What Is Geofencing & Is It Ethical?

The term geofencing has emerged as a buzzword in the mobile marketing community. The idea is simple: businesses can use technology to create an electronic fence around a particular location. Once a prospective customer enters that area, their smartphone will receive alerts for coupons and promotional offers. A May 2010 Wall Street Journal article points out that companies have begun exploring mobile applications that facilitate geofencing.  These companies include Burger King, Quizno's,  and Sonic. The objective of geofencing is straightforward: reduce advertising expenses with strategic demographic targeting.

From a consumer standpoint, geofencing is both valuable and unnerving. As consumers, we want access to information and valuable promotional opportunities. Shopping, dining out, and exploring are important activities in our daily lives. At the same time, it's a little scary to think about companies accessing your location and mobile phone data.

For this reason, it is important for businesses to maintain high levels of communication with prospective customers. It's a two-way contract-- customers will be more open to supporting a business if they understand how companies are accessing and using their information.

While businesses explore geofencing as an option to conserve advertising costs by geographically targeting consumers, it is important to make sure that user privacy remains a priority.

According to the WSJ, pretzel company Auntie Anne's, Inc. started a text messaging campaign in 2009 through marketer ExactTarget. On a number of pretzel wrappers and cups, Auntie Anne's invited customers to text a number for email coupon offers. According to Auntie Anne's chief marketing officer, the results of the test were strong -- moreso than traditional coupons.

In 2010, online coupons accounted for two percent of the amount spent by customers redeeming promotions at franchise restaurants. According to an analyst for market research firm NDP Group, that two percent amounts to $280 million.

Geofencing technology also has applications beyond marketing. These types of applications can assist with matters of public safety including vehicle thefts and child abductions. Other applications to geofencing technology include wildlife management.

From a business standpoint, it is important that businesses and consumers maintain a balance of power in choosing to receive advertisements. It is mutual trust that will help this technology thrive, and ultimately, trust comes from open communication. When exploring applications for geofencing, it is important to think beyond the technology to embrace fundamental human values. Ethical marketing practices should remain a priority, especially as this new technology evolves. Geofencing should open doors.

Photo Credit.
WSJ Article.