of geomarketing. Geomarketing is a set of tools and methods based on Geographic Information Systems (GIS)  focused mostly on three aspects: analysing spatial customer behavoir, retail location and spatial marketing management. Geomarketing methodology can be used to spatialy analyze and optimize elements of marketing process but it cannot be considered a part of marketing communication channel itself. There it cannot be considered equal to Location-Based Marketing itself.