In October 2010, the UK-based cell phone carrier O2 launched the country’s first large-scale, location-based service for delivering targeted marketing to mobile devices. The concept of targeted marketing is considered to be a vital part of any business. O2 Media, the mobile marketing division of the company, already uses customer data to provide personalized market-
ing to companies. For example, an iPhone application (“app”) for a theme park that was targeted at families with children had great success, with approximately
30 percent of those targeted eventually downloading the app. The traditional targets for marketing are age, gender, interests, and so on. Location-based marketing can go further by targeting marketing at the right individuals at the right time, when they are in the right location to make a purchase.
Here’s how O2’s system works. O2 customers opt into the system by providing their age, gender, and interests. When customers are near an outlet that matches their profile, they receive an SMS message for discounts or other special offers. As of O2’s launch, it was limited to providing discounts to Starbucks coffee shops and outlets supplying L’Oréal hair products, but O2 Media was confident that other partners will come on board.
The service is based on a technology called “geo- fencing,” which is provided to O2 by a California
based company called Placecast. In 2009, Placecast conducted a trial, under the name of ShopAlerts, involving three different types of retailers— American Eagle Outfitters (clothing for young adults), North Face (outdoor equipment and apparel), and Sonic (fast-food outlet). Although there may be some overlap between potential customers at these three retailers, plenty
of people will fit one category but not the other two. Targeted marketing reduces the likelihood of relevant marketing messages being lost in “junk mail”; that
is, customers get SMS messages that they know are probably relevant. According to research carried out by Placecast on ShopAlerts users, most customers opened the alerts immediately, and 65 percent made
a purchase as a result of receiving the SMS message (interestingly, not always a purchase mentioned in the message).
O2 had to resolve several issues with this type of marketing.
• Opt in and opt out. Customers must be able to opt out of the system at any time and must be required to opt in at the start.