How the quiet rise of beacons has reshaped retail marketing

Over the last four years, there's been a technological uprising in the staid world of coupons.
Written by Natalie Gagliordi, Contributor

It's President's Day weekend, which for some of us means a blissful three-day respite from the rigors of work; a bonus day to help us manage the doldrums of winter.

To mark the occasion, I decided to take a leisurely drive through the local suburban sprawl -- because, let's face it, nothing shows reverence to our nation's leaders like some healthy consumerism.

To kick things up a notch I activated my phone's locations services, and without fail, the push notifications began pouring in. I was quickly alerted to two nearby mattress sales, a furniture "blowout", a winter clearance, and two ~limited-time~ offers.

Of course, an experience like this is of my own doing: I have an app on my phone that allows geofences to pick up on my location and send me digital coupons to nearby stores. What's interesting about my experience, however, is the not the existence of location-based push notifications, but the sheer number of them.

Over the last four years, there's been a technological uprising in the staid world of coupons. Bluetooth beacons first arrived on the scene in 2013 when Apple released the iBeacon specification, and since then a number of players have entered the space and built entire businesses around the bet that these kinds of location-sensing devices will eventually reach ubiquity and change the face of retail marketing.

While some have been quick to pan the concept as an overblown fad destined to join QR codes in the technology dead zone, beacons and geofences have cropped up, albeit quietly, in a bevy of nationwide deployments.

In 2014, department store chain Macy's announced plans to roll out Shopkick-powered beacons in all of its stores. CVS Health began using beacons in early 2015, with Target joining months later through its own beacon pilot. Pharmacy chain Rite Aid entered the fray just last month.

But even with these types of large-scale rollouts, the ultimate success of beacons is still shrouded with doubt. A survey conducted by Forrester last year found that only 3 percent of retailers use beacons; while just 16 percent had plans to try the technology in the foreseeable future.

"In 2014 there were a lot of pilots and testing, but in 2015 we started to see a lot more serious deployments happening," said Brian Dunphy, SVP of business development for Gimbal.

Spun out of Qualcomm in 2014, Gimbal's platform targets brick-and-mortar enterprises with large, consumer-facing apps to help them leverage both geofence and beacon technology.

Dunphy admits that the beacon revolution has been slow going in some segments, mainly in retail locations and quick-service restaurants, where operational testing created hurdles for large-scale deployments.

But like other companies in this space, Gimbal rests on the notion that location-specific coupons sent in conjunction with geofences and beacons are far more likely to be used than other marketing offers.

According to Dunphy, a mobile app using basic push notifications without location data has an average open rate of 4 to 8 percent. But when using a geofenced message, the open rate increases to 25 to 30 percent. By contrast, a coupon sent via email has an open rate of just one or two percent, at best.

"When you make an offer and you tighten the location boundary as to when and where you engage the user, the higher the likelihood of capturing the interest of that person," he said.

For Gimbal competitor inMarket, the message is less about what a beacon is and what can it do, and more about what value can be created with it.

"When we say proximity marketing, beacons are just one part," said inMarket president Kevin Hunter. "It's incorporated into the right engagement, and there's no single technology that can be the end-all of engagements."

inMarket offers both geofencing and beacon services, and says it has location data for tens of millions of shoppers in categories like groceries, entertainment and auto. The company works with publishers such as Conde Nast and Gannett (which run apps like Epicurious, Coupon Sherpa, List Ease and ScanLife, among others) to help them "beaconize" their apps so that they can communicate with proximity devices.

"Proximity media is a huge space where value is being created," Hunter said. "If you look back, the sports venues went first and were early adopters, but retailers were a little slower. But now that there is a place where value can be returned to retailers, so we are seeing an acceleration take place around this type of technology."

Take CVS Health, for example. The pharmacy chain has deployed beacons in the majority of its 7,600 retail stores.

For the most part, CVS uses the technology to serve up real-time notifications, like a reminder to refill a prescription, or to pick up one that is ready. Brian Tilzer, chief digital officer at CVS Health, said the company has been pleased with the uptake of the notification feature.

Based on its recent pilot program, 62 percent of CVS customers said the push notifications improved their store experience. That number increased to 72 percent for those who received a pharmacy notification.

"Our clear focus with beacons is to engage our customers in a meaningful way, with messages and services they need -- versus just another marketing channel to push coupons and offers," Tilzer said. "With this in mind, we're considering many more opportunities to deliver useful information to customers, whether they're at CVS to pick up prescriptions, visit Minute Clinic, shop for front store items or order photos."

Looking further ahead, Tilzer anticipates beacons becoming part of the foundation for the broader Internet of Things movement in retail.

"There are clear synergies amongst beacons, devices, sensors and networks that comprise the Internet of Things," he said. "From our point of view, we see our deployment of location-based marketing technologies serving the same broader aim of the IoT, which is to make life easier and more intuitive."

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