Geofencing: Targeted Mobile Strategies for Small Business

by Angela Stringfellow

2 min read

In marketing terms, geofencing is a method for targeting mobile users with advertisements. The GPS-based technology creates a virtual perimeter, or fence, around a specific business location and identifies users who are in proximity.

Geofencing is particularly useful for promoting limited-time offers, because it sends the ads only to consumers who are nearby at certain times. The only catch is customers must opt in to receive your messages. Often, this is accomplished by asking consumers to consent when they download a company’s mobile app or by sending an initial text message asking for an opt in. Customers may also opt out at any time, so your marketing messages must be carefully crafted to deliver value. According to, a geofencing notification must “be brief, location-relevant, and one that prompts action.”

Here are three ways to use geofencing effectively.

1. Refine your customer targeting and boost conversion rates. Alen Malkoc, CEO of Optyn, previously founded Dealster — which he sold, along with its geofencing technology, to Half Off Depot in 2012.

“We used geofencing as the first factor of identification and matching consumers and merchants that are in a similar area,” he says. Malkoc used a three-tiered approach to categorize potential customers, including those in a one-, five-, and 10-mile radius.

In his experience, conversion rates are better within a smaller radius. “Most importantly, the conversion from lead to new customer to repeat customer is much higher for a geofencing marketing campaign” than other digital marketing tools, such as Google AdWords, he says.

“With local small businesses, location is the most significant driver of converting and acquiring customers,” Malkoc adds. “The key focus should be to reach the right customer, and in order to do that, start with location as the No. 1 factor.”

2. Define your ideal perimeter. Determining the ideal radius for your business isn’t a guessing game; it’s a matter of supply and demand. “If there are 20 Chinese restaurants (of good quality and similar value) in a one-mile radius, people won’t be willing to retain an existing relationship with restaurants that are further out,” Malkoc explains.

Coffee shops and dry cleaners, for example, should stick with a smaller radius, because customers typically can find ample alternatives nearby. The products and services are inexpensive and often seen as commodities, giving customers little motivation to travel farther to obtain something they could get two doors away.

But for businesses that have the benefit of scarcity, a larger radius can be quite effective. Recreational companies, such as paintball fields, are less likely to have close competition and customers are more willing to travel farther to get there. Specialized retailers, such as bridal and ski shops, movie theaters, and high-end restaurants also fall into this category.

3. Drive traffic to your small business. Geofencing is an affordable way to deliver your marketing messages to the right people, at the right time, and in the right place. According to a study by Placecast, 53 percent of shoppers have visited a retailer after receiving a location-based alert, and 50 percent say that visit was unplanned.

“The real value in geofencing is similar to that of the overall internet: It levels the playing field, which gives smaller businesses that don’t typically have the marketing budget the opportunity to compete against the bigger retailers,” says Stacy Bennett, principal of Bennett Marketing Group.

“Additionally, it is a win-win vehicle. It offers consumers a timely message that coincides with their physical location and offers marketers a cost-effective way to reach consumers with a targeted message.”

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