Geofencing for Business: How to Win and Keep Customers

September 14, 2023

What is the value of geofencing for your business and your customers? Considering that geofencing is compatible with 92% of smartphones, you can reach a larger and more diverse audience with your location-based messages. Moreover, mobile ads with geofencing have a click-through rate that is 100% higher than non-geonfenced ones. This means generating more interest and engagement from your potential customers.

Additionally, 53% of shoppers visited a retailer after receiving a location-based notification, demonstrating that geofencing is a powerful business tool that can drive foot traffic and sales to your physical stores. In our previous article, we explored the difference between geotargeting and geofencing and how they can serve different objectives. In this section, we will focus on geofencing and how it can help you connect with your customers more effectively.

Geofencing Types: By Shape and Size 

Geofencing is a technology that allows you to create virtual boundaries around specific areas and trigger actions when a device enters or exits those areas. It can be used for many purposes, such as marketing, security, operations, and customer engagement. Diving into more technical features, the two main types of geofencing are: polygonal and radius.

  1. Polygonal geofencing allows the user to manually draw a shape around an area of interest, using multiple points to form a polygon to define the boundary. This type of geofencing is more accurate and customizable than radius geofencing, as it can fit the shape of the area more precisely. For example, a polygonal geofence can be used to target customers who visit a specific store in a shopping mall or to measure foot traffic in a park.
  1. On the other hand, radius geofencing uses a single point and a distance to create a circular area around an object or location. This type of geofencing is simpler and faster than polygonal geofencing, but it can also be less precise and reliable. For instance, a radius geofence is best for general areas like airports, parking lots, or parks. It can be used to send an alert to a user when they are near a point of interest, or to count the number of devices in a certain area. However, radius geofencing can also include unwanted areas or exclude relevant ones, depending on the size and shape of the circle.

Geofencing types: Based on Data

Based on the type of data and actions that are triggered, there are two different types of geofence: active and passive. Both can use either polygonal or radius geofences.

  1. Active geofencing requires the user to have the app open on their device and uses GPS to track their location. Active geofencing can send personalized messages, notifications, or offers to the user when they enter or exit a predefined area. For example, a restaurant can use active geofencing to send a coupon to a customer who is near their location. As reported by MordorIntelligence, the active geofencing market is witnessing growth due to increased use of spatial data, improved real-time location technology, and higher adoption of location-based applications among consumers globally. The Market size is expected to grow from USD 1.47 billion in 2023 to USD 4.19 billion by 2028, at a CAGR of 23.23% during the forecast period (2023–2028).
  1. Passive geofencing is a technique that tracks the location of a device using Wi-Fi or cellular data without requiring the user to open an app. It can gather information about the customer’s location-based behavior, preferences, and patterns. For example, a retailer can use passive geofencing to measure foot traffic, dwell time, visit frequency, and bounce rate of customers in their store or in a specific section of the store. This can help the retailer improve their store design, product selection, pricing strategy, and marketing efforts. 

In principle, active geofences employ polygons to target store visitors or radius to alert users who are near a point of interest. Passive geofences also utilize polygons or radius to gather customer data, like time spent at a location or visit frequency. Therefore, active and passive geofences are not mutually exclusive with polygonal and radius geofences but rather complementary.

What are the Main Geofence Events? 

Geofence events happen when a device enters or leaves a geofence. They can trigger actions or notifications based on the device’s location and the user’s preferences. It can have many different applications: the most common is in location-based marketing. There are three types of geofence events: “Enter”, “Exit”, and “Dwell”. 

  • The “Enter” event occurs when a device crosses the geofence boundary. This event can send personalized messages, offers, or ads to customers based on where they are. Imagine you are entering a concert venue and receive a notification to welcome you and show you a map of the venue when you are near it. The “Enter” event can make customers more loyal and keep them coming back.  
  • The “Exit” event is when a device leaves the geofence area. This event can mark the end of an interaction or transaction with a customer or an employee. For example, you just had a delicious meal at a restaurant, and you get a message that says, “Thank you for dining with us! Please rate your experience and enjoy this loyalty reward.”  
  • The “Dwell” event is when a device stays in the geofence for a long time. This event can measure customer behavior, interest, and engagement with a location or an activity. For example, a museum can see how long visitors spend in each exhibit or section. In this way, it is possible to collect valuable insights for optimizing location design, content, and marketing.

Bottom Line

Geofencing has a wide range of benefits, such as the ability to target and engage a wider audience, boost engagement, drive foot traffic to physical stores, and gather valuable location-based data for optimization. But its applications go beyond the marketing and retail industries. From logistics and transportation to healthcare and real estate, its potential is vast. However, privacy is one of the most important concerns. When using geofencing, businesses must be clear with their customers and obtain their consent.

Geofencing can unlock the full potential of location-based services and create added value for both businesses and customers with a strategic approach. Creating, monitoring, and responding to virtual boundaries improves business performance, security, and adaptability, helping overcome modern challenges. So with that in mind, how do you see this technology enhancing the growth and success of your business?

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