Location-based Mobile Advertising: Is Hijacking Customers a Niche or Bonanza?

Meat Pack, a trendy shoe store in Guatemala City uses a novel and audacious marketing strategy to “hijack” customers using short-term offers to lure consumers away from rival stores. Siegfried Mortkowitz reports

Meat Pack’s app, named Hijack, uses GPS to determine when one of its customers enters the geo-fenced official store of a brand sold at Meat Pack. That customer is then notified via the app of a discount offer based on how quickly he or she can make it to the Meat Pack store. The discount is actually a countdown that begins at 99 percent and decreases by 1 percent over time.

The strategy has been a big, and much-talked-about, success. Consumers are literally “hijacked” from competitors, the store’s discounted shoes are rapidly sold and it creates a viral effect because whenever a “hijacked” consumer redeems a discount, that customer’s Facebook status is automatically changed, informing her friends of the promotion.

It is also fun and generates the kind of excitement produced by flash sales and flash mobbing. Because of its success, the Hijack campaign has become a near-legendary example of how location-based mobile advertising is able to reach a target audience, personalize the consumer experience and leverage social media to increase sales and raise brand awareness.

Though this strategy is not typical of the location-based mobile advertising, it does exemplify its potential. Brett Kohn, vice president of Marketing and Product at Thinknear, a U.S. leader in mobile advertising and a subsidiary of Telenav, explains it as follows: “How does a marketer reach people who are outside of a store, make them aware of products or a brand, and get them into the store? If I’m a Walmart or a Target, I’m going to want to reach people who are within a reasonable distance of my store, because people are not going to travel 10 or 20 miles to get to a store.”

But, as in the Meat Pack strategy, not everyone in the vicinity of the store is targeted. A retailer who sells consumer electronics, for example, or a consumer electronics manufacturer will want to attract people who have already purchased similar goods in the past. And they will want people who can afford their products. So, other layers of data are required, which identify customers with the right demographic profile and who have visited electronics stores in the past. This potential audience includes proximity shoppers and people who live in the vicinity of the retailer.

Kohn says the data points used to target customers who live near a retailer include such demographic data as what type of neighborhood the consumer lives in, that neighborhood’s profile, where the targeted consumer shops and works and where he travels on weekends.

“That’s really powerful data for brand advertisers,” he says. “Say a store wants to hit high-income neighborhoods for a particular product. You could do it with a five-mile geo-fence around the store. And within that geo-fence, you target only specific neighborhoods based on average household income. Or if the product is oriented towards families or kids, you could target neighborhoods over-indexed for family size or children.”

For proximity shoppers, Kohn uses the example of Dove Body Wash sold at “big box” stores. “To do that targeting we may say we want to reach people who are within five miles of a Target or Walmart, who live in high-income neighborhoods and people who have recently shopped at a store similar to Target or Walmart. You’ve got historical location data, you’ve got proximity data, and you’ve got demographic data all in the same audience.”

This type of targeting is also used by multicultural marketers that want to target Hispanics, for example, or marketers that target neighborhoods that are over-indexed for certain types of cars.

David Barker, senior vice president and managing director of Amobee EMEA, a global marketing technology company, suggests that for location-based tactics to work, regional variations and consumer behavior need to be taken into account.  He previously worked with location-based mobile advertising at Nokia.

“In the U.S. we sold advertising to hotel chains,” he recounts. “Consumer behavior in America showed us that travelers are spontaneous with accommodation bookings, so the big chains wanted to target around relevant, real-time audience behaviors to make them more aware of nearby hotels. While this worked well in the U.S. it wasn’t as effective in Germany, as Germans tend to book ahead of their journey.”

 “Whether you’re talking about proximity, demographic or behavioral traits, that’s all location data that is unique to mobile,” Kohn says. “It’s a very powerful data set and, if managed properly and effectively, can have really good results.”

But the solution is still in its infancy and is still undergoing growing pains. For example, according to Kohn, one of the big issues in the industry is the quality of the location data, which varies considerably. The reason is that the solution only works if the consumer has opened an app which he has allowed to collect and pass on his data, including apps with loyalty programs, such as Hijack.

“What we find is that only roughly 30 percent to 40 percent of that data is accurate,” he explains. “The reason is that app developers don’t spend a ton of time working on location technology. They focus on building their apps. And often they rely on services used by the operating system, and sometimes that does not result in high-quality data.”

That’s one reason, says David Moth, editor and head of Social at Econsultancy, which advises global marketers and ecommerce professionals, the promise of real-time mobile advertising has rarely been met. “The Meat Pack strategy is one of the rare examples of the industry’s success,” he says. “There’ve just been too many barriers.”

The fact that an app must be open for it to work, Moth says, is one reason the solution scales badly. “The chances of you actually having the [purchasing] data available on that person and them having all the necessary location services fixed on their phone, it normally requires them to have your app, and the app open, and the chances of all that coming together are actually quite rare.”

Amobee’s Barker agrees, arguing: “Location targeting is typically not enough as a standalone tactic in digital campaigns, because in the U.K. you might end up with 5,000 relevant people that have gone to a retailer that you compete with in the last month. But the brands tend to say, ‘Bring us 50,000 people.’ Adding it as part of a wider media mix enables the campaign to be scaled more efficiently.”

As an idea of how much data and audience insights Amobee uses for its scalable digital advertising solutions, Barker says the company’s proprietary Brand Intelligence platform analyzes and correlates some 60 billion content engagements every day. “That includes what people are reading, what people are sharing, what people are interacting with,” he explains. “This is tracked over the web, video, mobile and social each day.”

Amobee is also an ads API partner with Facebook, Instagram, Twitter, Pinterest and Snapchat. “Location data and targeting is great, but it’s a little too niche to focus on it without taking into account all the other rich data insights that can be accessed,” Barker says.

The other problem is that all those real-time adds can be a “bit creepy,” Moth says. “Just because I’ve got a Selfridge’s app on my phone doesn’t mean that every time I walk past a Selfridge’s I want to be pushed to go in and buy a t-shirt. That can be irritating.”

As proof of the growing resistance to “creepy” online apps, he cites a recent study by PageFair that found that the use of ad blockers grew by 41 percent between the second quarter of 2014 and the same period in 2015, when 198 million ad blockers were in use globally. Significantly, 57 percent of people aged 18 to 34 who responded to the survey said they would use ad blockers “if the quantity of ads increased from what I typically encounter today.”

Barker says that advertisers must be cautious when using real-time push ads on mobile. “If a marketer can communicate to a consumer on his mobile phone, that’s an amazing thing. But we need to appreciate that it’s a very personal device, so the content needs to be as relevant as possible to what that consumer is doing and their environment.”

But it is primarily the lack of scale that is keeping the solution from growing as fast as had been expected. “Major brands have said that they love the idea of leveraging location, but it must give them the scale they want,” Barker notes.And Moth says, “It’s actually quite difficult to come up with a brilliant use case. The use cases at the moment are not that compelling, which is why it hasn’t caught on that well.”

However, Moth goes on to say that millennials, who have grown up with mobile and are attached to their apps, could be a more susceptible audience for the solution, especially if it started using social network apps that are almost always open, such as Facebook, or an app that is already location-based, like Google Maps.

“People are constantly on Facebook, so you could get these notifications through Facebook,” he says. “Also, Facebook Messenger could be a potential way for brands to message people, saying, ‘Why not come into our store? We’ve got this on offer or a new range of clothes from this brand’.”

He cites the example of someone offering a mobile payment app and using Facebook’s location services to inform users when they are in the vicinity of a shop that uses his product. The notification appears in real time on the Facebook user’s Timeline or News Feed. “It’s very cost-effective,” Moth says.

In addition, Google announced in May that it would begin trials of a new service showing the logos of business locations on Google Maps, both on the desktop browser and on the mobile app. In the latter case, the logo—which the business has paid for—would appear on the map as the driver follows a certain route. The logo would also link to coupons for items at that store or allow the user to browse the store’s inventory.

“That is probably an area that is more likely to succeed,” Moth says, “because people are actively looking for something around them, so you can put a relevant ad in front of them. When they’re actively searching for something, you know they are in the market for this product.”