Advertising and marketing play an essential role in attracting customers. From TV ads to newsletters or online marketing campaigns, companies have a plethora of options to choose from. Location-based messaging is one such option that focuses on attracting nearby customers to visit a store. How can companies combine their customers' geolocation data and a brand app in order to attract more traffic to their physical stores?
We speak with Jani Merikivi, an associate professor at Grenoble Ecole de Management, who recently co-authored new research that shines a spotlight on location-based messaging campaigns in order to better understand what techniques are effective.
What is location-based messaging?
Simply put, location-based messaging is a service that sends text messages to potential customers who are near a store location. If a brand has a mobile app used by customers and access to their geolocation data, then it is possible to send marketing text messages when a customer is within a certain perimeter of the store. The technology has been around for some time, but its acceptance has been somewhat slow. This is probably due to the sensitive nature of the service. It can be a touchy privacy issue when customers start receiving ads from a company because of their location.
In your research, you analyzed two techniques: scarcity and social proof. Can you explain what they are and why scarcity was the more effective technique according to your results?
Scarcity and social proof are two persuasion techniques used in location-based messaging. Scarcity refers to a messaging campaign that focuses on communicating the scarcity of a product (e.g., only X number of products left, come in quickly to get yours). Social proof refers to messaging campaigns that rely on support from recognized third parties. For example, a social proof campaign might inform customers that other customers recently bought their product or service and rated it excellent, thus inciting customers to make a purchase as well if they appreciate and identify with them.
Our study results demonstrated that scarcity was the more effective technique. Three variables, entertainment, irritation, and informativeness – in this order – indicated that scarcity performed better with customers. The scarcity of an item may generate a form of excitement which is correlated with the entertainment value of the message. Scarcity also reduces the irritation that can be generated by receiving such targeted ads. There is also a clear informative value in knowing, for example, whether or not a product is available. While social proof techniques can be effective, the message is not necessarily specifically tied to the customer's location and therefore of less value for location-based messaging.
What are the implications for companies seeking to implement location-based messaging? Is this technique of relevance during the COVID-19 crisis?
The first advice is to consider whether location-based messaging is appropriate for your sector. For example, pharmacies sending out drug information based on geolocation data might be too sensitive and invasive for customers whereas this persuasion technique has shown itself to be useful in the fashion retail industry. Next, you have to consider your company's capacities. If you already have a mobile app and access to customer geolocation data, then setting up location-based messaging should not be a heavy investment. During the current Covid-19 crisis, it's easy to understand that some customers may be wary of returning to physical stores. If location-based messaging is used to provide informative content (e.g., number of people in the store or hygiene measures), this might be an effective way of building trust with returning customers.
Selmar Meents, Tibert Verhagen, Jani Merikivi, Jesse Weltevreden (2020) Persuasive location-based messaging to increase store visits: An exploratory study of fashion shoppers. Journal of Retailing and Consumer Services. 57, Nov 2020. https://www.sciencedirect.com/science/article/pii/S0969698920308262