Location Based Services to All

The holy grail of marketing on mobile devices for at least the latter half of this decade revolved around the promise of location based services, or LBS. LBS mean that the network will share its knowledge of your whereabouts with an application, which in turn can react to it. For example, detecting that you are walking next to a McDonald’s location, your mobile device can suddenly pop a message on its screen telling you that you just got a coupon for a free Diet Coke if you buy a Big Mac. Built-in GPS would be the simple avenue to obtaining location data. Still, as Google Maps users on older Blackberry devices know, using cell tower information can give you a pretty decent idea where you are as well.

The main setback to widespread adoption of such marketing magic had been the mobile carriers themselves. Always fearing the same fate of Internet service providers, they look for angles to retain control and squeeze income out of any potential revenue stream. Adopting caution instead of openness, having access to mobile device-based LBS was generally only possible through carrier partnerships. In the best case, the carrier had the application preinstalled on all devices, but getting there was an almost impossible mission. Worse yet, American consumers are not keen to install third party applications on their phones, unless your name is Google or Facebook.

Apple’s iPhone changed all of that in two ways thanks to its exclusive agreement with AT&T:

1. Third-party iPhone applications are allowed to access location information obtained from its built-in GPS device.
2. Users can easily install third-party applications from the App Store.

Google, following Apple’s lead, made the same possible on phones running its Android operating system with its own easy-to-download application store.

However much better things are now, something may be missed in the hype. The vast majority of mobile device users do not own an iPhone or an Android-based device. They also still do not have built-in GPS or applications that use it. So are they destined to stay in the dark when it comes to LBS? Are there other networks that can be leveraged in order to provide location awareness outside of the world of cellular communications?

The answer is yes and you are using it every single day, probably. The network is even deployed worldwide and is tried and tested for decades: credit card and payment networks. In the modern world, the vast majority of people turn to plastic before they turn to cash. Credit card companies are so keen to have us do that they actually reward us with cash and hotel and airline miles. Beyond racking up debt, there is a hidden utility that can be tapped, at least for marketing purposes in this vast payment network.

As a suburbanite, I frequently head to the sprawling shopping centers near my home. Like many parents, I go to Target frequently to get diapers for the baby and replenish other household products. I always use my credit card to pay because I want to get cash back, even if it is 42 cents for the current purchase. This is where the magic can take place; the credit card network knows where I am from the authorization and processing of the transaction. Why not send me a text message with a coupon for a free latte at the Panera location next door to the Target store? It is the payment transaction that provides the network its location awareness and this network is currently not doing anything with that information. Better yet, I did not need any special hardware other than old school plastic; no special mobile device or GPS technology. Any mobile device will do.

Clearly there are huge hurdles with privacy the top among them. Technology can always be figured out if enough effort and support is thrown into the mix. Consumers can be incentivized and shown the benefits of such a program, especially with no investment or effort on their part being necessary to participate. They must also explicitly agree to receive such messages, often on their own dime. At the same time, very few entities have access to this information, namely Visa, Mastercard, American Express and to a lesser extent, Discover Financial’s Novus network.

Still, banks can rely on another network that is under their own control – automated teller machines or ATMs. People always need cash for the few instances that credit cards do not work. Whenever you go to an ATM, the bank knows where you are. This is again a perfect trigger to provide you with location based marketing information. Similar to the coupons printed on the back of supermarket receipts, banks can give you coupons to businesses that are close to the ATM device.

A weakness of this approach is its immediate nature: the reaction to a consumer’s known location must almost be instantaneous. Otherwise, the consumer has just moved on and the relevance of the message/coupon/information may be reduced. Nonetheless, its low fidelity and near-independence of mobile device capabilities beyond SMS gives it a lot of its power. Can you hear me, Visa?