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Glossary – Geofencing

Geofencing

Nikiforov Alexander
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What is geofencing?

Geofencing is an innovative technology that allows the creation of virtual boundaries for specific areas and triggers automatic actions when a mobile device enters these boundaries. In a business context, this technology is used to send promotional messages based on geolocation, making it particularly relevant for retail, banking, and small to medium-sized businesses with physical stores.

In 2016, Raiffeisenbank became the first in Russia to implement geofencing in its mobile application. Customers receive push notifications about discounts and special offers when they are near a retail location where these offers are available.

How does geofencing work?

The principle of geofencing is quite simple:

  1. The company uses specialized software to create virtual geofences, for example, around its stores or restaurants.
  2. When a customer's mobile device enters the designated area, the system determines their geolocation using GPS, Wi-Fi, or Bluetooth.
  3. Next, the information is sent to a customer data platform (CDP), which analyzes the customer's purchase history and generates a personalized message.
  4. The message containing advertisements, special offers, or reminders is sent to the customer via SMS, push notifications, or a chatbot in a messaging app.

For instance, when a customer walks past a store with activated geofencing, they may receive an SMS message advertising products from that store. In one successful example, Burger King set up geofencing around McDonald's restaurants, offering customers the chance to order a burger for a symbolic price of 1 cent, which significantly increased their foot traffic.

Applications of geofencing in business

Geofencing is actively used in various sectors, including:

  • Retail — for sending personalized offers to customers near stores.
  • Banking services — to inform customers about special offers when paying with a card.
  • Parental control systems — for tracking children's location.
  • Smart homes — for automating processes such as opening gates or turning on household appliances when owners approach.

Advantages of geofencing

Geofencing offers numerous benefits for businesses:

  1. Timely interaction with the audience: Sending messages to potential customers while they are near a retail location significantly increases the chances of impulse purchases.
  2. Targeted targeting: Geofencing allows for precise campaign settings aimed at target consumers, making the use of advertising budgets more effective.
  3. Personalized communication: The ability to create individual offers, such as discounts for purchases in the next hour, enhances customer loyalty.
  4. Data collection about the audience: Geofencing helps analyze customer behavior, including visit frequency and time spent at retail locations.

Thus, geofencing becomes not only a tool for increasing sales but also an important element in strategic marketing planning, allowing companies to interact more effectively with customers and adapt to their needs.