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INTERACTIVE SESSION: ORGANIZATIONS 'LOCATION-BASEO MARKETING ANO AOVERTISINGIn October 2010, the UK-based cell phone carrier 02launched the country's first large-scale, location-basedservice for delivering targeted marketing to mobiledevices. The concept of targeted marketing is consid-ered to be a vital part of any business. 02 Media, themobile marketing division of the company, alreadyuses customer data to provide personalized market-ing to companies, For example, an iPhone application("app") for a theme park that was targeted at familieswith children had great success, with approximately30 percent of those targeted eventually downloadingthe app. The traditional targets for marketing are age,gender, interests, and so on. Location-based market-ing can go further by targeting marketing at the rightindividuals at the right time, when they are in the rightlocation to make a purchase,

Here's how 02's system works. 02 customers optinto the system by providing their age, gender, andinterests. When customers are near an outlet thatmatches their profile, they receive an SMS message fordiscounts or other special offers. As of 02's launch, itwas limited to providing discounts to Starbucks coffeeshops and outlets supplying I10réal hair products, but02 Media was confident that other partners will comeon board.

The service is based on a technology called "geo-fencing," which is provided to 02 by a Californiabased company called Placecast. In 2009, Placecastconducted a trial, under the name of ShopAlerts,involving three different types ofretailers- AmericanEagle Outfitters (clothing for young adults), North Face(outdoor equipment and apparel), and Sonic (fast-foodoutlet). Although there may be some overlap betweenpotential customers at these three retailers, plentyof people will fit one category but not the other two.Thrgeted marketing reduces the likelihood ofrelevantmarketing messages being lost in "junk mail"; thatis, customers get SMS messages that they know areprobably relevant. According to research carried outby Placecast on ShopAlerts users, most customersopened the alerts immediately, and 65 percent madea purchase as a result of receiving the SMS message(interestingly, not always a purchase mentioned in themessage).

02 had to resolve several issues with this type ofmarketing .

• Opt in and opt out. Customers must be able toopt out of the system at any time and must berequired to opt in at the start.

• Age. The 02 scheme is not available to customersyounger than age 16.

• Data sharing. The targeted marketing is based oninfarmation supplied by the customer. This datamust not be shared with other customers.

• Frequency. Because the SMS is triggered by thecustomer moving into the geo-fenced area, thereis a danger that the customer will be bombardedwith messages as he or she walks up and downthe street. The Placecast American trial cappedmessages at one per every 48 hours and threeper week. The 02 scheme limits the frequency ofmessages to one per day.

• Devices. The 02 scheme works on any mobilephone. It is not necessary to download an app(i.e., a smartphone is not required), and it doesnot affect the device's battery life.

As you might expect, 02 and its partners wereenthusiastic about the venture. According to ShaunGregory, managing director of 02 Media, the marketpotential is huge and this is a modern and efficientway to reach a mass audience in one go. Hal Kirnber,head of CRM for L'Oréal, noted that the opportunitywas very exciting and I10réal would learn a great dealwhich it could implement in future initiatives.

The use of text alerts for marketing does need toconsider the potential customer and their use oftex-ting. A survey conducted in October 2010 by comScare,a marketing research company that studies onlinebehaviar, found huge differences in mobile behavior indifferent parts ofthe world. The survey included cellphone users in Japan, the United States, and Europe.The researchers found that in the European samplemore than 80 percent of people sent SMS messagesto one another; in the United States the figure was66.8 percent. In Japan, however, the figure was muchlower-40.1 percent, Of course the lack of enthusiasmfor sending messages does not necessarily reflect anunwillingness to receive marketing texts.

It appears that in Japan the emphasis is less onthe opt-in approach of Placecast and more on loca-tion- based mobile advertising, a more sophisticatedway of changing the advertising that a user receiveswhen using an application. For example, someoneusing an iPhone ar Android app typically also seesbanner advertisements. AdLocal (now part of YahoolJapan) has the largest share of Japan's location-basedadvertising market (valued at US $1 billion!), and suchtechnology can make sure that the advertising that the

user receives is based not necessarily on who they arebut where they are. Advertisers create their own adver-tisements using a wizard and then specífy the desiredlocations and dates to display them (for special pramo-tions, discounts, etc.). It seems that the success ofthistype of intelligent marketing is likely to spread to theUnited States and Europe.

Sources: "02 Launches UK's First Location-BasedMobile Marketing,"02 news release, October 15, 2010; Katheryn Koegel, "Consumer

CASE STUDV QUESTIONS1. MO different approaches to capturing consumer

interest are described in this case. How do thePlacecast and AdLocal approaches differ?

2. Do you think that targeted advertising is betterthan a blanket approach? What is the differencefor the advertiser? For the consumer?

3. The information fram the comScore survey didnot differentiate between age groups, only

Insights on Location-based Mobile Marketing," January 2010; "com-Score Releases First Comparative Report on Mobile Usage in Japan,United States, and Europe," comScore press release, October 7, 2010;Farukh Shaikh, "YahooJapan Scoops Up Location-Based Mobile AdFirm Cirius 'Iechnologics," eBrands, August 17,2010 (http://news.ebrandz.com/yahoo/2010/3515-yahoo-japan-scoops-uplocation-based-mobile-ad-firrn-cirius-technologies-.html, accessed October 25,2010).

Case coniributed by Andy fones, Staffordshire University

country. Do you think there are differences inbehavior among different age groups that wouldmake location-based marketing better for onegroup than another?

4. Think ofbusinesses in your area that mightbenefit fromjoining the 02 scheme. What couldthey offer?