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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Khan, of the Toronto-based Location Based Marketing Association, agrees. "Who knows if the market will be $7 billion or $10 billion or $15 billion. But one thing is certain. It's going to be big."

Khan broadly describes location-based marketing as "the intersection of people, places and media." In this context, places range from the homes where we wake to the places we pass during our commutes to the offices or other venues where we spend our days — and back again.

The Opus Research report drills down a bit to inside locations, places where tools like GPS have traditionally had limited value.

Why are indoor location marketing services such a big deal? Well, as Google's Dodge has so accurately noted, "Because indoors is where we spend money, meet friends, and where business happens" — and older tools like GPS and online maps work best outdoors, with clear line of sight to the sky.

Smartphones, with built in sensors, accelerometers, gyros, Wi-Fi radios and cameras, have opened up worlds of possibilities for indoor positioning. Coupled with any one of the multiple technologies now under development, they enable customers to do a host of things, from navigating shopping malls and museums to sharing their locations with friends and family, searching for items within stores and receiving location specific coupons or offers.

How Do They Do It?

How are companies tracking people indoors? The MIT Technology Review highlighted just five of the emerging technologies in a report last November:

  1. Wi-Fi Triangulation — Companies like WiFiSlam and Ekahau use radio signals and unique identifiers from smartphones to triangulate position.
  2. Radio Beacons — Cheap, low power, radio beacons located at known positions within a building are the keys for companies like BlinkSight and Insiteo.
  3. LED LightsByteLight is one programming LED lights in the ceiling to pulse faster than the human eye to communicate their position to smartphones.
  4. Magnetism Maps —Indoor Atlas and are testing ways the internal compass in smartphones can detect unique magnetic distortions in stores.
  5. Sensors — Aisle 411 and PointInside are capitalizing on multiple sensors in smartphones that can measure your direction, turns, speed and height above sea level to create a three dimensional view of your location. Starting with a known position from other methods such as GPS, cellular or Wi-Fi, the smartphone sensors can be used to track your position inside a building.

And that's only a partial list. Many companies including iSIGN use combinations of technologies including Bluetooth to deliver rich media, permission-based messages to customers. For example, iSIGN's Bluetooth transmitters integrate with point-of-sale terminals, digital signage and back-end loyalty program and customer analytics management systems to provide real time data collection and increased engagement with customers.

Four Important Facts

Sterling said digital marketers should recognize the value of these new opportunities -- and offered four reasons why.

  1. Being able to influence consumer buying at the point of sale (in stores) is incredibly powerful. We talk about going "from the last mile to the last aisle." What brand wouldn't want to be able to try and sway a consumer in the store? Marketers already understand this well. That's partly what all the "shopper marketing" going on today is about.
  2. Bringing the range of digital targeting and analytics capabilities into the store is going to spark dramatic changes. The physical and online worlds have largely been separate until the rise of smartphones. Now digital marketing is going where it hasn't been able to go before, including inside the store.
  3. There's also a very powerful parallel story about return on investment (ROI) and being able to track the influence of online and mobile ads to the point of sale. That's a big part of this story too. Marketers haven't had that visibility before and as a consequence they don't really have a complete picture of ad performance and ROI. That's all about to change.
  4. Marketers also need to know that indoor location and marketing are not a speculative phenomenon that is years away. Retailers are experimenting with these things today and the competitive dynamics of the market will compel virtually all the major shopping centers and top retailers to adopt indoor location. How they use it is another discussion.

Big and Getting Bigger

Khan thinks this will be the year location-based marketing is understood as a data play and not a platform. In an interview with CMSWire, he expanded on one of his most commonly cited metaphors. Location, he said, "is the new cookie" — a message or segment of data containing information about a user.

We're getting better and better at tracking people across media types, from their phones or tablets to a laptop or desktop at the office to the digital signs in the coffee shop. Location is the cookie. Marketers should be looking at these cookies as people cross locations throughout the day to understand not only where people are but what type of media they use in each location."

Sterling noted that indoor location technologies are not just about marketing and retail. In fact, he noted, we'll see it used in a range of other contexts, from tourist destinations like museums to hospitals. "But in the marketing arena there are significant benefits to be had by both consumers and merchants across a range of use cases," he added.

Privacy and consumer education will be important parts of the equation, of course. "Merchants will need to embrace privacy best practices and gain consumer acceptance and opt-in participation. But if the benefits are strong enough that shouldn't be a problem," he said, noting that research shows most smartphone consumers are already using their phones in stores.

Title image by LDprod (Shutterstock).