proximity marketing advantages and disadvantages

The Mobile Proximity Marketing Advantages and Disadvantages Retailers Must Know

The mobile market is maturing, with 82% penetration anticipated by 2020 in the US. With the majority of adults now with a smartphone in hand, it stands to reason that retailers will want—and need—to leverage these devices to gain foot traffic, sales, and new customers.

One unique approach is through proximity marketing, which employs geolocation to market to consumers within physical reach of a store. Beacon technology, which powers proximity marketing, results in an estimated 40 million messages a year, and that number is ever increasing. As a result, the retail industry must be sure it is primed to take full advantage of this technology now and in the coming years.

While proximity marketing is ideal for targeting the right audience at the right time, it’s also a complex and emerging marketing style that’s bound to have to work out a few kinks. However, if your business is aware of the challenges, then proximity marketing could be a valuable resource for increasing market share and brand awareness. By partnering with a knowledgeable third party, your brand can take full advantage of proximity marketing while minimizing expenses and easily gaining the attention of an existing consumer base. Let’s explore the advantages and disadvantages of mobile proximity marketing.

The Mobile Proximity Marketing Advantages for Retailers

While mobile marketing might have reached maturity in the US, proximity marketing has not. This is an emerging platform that companies are just beginning to utilize. However, brands that have already adopted this technology have seen its benefits and advantages firsthand.

A prime example of proximity marketing in action is Macy’s, one of the earliest adopters. The retailer added beacon technology to their stores in advance of Black Friday in 2015 through its Walk In and Win campaign. Macy employees and advertisements notified visitors of the upcoming event, encouraging them to download the store app in order to stay in the loop. Then, to incentivize consumers on Black Friday, users were given the opportunity to win prizes and play games via their mobile devices whenever they entered a Macy’s store. While the retailer never publicly revealed the results, it’s pretty telling that they increased their beacon installation efforts shortly following the event.

benefits of proximity marketingSome of the best advantages of proximity marketing for retailers include:

  1. Increased brand awareness: As proximity marketing is still in its infancy, retailers who choose to use it can garner a lot of attention. Macy’s proximity marketing event made headlines all over the US during the holiday season in 2015, which likely helped to drive their sales and increase brand awareness.
  2. Engaged users: Proximity marketing is unique from some other digital marketing opportunities because it’s permissive. In most instances, users give the app their consent prior to receiving push notifications. That means that each notification is more like contacting a warm lead than a cold call.
  3. Higher conversion rates: It is estimated that 57% of consumers are likely to engage with location-based advertising. If your target audience is asking for it, it can be assumed that it will be a sure-fire way to gain a bigger following. And, as this marketing moves with consumers, you’re notifying an audience who is already motivated to buy.
  4. An automated edge: Proximity marketing doesn’t require much effort from store personnel. It’s automatic; technology does the work for you. That frees up your employees to work on in-store customer service while beacons get them in the door.
  5. Insights on purchase behaviors: One highly valuable aspect of proximity marketing is the data it creates. You’re essentially getting a purchase map from the consumers in your store. You can see what drives your consumers to buy, whether it’s discounts, informational videos, or interactive campaigns. This allows you to adjust future strategies accordingly.

Proximity marketing offers a great opportunity to improve customer conversion and drive brick and mortar sales. However, there are some challenges to be aware of. As it’s an emerging marketing technique, there are still some challenges to be aware of before you implement the technology in your store.

The Challenges of Proximity Marketing and its Disadvantages

Proximity marketing may be a game changer, but there are still some unanswered questions. It can be difficult to predict which approach will be successful when you are implementing new marketing-based technology. That’s why the use of proximity marketing has drawn the following criticisms, creating some notable disadvantages:

  1. Conversion issues: While consumers download a large number of apps, they don’t use a majority of those apps regularly. It’s estimated that an app can lose as many as 90% of its active users in the first 30 days. The focus on engaged daily users, as opposed to simple downloads, is a far more important metric as a sales driver.
  2. Excessive opt-ins: Consumers may have to opt-in to many different services. For example, they’ll likely need to not only approve the installation of your app but also opt in to share data and location information. The more screens they must approve, the less likely they’ll be to finish the installation process and start to engage with your brand.
  3. Management complexity: Proximity marketing is a specialty form of marketing that not every company can manage. It requires the right hardware and programming as well as an expert to monitor it.
  4. Privacy concerns: Once you have obtained customer data, you’re responsible for its safekeeping. As proximity marketing captures a high level of personal user data, to include purchase behaviors, banking information, their location, and other individual details, this data could be highly desirable for cyber criminals. Companies need to be prepared to not only store but also strongly protect this data.

While proximity marketing is not without its disadvantages, many of these concerns can be resolved by choosing to partner with a trusted third-party mobile app. By capitalizing on the expertise of third-party companies, retailers of all sizes are able to achieve high conversion rates with beacon-based proximity marketing campaigns.

Third Party Apps: A Necessary Partner in Mobile Proximity Marketing Campaigns

High-performing, innovative third-party retail apps provide proximity marketing that retailers can easily implement while avoiding many logistical concerns. Reputable partner apps have strong systems in place to prevent data breaches and have the experience to know how to interact with consumers without being intrusive.

Third-party apps strike the right balance between respecting a consumer’s privacy while providing timely marketing. They turn applied beacon technology into an interactive, fun experience that consumers want to engage with. They also manage and consolidate the user agreements necessary to collect consumer data. With the right third-party app as your partner for a tech-forward proximity marketing campaign, you can gain access to a user base that is already active and engaged.

Shopkick helps companies take advantage of proximity marketing while controlling costs. Our partners connect with our engaged users when they’re motivated to buy. For more information, contact our team today.

Image courtesy mimagephotography



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Dima Volovik

EVP of Product and Engineering

Dima Volovik is the EVP of Product and Engineering at Trax Retail — Shopkick.

Dima Volovik is the accomplished product and engineering leader who led teams to deliver innovative and commercially successful e-commerce products, marketplaces, and enterprise solutions for Amazon, Comcast, Fandango, and Universal Music. Before joining Trax, Dima was the Director at Amazon, where he led product development and Engineering for Amazon Appstore and Amazon Prime Video, CTO at Fandango, and Paciolan, head of technology at Golf Channel/Golf Now, and Global VP of Direct to Consumer Technology at Universal Music Group. Dima’s expertise includes developing consumer products, marketplaces, and enterprise solutions.

Dima grew up in Baku, Azerbaijan, where he received his MS in Electrical Engineering from Azerbaijan Oil Academy, and he currently resides in Los Angeles, California, with his family.