Geofencing Explained

Every marketer has the goal of compelling their customers to live up to their potential. Whether that is through peer measurement tactics like running a tiered loyalty program, or individual competition tactics like a visit challenge, there are many ways to drive more visits and spend. One element that many marketers fail to consider, however, is geographic potential. What exactly does that mean? Let’s dive in.geofencing w caption_edited-1

Geographic Potential

Geographic potential is the highest frequency with which a customer can visit your restaurant or retail locations based on their proximity to them. Marketers might think they have the geographic information they need about their customers because they ask for an address when a customer registers for their loyalty program. While most customers will probably provide their home address, does that really paint the full picture of their geographic whereabouts? Of course not! If you want to capitalize on the geographic potential of your audience, you need to paint the full picture of where they are spending their time. Say a member of your loyalty program – let’s call him Joe – provides his home address when he signs up for your program. You have a location one mile away from Joe’s address, and you send him lunch offers on a regular basis, but he never redeems them. What gives? It turns out that Joe works 20 miles away from where he lives, so he is never in the area around lunch time. A better use of marketing resources would be to send him dinner offers.


So how can you know that Joe doesn’t work near his home? Geofencing makes this possible – let me explain how it works. Look at the images below for help with visualizing the concepts.

In Figure 1, you can see the rings drawn around the Paytronix Newton office address. The closer someone is to your location, the more likely they are to stop by. A ‘geofence’ is a designated radius around a given location. For example, let’s say your brand uses geofencing and you set the radius to be a mile around each location. Joe has downloaded your app because he loves your brand, and now, whenever he enters the geofence, he gets a message enticing him to come in and visit your location. Meanwhile, you collect data about his whereabouts. You can now track when he is near your locations by frequency as well as day part. This data proves that he is never around during the daytime – dinner offers are your best bet with getting an incremental visit out of Joe.geofencing data w caption

Figure 2 shows an example of what geofencing data looks like. The blue dots represent people who received the geofenced message but did not come in, and the yellow dots represent the people who received the message and decided to come in. On average, Paytronix has seen brands generate a 30% visit rate with their geofencing campaigns, which is incredible! As a marketing tool, geofencing far surpasses email when it comes to effectively converting members. Your customers are 136% more likely to visit if they receive a geofenced message than if they receive an email.

Does Your Brand Need This?

As always, this depends on a number of factors. If you are a restaurant brand, examine the following:

  • Mobile Infrastructure. Does your brand already depend on mobile communication with its customers? Acclimating to geofencing as a marketing tool will go more smoothly if you already have an app in place. Plus, if your app has been successful, it’s a good indicator that you have a very mobile-fluent audience that will be more receptive to location-based messages.
  • Is your audience tech-savvy? Are they younger? Do they make split-second decisions?
  • Are other brands in your space using geofencing already? If they are, you don’t want to fall too far behind.

If you are a convenience store, this decision could be less clear-cut. The convenience store market is still lagging behind restaurants in terms of customer engagement technologies and strategies, but that doesn’t mean your business should wait! There is a lot of value for convenience stores in the geofencing tool. Geofencing works best for quick-serve restaurants (QSRs) rather than full-service restaurants (FSRs) because it’s easier to convince customers to pop in and buy a sandwich rather than ask them to change their plans and sit down for an hour-long meal. Since convenience stores require even less time of customers than QSRs, it seems that geofencing could be a perfect fit. When a customer comes to a stoplight near a convenience store, they could get a geofenced offer on a gas discount and compel them to stop by to fill up. Or, they could receive an LTO or BOGO offer. Convenience store marketing is entering a new era with loyalty and mobile programs coming to the forefront, and geofencing could be a big part of the shift. The geographic potential is endless.

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