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Location, Location: Reinventing the Customer Experience with a $10B a Year Digital Marketing Technology

Mobile commerce.jpgBrace yourself for the next evolution of digital marketing — indoor location and place-based marketing, a fast-growing segment that could be worth more than $10 billion annually in the US by 2018.

Indoor location technologies bring Internet-style tracking to physical spaces. And their development is changing the way retailers, venue owners, manufacturers and brands think about operations, place-based marketing and the customer experience, according to a new report from San Francisco-based Opus Research, an IT industry analyst firm.

That's no surprise to people like Asif R. Khan, founder and president of the Location Based Marketing Association, or Don Dodge, a Google executive who has invested in several indoor location companies. Indoor location and positioning technology is the next big thing — "bigger than GPS” or online maps, Dodge contends.

So do you know enough about the technologies and the companies developing them to effectively incorporate it in your digital marketing plans over the next few years?

Game On!

Last March, Apple paid about $20 million to acquire an indoor location company called WifiSLAM. Industry observers saw it as a sign that the war over indoor mobile location services was heating up — speculation confirmed in December when Apple activated "iBeacon" transmitters in its 254 US stores.

If you don't already know, iBeacon is an indoor positioning system or what Apple calls "a new class of low-powered, low-cost transmitters that can notify nearby iOS 7 devices of their presence." While Apple was the first major retailer to rollout micro proximity-based retail assistance, it's hardly alone.

This month, Apple announced yet another implementation of iBeacon. InMarket, a location based mobile engagement platform, began turning on iPhone-compatible sensors at Giant Eagle and Safeway grocery stores in Cleveland, Ohio, Seattle, Wash. and San Francisco, Calif.

Next month, the technology will make its way into 100 American Eagle Outfitters stores nationwide, including locations of sister brand Aerie through a partnership with Shopkick, a location-based startup.

Massive adoption of indoor location technology is on the way and "the market finally reached maturity," boast industry proponents like Christian Carle, CEO and co-founder of Pole Star, a European indoor positioning company. As Carle explained in a recent white paper on geolocation:

Indoor Location has become the holy grail of location based-marketing, bringing consumers from their home to the closest shopping mall or retailer, greeting them with a message as they enter the mall or the store, helping them navigate indoors, send product information and special promotions as they get closer, and finally allow them to pay for the items right from their mobile."

Game Changing Technology

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The payoff in just a few short years will be significant. In its soon to be released report, “Mapping the Indoor Marketing Opportunity,” Opus Research predicts the indoor location and marketing landscape will be worth more than $10 billion by 2018. Indoor or place-based marketing (which is somewhat broader) relies on smartphones for location awareness and encompasses geo-targeted mobile inventory, as well as in-store push notifications.

Opus Research Senior Analyst Greg Sterling, the primary author of the report, and his co-author, Research Director Derek Top, told CMSWire that brands, retailers, ad networks and publishers are starting to grasp the opportunities and potentially radical changes coming with offline analytics and indoor location. Sterling explained:

Today, some $40 or $50 billion is spent annually in the US on in-store merchandising or shopper marketing. That would include buying shelf visibility, in-store coupons, branded or product displays, in-store video and so on. We believe that a portion of this current 'analog' spending will migrate to digital and mobile — targeting people very near or in stores and venues."

According to an executive summary of the report, more than 1,000 retail locations in the US are already using or experimenting with some form of indoor location for analytics or customer experience purposes. But that number is likely to explode very rapidly. "Value and competitive dynamics will make indoor location (and analytics) mandatory for most retailers. In addition, offline conversion tracking will become standard, changing how marketers think about the value of digital advertising," it notes.

Insider Tracking

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