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What is geofencing and how does it work?

The complete guide to geofencing

Table of contents

  1. What is geofencing and how does it work?
  2. Introduction
  3. What is geofencing?
  4. How does geofencing work?
  5. How geofencing is being used by businesses
  6. What does the future of geofencing look like?
  7. Geofencing statistics
  8. The main benefits of geofencing
    1. Precise targeting
    2. Reduce wasted ad spend
    3. Personalised customer experience
    4. Clear Call to Action

1. Introduction

As the global usage of mobile phones increases year on year, so does the mobile data usage. A report by Statista suggests that mobile data usage will substantially increase by 2025. As more and more people use mobile phones on the go, the opportunities for companies who use geofencing as part of their marketing campaign are increasing at an unprecedented rate. 

In recent years, marketers have started using the endless opportunities geofencing provides, taking full advantage of location based marketing.

Geofencing isn’t just limited to mobile advertising, this article will provide you with all the information you need about geofencing, some of the ways companies are currently using it, how to integrate geofencing into your marketing strategy and the opportunities it will provide for the future.


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2. What is Geofencing?

Logistics companies were among the first to adopt geofencing technology for commercial use. It enabled them to get notifications when their fleet arrived or left specified areas. Geofencing has been around for a while, however, the ways people use it has increased substantially in recent years thanks to technology becoming more affordable and the widespread use of smartphones. 

Geofencing is a location-based service that uses RFID (Radio-Frequency Identification), GPS (Global Positioning System), cellular data, IP address ranges or Wi-Fi to prompt a predetermined action when a mobile device enters or exits a virtual perimeter on a geographical location; also known as a geofence. A geofence is essentially a virtual boundary in a geographical area. Geofences can be created to fence a dedicated area or be dynamically generated as a radius around a location such as a landmark, a specific building or postcode.

Target your customers based on their real-life movements with Geofencing Ads

Having the ability to create virtual boundaries and send real time messaging to people within the geofences and after they leave gives companies incredible opportunities to take their marketing to a whole new level.


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3. How does Geofencing work?

Geofencing works by creating a virtual boundary around a specific geographical location in GPS or RFID enabled software. Once the geofence is defined, the predetermined action will trigger when a person enters or exits the area. The action is usually specified by marketers, companies or developers depending on the intention and objectives behind creating the geofence. 

Mobile applications often have geofencing functions within the code, since a user has to opt-in for the geofence to work. For example, if someone walks passed Marks & Spencer and has the app installed on their phone with location services turned on, Marks & Spencer’s could send app notifications that contain offers to try to lure the customer into their store. 

Using geofencing for marketing may seem daunting and complicated at first, but it really isn't if you use the right software and an experienced company to guide you through the process.

The first thing to figure out is exactly which geographical locations you wish to target. This could range from locations that are holding trade events or even the location of competitor’s premises. Once the geographical locations are defined, a geofence can be created and the first step is complete.

The next step is to create highly targeted ads specifically related to the people who will be entering your geofence. Once the ads are complete, more targeting options can be added to your campaign, such as age, gender and recent keyword searches. For example, you could choose to only serve ads to people who enter your geofence, are between the ages of 32-45 and have recently been searching online for products or services your company offers. 

There are three main ways to create a geofence:

1. Polygonal Geofences

Polygonal geofences offer more accuracy than radius based geofences because you can use 12 to 15 points to define an area. The Fluid Ads Platform uses polygonal geofences to create areas in which clients can target their audiences. The platform allows users to create geofences that are accurate down to a metre. All you have to do is determine the geographical boundaries of where your customers are, create a polygonal geofence and target anyone who enters the pre-defined area with digital display ads.

2. Latitude and Longitude Geofences

Longitude and latitude systems use a square-based system to create geofences. Typically you will need the latitude and longitude coordinates for your desired location, this will enable an accurate capture radius which can be 10 ft to 500 ft around it depending on what your requirements are. The downside to this method of creating geofences is that the area you may wish to define may not be square in which case there is potential for wasted ad spend due to targeting people who are in the building next door or are walking passed the building or area you wish to target.

3. Circular and Radius Geofences

Circular and radius geofences are self explanatory, it allows you to define a circle or radius using a specific location as the centre and then decide how large you want the circle or radius to be. This method of geofencing has the same downside as latitude and longitude geofences; they are not as accurate as polygonal geofences and can result in less accuracy depending on what you require the geofence for.


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4. How Geofencing is being used by businesses

With advancements in technology and the increasing use of smartphones, geofencing is becoming more and more popular with businesses. Geofences can be used for a variety of purposes, depending on the objectives and motives behind the person or company using the technology.

Once a geographical location has been fenced and the goals and objectives are set, the potential opportunities for businesses using geofencing are endless; particularly for social media and digital marketing.

Geofences can be used to send targeted messages to social media platforms, trigger in-app notifications, publishing digital display adverts to websites through GDN (Google Display Network) or other display ad networks, triggering alerts and text messages, collecting location based data and disabling certain technologies.

Here are some common practices of geofencing used by businesses in specific industries:

  • Retailers: Some retailers create geofences around their competitor’s shops. When you walk into the competitor’s shop, you’ll get a push notification luring you away, this can be in the form of a one-day-only offer or a money off coupon.
  • Recruiters: Recruitment companies can geofence academic institutions, job fairs, corporate offices and anywhere else the types of candidates they are looking for may frequent e.g. a role for warehouse pickers would target warehouses where you’ll find quality candidates. Once these areas are defined, geofencing advertising technology allows them to send highly targeted job advertisements to potential candidates.
  • Logistics companies: Logistics companies are among the first sectors to adopt geofencing for commercial use. It allows them to track and control vehicles, ships and any other form of transport by receiving notifications when their fleet enters or exits a pre-defined area.
  • Marketing: Aside from social media marketing, geofencing is a very popular way for companies to deliver targeted messaging in various formats to real world locations where their target audience frequently visits. This could be a car dealership targeting their competitor’s stores advertising their stock, a bookmaker targeting sports events with live odds or a ticket company targeting events with tickets for upcoming events.
  • Human Resource Management: Companies can use geofencing to monitor employees, particularly workers who spend their working days doing field work. It also offers companies easy ways to automatically clock employees in and out as they come and go, avoiding long queues at the clocking-in system at the end of shifts.
  • Social Media: One of the most common ways companies use geofencing comes in the form of social media marketing. Facebook, Instagram and Snapchat are among some of the social media companies that offer geofencing as part of their targeting options.

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5. What does the future of Geofencing look like?

Despite some concerns surrounding privacy, the future of geofencing looks very promising and seems very unlikely that the popularity and excitement that overshadows the concerns is likely to decrease anytime soon. According to a report by Markets and Markets, the global geofencing market is set to grow from over $540 million in 2017 to over $1.8 billion by 2022; a compound annual growth rate of 27.5%.

Increased personalisation is among one of the key advantages of geofencing. Technology that facilitates the creation and customization of ads built with the immediate needs of the consumer as a primary focus is predicted to become more comprehensive, allowing marketers to increase their success when using geofencing as part of their marketing strategy.


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6. Geofencing statistics 

Clearly, geofencing can provide incredible results for companies and marketers who are seeking to accurately target people using their real life movements. Here are some statistics to demonstrate just how effective geofencing can be for marketers and the increasing opportunities in the coming years:

Using location data increases the effectiveness of marketing campaigns. A report by Factual identifies that using location data to increase the effectiveness of advertising and marketing campaigns can have substantial benefits. Nearly 90% of marketers believe that location based marketing and advertising has increased sales, boosted customer engagement and enhanced their customer base. 

A significant percentage of marketing budgets to be spent on location-based marketing. A report by CMO reveals that 52% of global marketing budgets are being spent on location-based marketing, mainly being led by the North American markets. 

Location targeted ad spend is increasing year on year. BIA advisory services conducted research on location based marketing and produced a five-year-forecast which reveals that global location-based marketing spend will reach $38.7 billion by 2022. 

Location based marketing benefits according to industry professionals in the US. Research by Statista reveals the top benefits of location-based marketing according to industry professionals in the US. The top benefit was increased sales, followed by a growth in customer base, higher customer engagement, deeper knowledge of customer’s needs and interests, higher response rates and improved return on investment.


7. The main benefits of Geofencing

Marketers are excited about the potential of geofencing. It’s a way for them to engage with their audiences in new ways and get more out of marketing. Here are the main benefits of geofencing: 

  • Precise targeting

With the ability to hyper-target prospects, you’ll not only be able to reach people at the right time and place, but engage them with messaging that is relevant. By targeting individuals in a specific geographic area and filtering by certain criteria such as age or gender, marketers can increase their chances for success and engage potential customers. 

  • Reduce wasted ad spend

When you hyper-target your ads and send them to the right location at the right time, engagement numbers and conversions increase. The more accurately audiences are targeted with the right messaging, marketing budgets will be more effectively spent. 

  • Enhanced data collection

There are many ways to improve your business using location data. Using geofencing to gather data will give you access to plenty of insightful data metrics. You can also look at traffic patterns, when people are in/near your locations. Using this data, marketers can get a better understanding of consumer behaviour and ultimately improve their customer experience while also increasing engagement levels among current customers.

  • Personalised customer experience

Personalization is the key to success in today’s competitive market. When you are focused on marketing, customer experience should be tailored specifically for each individual person that visits your website or app. Personalising your messaging can make all the difference between receiving new customers and keeping old ones.

  • Increase local sales

Local optimisation is extremely valuable for most businesses, but it can be challenging to rank high within your target area. If you are making efforts towards improving the performance of local searches and want another way to target local consumers, geofencing is definitely worth considering. They provide a location-based marketing that targets specific geographic regions with promotions or offers tailored just for them.

  • Expand brand awareness

Geo-Targeted advertising can also be a great way for brands to promote their online channels and increase awareness. You can be a brand of convenience for your customers. Geofencing marketing provides the opportunity to remind people you exist and let them know that they’re right there, ready-to-serve when it’s convenient for them.


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8. Tips on how to integrate Geofencing into your marketing strategy

Create geofences the right size

Companies can get over ambitious when it comes to creating geofences and make them too big. This can lead to oversized geofences which can potentially decrease the effectiveness and result in wasted ad spend. If you need to target several areas, it would be better practice to create multiple geofences rather than one big one that covers all of the areas you wish to target and some areas you do not wish to target. 

Thoroughly research your target audience 

Your target audience is a very important part of geofencing marketing. If you understand who they are and what makes them tick, then it will be easier to create an area with high conversion rates for your company’s products or services. Do you know who is in your target audience? If not, then find out by looking at the data that you already have. Maybe check social media and interact with customers about their experience of doing business with you or your competition. 

Clear Call to Action

Giving your potential customers an immediate reason to come in is essential, but it’s also crucial that you not be too pushy about the opportunity. The key to success for your ads is not just quality but also creativity. Be original, creative and appealing. You don’t want spammy or self-serving content which can irritate customers who already feel overwhelmed by all the ads they see online. Instead, create an engaging ad with clear CTA’s that guides people through the buying funnel in the most natural way possible.

Regularly review results and data 

To optimise the success of your geofencing marketing campaign as well as other digital campaigns, be sure to review data on a routine basis. Otherwise you won’t know how they’re performing and how they can be improved. Analytics can be a little tricky, but it doesn’t have to be. There are plenty of companies (including us) that will help you make sense of analytics and how your campaigns are performing. Fluid Ads offer digital ad reporting as standard with all campaigns so you can clearly see all the metrics you need to optimise your campaigns.

Use all available targeting methods 

Geofencing is just one method of targeting. It is most effective when you combine geographic targeting with other targeting methods to really hone in on the perfect audience for your ads. There are many other targeting options you can use in combination with geofencing, these include:

Keyword targeting:  A targeting tool that not only targets keywords used in searches, but the search intention behind those words. For example, if you’re a vegan friendly restaurant, you can target people who have been recently searching for terms related to vegan restaurants. Make sure your ads and landing page have content relating to the user’s search. 

Retargeting: Retargeting is the opportunity to capture data on your website visitors and ‘follow’ them around while they view other content and browse other websites. You can also win back those who didn’t convert in their first visit by re-engaging with a person after an initial interaction has ended. Retargeting Ads are a great way to stay at the forefront of your customer’s minds and engage with them as they visit other sites. You can also pull back users who have been browsing online, even if you don’t know their email address or any personal information. 

Time and Date: Ad scheduling can help you maximize your ad budget and make the most of every user. For example, if you know that your target audience is active on Mondays through Fridays at 8:00 am -5 pm then you would only run promotions during those times.

Context targeting: A targeting option that shows an ad to people who are interested in the content on your page, like if you were reading a news article about local vegan restaurants your ad can be displayed next to the article.

Demographic targeting: This targeting option allows you to show your ads to people of a specified age, gender, household income or parental status. 

Do you want to start geofencing marketing today? 

Speak to one of our team to find out more on how the Fluid Ads platform can provide you with everything you need in one place to start using geofencing ads today. 

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