Chapter 10 E-commerce: Digital Markets, Digital Goods 417 INTERACTIVE SESSION: ORGANIZATIONS LOCATION-BASED MARKETING AND ADVERTISING In October 2010, the UK-based cell phone carrier 02 Age. The O2 scheme is not available to customers launched the country's first large-scale, location-based younger than age 16. service for delivering targeted marketing to mobile Data sharing. The targeted marketing is based on devices. The concept of targeted marketing is consid- information supplied by the customer. This data ered to be a vital part of any business. O2 Media, the must not be shared with other customers. mobile marketing division of the company, already Frequency. Because the SMS is triggered by the uses customer data to provide personalized market- customer moving into the geo-fenced area, there ing to companies. For example, an iPhone application is a danger that the customer will be bombarded (app) for a theme park that was targeted at families with messages as he or she walks up and down with children had great success, with approximately the street. The Placecast American trial capped 30 percent of those targeted eventually downloading messages at one per every 48 hours and three the app. The traditional targets for marketing are age, per week. The O2 scheme limits the frequency of gender, interests, and so on. Location-based market- messages to one per day. ing can go further by targeting marketing at the right Devices. The O2 scheme works on any mobile individuals at the right time, when they are in the right phone. It is not necessary to download an app location to make a purchase. (.e., a smartphone is not required), and it does Here's how 02's system works. O2 customers opt not affect the device's battery life. into the system by providing their age, gender, and As you might expect, O2 and its partners were interests. When customers are near an outlet that enthusiastic about the venture. According to Shaun matches their profile, they receive an SMS message for Gregory, managing director of O2 Media, the market discounts or other special offers. As of O2's launch, it potential is huge and this is a modern and efficient was limited to providing discounts to Starbucks coffee way to reach a mass audience in one go. Hal Kimber, shops and outlets supplying L'Oral hair products, but head of CRM for L'Oral, noted that the opportunity 02 Media was confident that other partners will come was very exciting and L'Oral would learn a great deal on board which it could implement in future initiatives. The service is based on a technology called "geo- The use of text alerts for marketing does need to fencing," which is provided to O2 by a California consider the potential customer and their use of tex- based company called Placecast. In 2009, Placecast ting. A survey conducted in October 2010 by comScore, conducted a trial, under the name of ShopAlerts, a marketing research company that studies online involving three different types of retailers, American behavior, found huge differences in mobile behavior in Eagle Outfitters (clothing for young adults), North Face different parts of the world. The survey included cell outdoor equipment and apparel), and Sonic (fast-food phone users in Japan, the United States, and Europe. outlet). Although there may be some overlap between The researchers found that in the European sample potential customers at these three retailers, plenty more than 80 percent of people sent SMS messages of people will fit one category but not the other two. to one another; in the United States the figure was Targeted marketing reduces the likelihood of relevant 66.8 percent. In Japan, however, the figure was much marketing messages being lost in "junk mail"; that lower-10.1 percent. Of course the lack of enthusiasm is, customers get SMS messages that they know are for sending messages does not necessarily reflect an probably relevant. According to research carried out unwillingness to receive marketing texts. by Placecast on ShopAlerts users, most customers It appears that in Japan the emphasis is less on opened the alerts immediately, and 65 percent made the opt-in approach of Placecast and more on loca- a purchase as a result of receiving the SMS message tion-based mobile advertising, a more sophisticated (interestingly, not always a purchase mentioned in the way of changing the advertising that a user receives message). when using an application. For example, someone O2 had to resolve several issues with this type of using an iPhone or Android app typically also sees marketing banner advertisements. AdLocal (now part of Yahoo! Opt in and opt out. Customers must be able to Japan) has the largest share of Japan's location-based opt out of the system at any time and must be advertising market valued at US $1 billion!), and such required to opt in at the start technology can make sure that the advertising that the 418 Part Three Key System Applications for the Digital Age user receives is based not necessarily on who they are but where they are. Advertisers create their own adver- tisements using a wizard and then specify the desired locations and dates to display them (for special promo- tions, discounts, etc.). It seems that the success of this type of intelligent marketing is likely to spread to the United States and Europe. Sonra "DZ Launches UK's First Location-Based Mobile Marketing." O2 news release, October 15, 2010; Katheryn Koegel, Consumer Insights on Location-based Mobile Marketing." January 2010; com- Score Releases First Comparative Report on Mobile Lisage in Japan, United States, and Europe,"comScore press release, October 7, 2010; Farukh Shaikh, "Yahoo Japan Scoops Up Location-Based Mobile Ad Firm Cirius Technologies, "eBrands, August 17, 2010 (http:/ews. chrandz.com/yahoo/2010/3515-yahoo-japan-scoops-uplocation. based-mobile-ad-firm-cirius-technologies.html, accessed October 25, 2010). Case contributed by Andy Jones, Staffordshire University CASE STUDY QUESTIONS 1. Two different approaches to capturing consumer interest are described in this case. How do the Placecast and AdLocal approaches differ? 2. Do you think that targeted advertising is better than a blanket approach? What is the difference for the advertiser? For the consumer? 3. The information from the comScore survey did not differentiate between age groups, only country. Do you think there are differences in behavior among different age groups that would make location-based marketing better for one group than another? 4. Think of businesses in your area that might benefit from joining the O2 scheme. What could they offer