Geofencing is placing a digital parameter around a physical location to capture the cell phone information of an audience attending the location. If you are a digital marketing firm looking to offer geofencing agency services to your clients, please check out these videos on how to sell geofencing:
Once the cell phone information is captured, they can now receive targeted display ads on most websites and apps. What that does is allow us to capture the data from people’s cell phones, specifically their location readers. Location readers on cell phones allow for such services as Uber, food delivery, etc. 90 to 95% of people have their locational data turned on. A geofencing agency puts all parts of the campaign together. From designing the ads to geofencing the targeted locations to reporting.
Now, what this does is form a very targeted audience.
• These are people that went to a physical location like a competitor’s place of business or a point of interest.
An auto dealer may want to geofence competitor locations. People going to other car lots are actively in the market to buy a car.
A pet food supply store may want to geofence a dog park. Once again, this is an active, real-time audience of people with pets.
A real estate agent may want to geofence open houses, building an audience of people actively looking to buy real estate.
The uses are endless. The bottom line is geofencing builds active, real-time audiences which can be served targeted display ads featuring your client’s business.
Two Components of Geofencing are Target zones and Conversion zones
Target zones (blue) are the locations being geofenced, like a competitor of your client.
A conversion zone (red) is the physical location of your client.
Why is this important? Because we can track people that have been served ads and physically visited your client’s location. Why is that exciting?
• You can provide precise Return on Investment to your client.
Let’s look at an example:
Here we have Dick’s Sporting Goods.
We start by placing custom-shaped geofences around places we believe potential customers may visit.
We look for competitor locations, and places of interest.
We have identified three competitor locations. But let’s not stop there. We have a great potential to reach athletes at the local soccer complex.
And softball players at the local baseball field.
Let’s also target a major league baseball stadium during baseball season.
Also let’s include the football stadium as well during football season. We call these shapes targeting zones.
We serve ads to an audience entering these zones. Anytime from when they entered the target zone, up to 30 days later, we can serve this audience ads.
This audience is out shopping for sporting goods at competitor locations.
These are local athletes and sports fans.
This is a perfect audience for Dick’s Sporting Goods to get their name in front of.
Now let’s talk about the conversion zone.
With the conversion zone in place, we can measure the number of people who have been delivered an ad after visiting a targeted zone, and later came and visited Dick’s Sporting Goods. Not their website, their actual physical location.
You should be getting excited about this! You should also be getting your client excited about it as well!
This allows us to prove the ROI of the advertising campaign
Let’s go back and look at our interview with Dick’s Sporting Goods. They agreed that the reasonable value of the average visitor is $100.
• AVERAGE VISITOR = $100
• NET PROFIT = $25
• COST OF CAMPAIGN = $1000
• 40 VISITORS x $25 = $1000
From that, we estimate 25% profit, which means each visitor is approximately $25 net profit to the store.
Breaking it down, if Dick’s Sporting Goods purchases a geofencing campaign with 100,00 impressions, the cost of the campaign is approximately $1000.
Going a little more with the math, we need to bring in about 40 visitors with the geofencing campaign to break even. 40 visitors x $25 = $1,000.
If we can drive 1 person to the store for every 1000 ads we show, the total visit rate or TVR is .1%, which would equal 100 store new visitors.
• TVR = TOTAL VISIT RATE
• 1 PERSON FOR EVERY 1000 ADS SHOWN = TVR .1%
• 100 NEW CUSTOMERS
• 100 x $25 = $2500
With 100 new store visitors, with a net profit of $25 for each new visitor, Dicks Sporting Goods should come out at $2500, more than double their advertising investment.
That is a pretty solid case for a renewal and marketing budget increase.
One thing we didn’t cover is the lifetime value of each customer. Local athletes and fans tend to shop at least monthly, making that value per new visitor net worth over $300 a year.
When you add that to the bottom line, your campaign is a solid return on investment.
Your client may ask you, what is a good TVR?
Steer the conversation back to a TVR that results in a positive ROI.
TVRs vary greatly in different industries. For example, restaurants have very high TVRs. Car dealerships have lower TVRs. This makes sense because people go to restaurants all the time, where we only buy cars every few years. A restaurant will need a higher TVR because the average ticket price is lower than that of a car dealer.
Here is another feature of a conversion zone
Let’s say that users that were targeted at the soccer field resulted in a lot of in-store visits. The baseball field we targeted did not result in very many in-store visits.
This is good information. We can look at the data of each targeting zone and optimize to those that are working best.
Let me simplify:
- We can target the places prospects go in the physical world
- We can then show them relevant ads
- We can track the people who were served an ad, then showed up at the store
- Then we can optimize the campaign, with the data, and improve it over time
This is a home run for any brick and mortar business, especially one with strong local competitors. This also runs along the lines of event targeting, but that’s another video.
One thing you will run into.
100,000 IMPRESSIONS = AUDIENCE SIZE OF 800- 1000 PEOPLE
Let’s start here. Impressions determine audience size. 100,000 impressions will cover between 800-1000 people. Remember, we are serving someone an ad 3-5 times a day depending on the frequency you set.
Since the geofenced location will most likely have more than 800- 1000 people, what happens is artificial intelligence kicks in. Through algorithms that consider factors like behavior and demographics, the AI is going to select the best candidates from the audience to serve ads too. This audience will be adding and dropping people, optimizing as it goes.
Bottom line is,
Not everyone entering a geofence will be shown an ad
It’s simple, the more audience size your client wants to cover, the more impressions they need to buy. Use the rule of thumb that every 100,000 impressions cover approximately 1000 people.
Tell your client if they would like to get in front of 5000 people who entered the geofence, 3 times a day for 30 days, their campaign should have a half million impressions.
If they want to get their targeted display ad in front of 10,000 people who entered the geofence, 3 times a day for 30 days, they will need about 1 million impressions.
Make sure they understand.
Key components to advertising are reach and frequency
To summarize, geofencing builds a very targeted audience. Physically visiting a location is the strongest indicator of buying intent.