What is Geofencing, and How Can It Be Used in Location-Based Marketing?

In today’s world of cut-throat competition in the digital marketing sector, resorting to traditional ways of advertisement cannot guarantee great results. Marketers need to go one step further to gain an edge over their competitors.

The technology of geofencing allows advertisers to create virtual boundaries and to target the most suitable audience for a business. And that’s especially true when reports suggest that “Geofencing is compatible with 92% smartphones”.

If you’ve seen a discount coupon suddenly flashing on your Facebook app while entering a shopping mall, you’ve already experienced this technology at the user end. Interestingly, studies show that approximately 53% shoppers entered a retail store after getting a location based message

While geofencing is not really a new player in the world of digital marketing, its popularity has grown with the rise in the number of smartphone users worldwide (projected to reach 3.8 billion by 2021)

Number of smartphone users
Source: Statista

What is geofencing?

Geofencing is defined as creating a virtual fence around a specific geographic location of your choice, say an electronic store, shopping mall or stadium.

The whole concept of geofencing is designed to help advertisers and marketers to provide location-specific information about their prospective audience. 

Geofencing is not limited to advertising alone and can be used for a variety of purposes.

This is a location-based service in which an app or software program uses RFID, WIfI, GPS (Global Positioning System) or mobile data to trigger a pre-programmed targeted action on a mobile device.

Targeted actions such as text, email, social media ads, app notification etc. are initiated the moment a portable mobile device or RFID tag exists or enters a virtual fence placed around a particular geographical area, known as a geofence

The notification that a user gets while entering the geofence will depend on how it is configured. It can vary from trigger text messages to mobile push notifications.

How does geofencing work?

How does geofencing work?
Image by mmi9 from Pixabay

To enable geofencing,
the developer must first establish a virtual boundary around the desired location on RFID enabled software or GPS.

Through an Application Programming Interface (API), a geofence can be seen as a circle that is drawn about 100 feet around the desired location from Google Maps.

Once the geofence is activated, it will serve as a virtual boundary. A response is triggered the moment an authorized device gets in or out of the region.

A geofence can be used anywhere and can be integrated with a range of technologies such as:

  • Cellular data,
  • WiFi
  • Bluetooth & 
  • Geomagnetic data

For outdoor or larger areas, cellular and WiFi data gives better results. 

Additionally, you could also use the GPS, but the results won’t be that accurate when compared to using the WiFi. 

For indoor requirements, Beacons, Bluetooth, WiFi or geomagnetic information provide better accuracy.

So we see that geofencing technology offers flexibility to the developer. It can be set up almost anywhere as per the requirement of the programmer. You could place a geofence around your store, your city or even around your competitor’s location.

The good thing about this technology is that you don’t have to do any mapping yourself as there is plenty of WIFI, Cellular and GPS information available from the databases of Apple & Google.

Since the location services need to be enabled for the geofence to work, the geofence will be usually defined within a mobile application.

Let’s suppose a user has installed a mobile application for a particular retailer. The moment he enters into a region where the geofence is set up, the mobile alters the advertiser who sends instant push notifications or advertisements through the mobile app. 

In this case, the geofence that is managed by the retailer is programmed into the app.

Essential elements required for a geofence

The two key components required for a geofence to work are 

1. An app:

In most cases, an app is very much essential for a geofence to work. The mobile application needs to be installed on the devices of the users who you are planning to target.

2. Location access: 

Geofencing cannot effectively work without having permission to the device’s location.

Once the app is installed into the device, it needs to request permission to grant access to the device’s location. There should be a selectable option which explains to the user why it is essential to have location access.

For Android users, these include:

2.1 Coarse Location: 

The approximate location is determined by using the data from WiFi access points and cell phone towers.

2.2 Fine location:

Here, the location is determined more accurately. Data is used from multiple sources such as cell towers or WiFi points and GPS.

For iOS users, once the app is installed it can support in two different ways to access location: 

  • When the app is in use it can access the location of the device. This is also known as “when-in-use authorization.”
  • The app can continuously access the location of the device while it runs in the background.

Geofencing tools

Below are some common tools used for geofencing:

1. Koupon Media:

This tool is usually used indoors like within the store premises. It helps by sending customised offers to shoppers when they are within the store. The tool has inbuilt features that can study the customers’ behavioural data and create targeted messages for them accordingly. 

2. xAd:

This tool serves messages based on the current geographic location of the customer. It also analyses the customers’ historic data and automatically creates boundaries around the areas frequently visited by them in the past. 

3. NinthDecimal

It helps to target customers through actionable media ads like sending discount coupons, appointment requests, etc. 

Benefits of geofencing

Studies report that mobile advertisements that use geofencing get double click through rate

Let us take a closer look at some of the main benefits of geofencing.

1. Helps to provide a personalised experience

Geofencing allows you to micro-target your prospective customers and send personalized messages that create conversions. Market research indicates that 71% consumers prefer personalised ad experiences

So if you’re creating a virtual fence around a specific location, you can make use of the demographic data that is received from prospective buyers who enter this marked boundary. 

And now that you have data from people who are likely to make a purchase, you can send location-based mobile advertisements and customised promotions. 

2. Effective targeting

The power of geofencing enables marketers to reach out to the right kind of customers at the right place and at the right time. By targeting a specific location, you will be able to filter out all irrelevant ads which are not suitable for the region.

This, in turn, will maximize the chances of your success in marketing.

For example, if you are a retailer of sports shoes, targeting your ads around gyms and stadiums will give you a better chance of success.

Needless to mention, these are the customers who are willing to walk into your stores and make a purchase after seeing your ad.

3. Efficient data collection

Geofencing helps marketers to gain access to tons of insightful data and customer information. This, in turn, enables them to smoothen their marketing strategies for creating ads which have better customer engagement and success rate.

Some of the vital information that is provided by geofencing is:

  • Traffic volume
  • Effectiveness of messaging
  • Stay durations
  • Areas frequented, etc.

By combining this information with web behaviour, purchase information and online activity, you can redesign your marketing strategy to target customers more effectively.

4. Higher chance of winning more customers

The technology not only allows you to place a virtual boundary around your own store location but also at any place where your customers are most likely to be. 

Marketers often use this to draw potential customers away from their competitors.

Dunkin Donuts, the multinational coffee and doughnut company has effectively used the technique of geofencing with behavioural targeting to attract prospects from their competitors.

Source: thinkwithgoogle.com

They placed geofences around coffee shops in the same area and sent targeted ads to those prospects. 

And the result?

  • Over, 36 % prospects clicked on the offer.
  • About 18 % of the prospects saved their coupons & 
  • Around 3.6 % came back to claim the offer.

5. Reduces marketing cost

Ad campaigns can cost a lot. Especially if you are using channels like TV advertising, internet advertising, newspaper publishing, radio, video advertising, consumer magazines, etc. 

Geofencing helps in cutting down the costs because it focuses on targeted local consumers who are most likely to buy from you. 

6. Helps to provide real-time analytics

Good marketing requires effective communication between marketers and customers.

Geofencing makes it easier to streamline the communication between the buyers and the sellers.

Since this technology notifies the seller the moment a customer enters the store; the sales team can be better prepared to receive them and pitch their offers.

7. Helps to notify the prospects regarding your online presence

social media
Source: Pixabay

Even though your company has an active social media presence, many of your customers won’t be engaged with you on social media.

With geofencing, you can notify your customers to engage with you on social media. It will help to increase engagement with your prospects on social channels.

8. Helps to improve the security

Since geofencing has the power to track the live location of people, it can be used to give out alerts in stores when:

  • A product is illegally removed, or 
  • When an employee leaves his duty before the commencement of regular working hours.

Businesses that can make use of geofencing

Below are some of the businesses that can leverage this technology:

1. Human Resource Management(HRM)

This technology can be used to monitor the behaviour of the staff within the work premises. 

Besides, it can be used to limit the access of staff from certain specific areas within the firm.

2. Marketing

Geofencing scores high when it comes to marketing. Brands can use this technology to send out messages to prospective customers the moment they enter into a certain specific geographical space.

3. Asset management

The technology of geofencing can be used to give alert to a network administrator when an asset that is meant to be used within a firm depletes. It can also be used to track the exact location of the asset if it is taken out without permission.

4. Managing fleet

Geofencing can help to keep a watchful eye on the fleet and can notify the dispatcher if it moves out of the desired area.

5. Drone management

The technology can be used to restrict areas for drones for regular as well as military operations.

Tips for implementing geofencing into your marketing strategy

The important thing to keep in mind before implementing geofencing is that this is a highly targeted form of location-based advertising. It is, therefore, crucial to understand what your customers are looking for and what their specific needs are.

The language used for advertising should be apt for the customers within a specific location. Advertisers should consider using different strategies for marketing the same product in two different geographical locations.

1. Use a combo of different marketing techniques

The use of any single form of marketing cannot guarantee a high ROI. And all marketers and advertisers would agree to that. 

Marketers need to use a combination of different marketing strategies to achieve their marketing goals. 

Geofencing can be coupled with other marketing techniques such as:

  • Mobile advertising
  • Video ads
  • Display ads
  • Social media marketing
  • Content marketing etc. to yield the best results.

2. Limit your area of targeting

It is true that you could place a geofence for a widespread radius. 

But think again.

Is it necessary? 

As mentioned before here, we are focussing on a highly targeted form of advertising. It is, therefore, advisable to limit the area of your geofence for getting maximum results.

As a thumb rule, it is better to restrict the area of your geofence within five to six minutes of travel radius.

Say, for example, if you are creating a virtual fence around your coffee shop which is the only in the street, it will be unwise and unnecessary to have an extended geofence spanning a few miles.

But of course, exceptions exist. If you are targeting a rural area, it is okay to extend the area of your geofence to a few miles to improve the capture rate.

3. CTA (Call to Action)

This is one of the most important things to consider while creating a geofencing strategy. While implementing geofencing do keep in mind that you need to have a very strong CTA that requires immediate action.

You have to give your prospects a strong and irresistible reason to walk straight through your front doors without thinking twice.

Messages like “Hurry! Offer runs out in the next 2 hours” or “Last day to get 20% discount” etc. are great to create a sense of urgency and grab your customer’s attention.

Examples of companies that are using geofencing

Geofencing is like a virtual sales team that works for you. Or an extension of your physical store. The technology saves you the trouble of making one to one sales pitches to prospective customers passing by your location. 

As technology advanced over the years and GPS has become an integral part of all smartphones and tablets, tracking the customers has become easier for marketers. 

Needless to mention, marketing opportunities for established brands as well as new business owners have increased considerably. They can now locate their potential customers at the most opportune time. Multiple brands have benefited from geofencing campaigns. 

Following are some popular examples from companies that recorded instant success with the technology:

1. Uber

Photo by freestocks.org from Pexels

The company has successfully used geofencing at Los Angeles International airport. The moment passengers arrive at the airport, they will be notified to avail the services of the company with details of the number of cars nearby.

2. BMW

Photo by Luis Quintero from Pexels

BMW used it to enhance their vehicle and passenger safety technology. Once the geofencing services are activated, the location of your car is accurately determined every 20 seconds.

If the car moves out of a specific geofence without authorization, the company and the owner are immediately alerted.

3. Walgreens

What is Geofencing, and How Can It Be Used in Location-Based Marketing? 1
Source: Walgreens

Walgreens created geofences which sent promotional offers to the customers as soon as they entered a marked boundary. The strategy has helped the company to win customer loyalty.

4. Starbucks

Photo by Adrianna Calvo from Pexels

The company used this technology to advertise drinks to customers. The moment a user walks into a region that has Starbucks, a push notification will be sent to their cell phone devices.

Final Words

Geofencing is an excellent way to reach out to more customers. With this technology, you can give timely and personalized offers to customers and lure them to your business.

When rightly employed the technique is a win-win situation for both, the buyers and the sellers. 

The customers gain by getting the best offers on their phone screen, exactly when they need it. And the marketers benefit because the technology helps them have an edge over their competitors.


Alvin is the Founder and CEO of MobileAds.com. He is a go-getter, and adventurous guy who believes in working smart to gain success in his business ventures and in life. He also founded RichMediaAds.com and MobileLanders.com.