Advertising is linked with promotion of product or service through various communication channels. Location-Based Advertising can be considered promotional message send by text or multimedia message based on user geographic position.
Although the market share of smartphones is growing very fast the majority of mobile phone users still own feature phones. According to The Pew Research Center 2011 the 83% of adult Americans own a mobile phone and 35% of them own a smartphone. In 2011 there were close to 6 billion active mobile subscriptions across the globe of which less than one third are smartphone owners, that is why the potential of SMS and/or MMS based mobile marketing accessible from every mobile phone, cannot be underestimated.
The study performed by Bruner and Kumar in 2006 showed that at this time attitude towards mobile advertising, including location-based advertising was rather negative. User did not differentiate between regular and location-based marketing messages. Receiving too many messages from marketers even if users have opted-in with, caused users to consider those messages as a spam. “Consumers saw mobile spam as having a negative impact on the brand image of the mobile network operator”, especially that in the United States, the user is financially responsible for the transmission and reception of messages. The study done by Kelley and published in 2011 showed that users’ have strong privacy concerns towards this potentially invasive form of advertising however advanced privacy settings may help alleviate some of these concerns, making users more comfortable.
The company called Placecast has used the potential of such a solution. The organization provides services Shop Alerts. It is an opt-in marketing service via mobile devices designed to drive customers to specific physical venues. ShopAlerts is a white-label service that delivers location-triggered mobile messages when customers enter geofenced area. The service works automatically on any mobile phone and does not require installing additional applications. Users opt-in to a given brand’s program and receive text messages on their phone with information, coupons and offers from places of interest around them.
In October 2010 Placecast collaborated with O2 the second-largest mobile operator in the United Kingdom owned by Telefónica. Two companies launched a six-month location-based marketing pilot in the UK, signing up Starbucks and L’Oréal as the first two brands to take part in the trial. The project invited consumers to opt in to the service to receive relevant messages dependent on their age, gender, interests and their location. In October 2011 according to Placecast they have reached 6 million subscribed customers.
It is important that user receive only relevant messages. Besides promotional messages they could have as well situational context (time of day, weather, community routes) or emotional context (places that might connote use of or relevance to the retailer such as sporting and event venues, recreation areas). O2 says that typically a user gets no more than one message per day, and only between four and six promotions per month. Messages sent as part of the service are free to users. It is as well clear how to opt-out from the service.
This solution gives opportunity to target wide number of mobile subscribers, however from the practical perspective it requires from the service provider to have an agreement with network operator and users to opt-in to receive promotional materials, which in cases of small brands and campaigns is not cost effective.