Analysis of Promising Beacon Technology for Consumers

I. Introduction

Cell phones and the emergence of technologies like beacons* present brand marketers with opportunities for location-based marketing, targeting messages based on where the consumer is located. This capability to pinpoint a location may also provide insight into consumers’ action, such as shopping, attending a concert or eating lunch. While this innovative technology presents a number of opportunities for strategic communicators, it also presents a number of challenges—the greatest being consumer hesitation to embrace push services that location-based technology relies on. Privacy regulations and mobile phone settings require consumers to subscribe to location-based services in advance so that consumers control push notifications and pop-ups, protecting themselves from being bombarded, especially with irrelevant or intrusive advertisements.

Marketers and communicators walk a fine line between maximizing brand utility and exploiting the invasive potential of this technology. Currently, consumers are required to download beacon applications and “opt in” to beacon services to take advantage of whatever experience is promoted. To overcome this challenge, advertisers and marketers should develop campaign strategies that create consumers’ awareness of and increase their engagement in beacon technology, which allows advertisers to reach consumers at the most pertinent time and in meaningful places, with a feature most relevant to them.

This research attempted to help marketers and advertisers understand how to make the most of the potential that beacon technology provides for real-time personal engagement. With an overwhelming amount of messages on every platform, and more and more brands fighting for consumer attention, how can this technology be used to provide worthwhile experiences and help consumers navigate purchases? Based on both primary and secondary academic research, this study examined beacon-technology opportunities and introduced strategies that brand communicators can use to build trust with consumers and enable mutually beneficial utility.

II. Background

While the beacons themselves do not send notifications to enabled smartphones, they send unique location identifiers to apps, which are programmed to respond differently based on the data received. Via these low-power signals received by phone applications, beacons enable catered and strategically targeted push notifications on just about any smartphone as it enters a pre-determined locations.

Beacons usually look like palm-sized air fresheners, or adhesives stuck to walls, shelving units or products. Any number of beacons are placed throughout store aisles, depending on the size of the space and the desired precision of proximity measuring. A beacon, which has a battery life of about two years, constantly emits BLE signals to phones with their Bluetooth capability turned on. Enabling this capability is as easy as turning on Wi-Fi and, despite speculation, there is no concern of battery drainage. When a beacon detects a mobile device, the beacon sends location-aware signals to phone applications, which then act on the data delivered, often assisted by content management platforms. Pre-determined actions can range from coupons and offers to specialized in-app experiences, but the sky is the limit in terms of what this technology looks like and how it is applied.

Although the possibilities of application are broad, most beacon technology marketing efforts currently enable retailers to offer real-time in-store engagement and brand promotions, with accompanying analytics that prove return on investment. For years, e-commerce businesses have been able to strategically target specific consumers by using the power of big data they collected from the Internet. From cookies to targeted banner ads, there is no denying that most have come to at least accept, if not appreciate, the personalized online shopping experience, although many consumers were hesitant and uncomfortable at first. Beacon technology introduces this catered personalization to brick-and-mortar retail businesses.

This technology, which can activate recommendations, insights and support via wave signals, has the power to deliver custom branded content and start a conversation with consumers at a crucial time and location—physically within any given proximity of the product and within seconds of the potential point of purchase.

Apple recognized beacon’s potential and introduced its trademarked iBeacon during the company’s 2013 summer Worldwide Developers Conference. Any iPhone4 or later comes completely beacon-enabled. It wasn’t long before Google followed suit ensuring that any Android OS 4.3 or later is beacon-enabled as well (Laird). Apple and Google made their software compatible with beacon, but don’t actually make the beacon hardware. These come from more than 50 third-party manufacturers, with more likely to enter market in years to come (Thomas). Most notably, companies such as PayPal and Qualcomm are even creating hardware of their own. Other main players include Estimote, Sonic Notify, Kontakt, Gimbal, Swirl, Blue Sense and GPShopper. Most provide beacon management systems and services in addition to the hardware or software platforms (Danova). These innovative companies are not just factory-like product manufacturers, but rather they are strategic think tanks that will truly determine the future of location-based marketing technology.

Beacon technology is not to be confused with existing, more traditional location technologies. While NFC (near field communication), GPS and QR code technologies have similar location-focused purposes and properties, none are capable of being as widely accessible or strategically location-pinpointed as beacon technology. NFC is powered by the phone and requires an NFC chip, which iPhones do not come equipped with (Evans “What Technology”). And as the name suggests, NFC technologies require almost physical touch, responding only within four centimeters of distance, while beacon has the potential to engage up to 200 feet of distance (Evans).

Consumers are far too familiar with a GPS declaring: “you have arrived,” as they hopelessly look left and right at what is surely not the desired destination. While GPS is great for navigating across a state, it does not map precise indoor locations. Maybe one day it will be able to direct consumers to the most optimal parking spot, point of entrance and guide up the stairs and down the hallway to a meeting room but, at this point, GPS uses satellites or cell tower triangulation that does not permit the identification of indoor location (Hulkower). GPS and Beacon technology can probably be best differentiated between “determining if someone is in your neighborhood or in a particular aisle, standing next to a specific product in your store” (Brown).

Lastly, QR codes have likely reached their height in usage. This location-based code achieved widespread adaptation and broad usage due to the fact that it could be easily generated for free and was compatible with most smartphones. However, the fact that this code requires consumers to download an application and physically pull data for themselves has minimized opportunity for brands to offer features that can offer personalized targeting and engagement.

NFC, GPS and QR code technologies each demand a pull instead of a push approach, actively requiring consumers to use their mobile phones to seek branded information, offers or experiences. Beacon technology almost entirely implements a push approach, although it requires people’s “opt-in” acceptance in the beginning. It does “push” targeted content to relevant users through a few layers of permissions. Bluetooth must first be enabled on the phone; and the consumer must also download the given brand or campaign-specific mobile app. And as of iOS 8, Apple has also required the app to be open for users to share their location. These provisions protect consumer privacy and prevent brands and advertisers from jumping the gun and pushing boundaries too close to “beacon-based spam.” (Beacon V. IOS 8).

The real challenge is building a strong foundation of consumer trust so that app users, shoppers, and all different types of consumers are receptive to brands’ efforts to create mutually beneficial relationships and enhance customers’ experiences by leveraging the power of beacons.

III. Literature Review

Many articles explored beacon technology’s potential, discussed the aspirational applications, and analyzed current beacon-enabled campaigns. Scholarly and business-focused studies have delved into what this technology and intelligence means for today’s consumer-oriented culture. Business Insider Intelligence, a research service, named beacon technology “the most important retail technology since mobile credit card readers” and predicts a five-year compound annual growth rate of 287%, with 4.5 million active beacons overall by 2019 and 3.5 million of these in use by retailers. Senior Business Insider Intelligence Analyst Cooper Smith is optimistic about the success of this technology, reporting that 72% of retailers plan to be able to identify a customer when they walk in the store. However, Smith still expresses that retailers need to be wary of privacy issues. (Smith)

A number of sources, primarily technology-, business- or marketing-focused, have covered the emergence of beacon-enabled campaigns and applications. While in the experimental stage in late 2013, Tony Danova from Business Insider Intelligence began to cover the applications being contemplated across a variety of industries. He listed retail, payments, events, content delivery, transportation and in-home applications. Danova named retail the first and most obvious market for this technology and provided encouraging data from mobile marketing firm, Swirl, which reported that already 67% of retail shoppers had received an in-store alert, and of those shoppers, 81% opened or read the alert, and 79% made a subsequent related purchase. Some analysts have suggested that the best way to approach the app development would be to partner with established lifestyle or shopping apps. Swirl’s data also suggests that shoppers are most likely, at 65%, to trust their favorite retailers with their location-based data (Danova).

Scholarly articles also covered the two-fold mutually beneficial potential of beacons. Digiday explained the opportunities at hand for stores and brands to collect consumer data and also to combat the practice of “showrooming,” currently hindering brick-and-mortar sales as consumers check out products in person and then pull up better deals right on their phones in store to place orders on sites such as Amazon. Another potential feature being discussed for this technology’s application is for stores to push notifications up to brands for bidding, meaning that they allow the brand that offers the highest profits to present its offer to the target consumer at the most crucial point of decision making—right in the aisle, before the purchase choice is made—via Beacon technology (McDermott).

Chain Store Age published a relevant piece about the evolution of consumer trust and how brands should be navigating the latest technological opportunities. This article also encourages companies to use consumer feedback acquired from beacon-based initiatives to redesign stores, to rethink staff interactions and in-store guidance, and to reinforce the relevance of app integration and omnichannel experiences. This article also examined a very fundamental truth emphasizing that consumer trust is the most crucial element to successful applications of new technology. Declaring that relationships are key to taking risks and making bold business decisions, this source advises that brands “communicate the benefits, deliver a quality experience, and keep building trust through proactive tech security and strong responses to any breach” (Beacon V. IOS 8). The conclusion of this article is that prioritizing relationships with consumers is key to successful beacon application.

The existing beacon-related literature has successfully started the conversation about the various opportunities and potentials for brands and advertisers to make the most of this technology. This study aimed to analyze these existing applications and present an overview of how marketers and advertisers can build beacons into their future strategic campaigns to increase the relevancy of communications in this digital age.Continued on Next Page »