Payments Leader

To Beacon or Not to Beacon

July 11, 2017

Trevor Mast I Senior Vice President Financial Services Products


Merchants are always looking for innovative ways to promote new sales. Historically, they’ve come up with a variety of ways to attract business, from hiring someone to stand outside their store with a big sign to promotional emails and newsletters to customized apps with push notifications. Recently, new beacon technology has raised some eyebrows. Beacons are small, Bluetooth-enabled devices that allow merchants to send deals, product information, advertisements and more to a customer’s smartphone based on their location. Beacons can also help collect information on customers and how they maneuver through a store.

Beacons technology and using geofencing with smartphones is nothing new but has been slow to reach retailers. As adoption rates increase, analysts predict beacons will become as important to merchant marketing as websites are today. There is now plenty of data to review and many cases to evaluate; what should retailers of all sizes do about beacon technology? How can it impact their marketing strategies? Is the hype justified? The move to digital and mobile app usage has proven extremely effective in customer acquisition, retention, and loyalty. With pinpoint accuracy, beacon technology can take customer marketing to a new level.

Beacons of Hope

Beacon technology is undoubtedly an intriguing retailing tool. While they are still in the experimental stage, retailers are expected to implement the tool increasingly. We can expect to see integration increase as retailers attempt to grow their revenue and elevate their shoppers’ experience.

Beacons are relatively small, cheap, and simple in nature. They operate on Bluetooth technology by detecting nearby devices – smartphones and tablets within 300 feet – that have opted into a service allowing message notifications on deals, promotions, and personalized offers. Retailers simply place a beacon device in a physical location, and when customers approach they will receive a message on their smartphone. Beacons can track the exact location of shoppers with impressive accuracy, turning foot traffic into sales. When shoppers pass an area within a store, they will receive a highly targeted alert that captures their attention and leads them to action.

Marketers are more likely to get attention for their marketing messages through beacons. Engaging with shoppers directly as they view products will helps retailers provide them with efficient access to relevant offers. Targeted devices do not always return information, as they are left to only take action on messages they prefer. Geotargeted messages from beacons can increase the “open rate” of mobile marketing messages significantly. In fact, beacon-originated notifications are opened over 50 percent of the time, compared to a rate of 15 percent for standard push messages.

Of course, most customers are not yet aware of beacons. This issue is not necessarily a big one, as the notification messages can still be sent to shoppers. Still, a lack of consumer awareness implies that shoppers are not expecting a beacon-powered experience. Since most shoppers use a smartphone to help them shop in or near physical stores, it is a massive advantage for retailers to directly offer them additional information and promotional offers. Going beyond the model of special deals and simple digital coupons, these small wireless devices can expand loyalty efforts to new heights – such as providing indoor heat maps where customers are engaged with directly, as well as conducting over-the-air transactions.

Push in Context, Don’t Spam

Without a doubt, the market is ready for beacon technology. Consumers readily install the apps of their favorite retailers and activate their Bluetooth. Typically, 50 percent of beacon users are in the U.S. and Europe, with the highest rates existing among the younger demographic. Technology advances are often seen as driving for more online e-commerce, but beacon technology swings the scales back to brick and mortar stores, helping retailers create new ways to draw customers into physical locations to shop with a personalized experience absent from online shopping.

Over the first five years, the implementation and acceptance of beacon technology have not been met with as much hype as intended. Still, retailers have gathered significant insight into consumer behavior. Through trial and error, beacon technology has evolved for use in greater ways than originally intended. Unsurprisingly, the earliest adopters have been large nationwide retailers. But with beacon devices costing under $30, and as messaging services software becomes increasingly affordable, the barriers for smaller operations to adapt the technology are disappearing. One-off boutiques that currently rely on social media can now take advantage of this rapidly growing trend as these affordable solutions are realized. Just as businesses without a website cannot be taken seriously, in a few years the same might be said for businesses without a beacon strategy.

Beacons also help retailers gain valuable insights into their customers, including how much time customers spend in their store, and in which areas/aisles they browse. Understanding customers better will help retailers retarget their advertising and app promotions to create a more productive relationship. Beacon technology encourages and nurtures loyalty by rewarding one’s physical presence in the store, and not just their transaction. It seeps into the online world too, where items bought at the website can be prepared as soon as the customer approaches to collect them while receiving a helpful message.

Retailers must tread a fine line between enabling a better customer experience and annoying their clientele with too many messages. The most well-meaning marketing campaign could easily fall into the spam trap. Once a customer is abused, they will likely end the relationship altogether by deleting the app. Learning what messaging falls flat and what moves the needle with shoppers will be key. The more shoppers feel as though the retailer “gets them,” the more likely they will reward them with loyalty and return visits.

The Trial and Error Period is Over

The prudent use of beacon technology offers great advantages to retailers looking to capture the attention of customers by generating engagement and rewarding those that choose to interact.This will build both loyalty and trust. Retailers can instantly adapt their marketing efforts to individual consumers, a strategy that can prove more successful and cost-effective than attempts to appeal to a broad target demographic.

After half a decade of trial and error, several themes and strategies have emerged. From the start, it is important to remain open. A dedicated store app is important, but smaller players especially must consider using third-party apps to send notifications. Rewarding loyalty instantly with points and discounts based on purchases, behavior and even for entering the store will prove fruitful. Getting smart with messaging through beacons will be necessary. As customers move through different hotspots and see different products appear, contextual information on additional products will complement the item the consumer wants.

The main reason beacon technology is being used more frequently is that it plays into the hands of modern consumers who use their smartphones for just about everything, especially shopping. Also, shoppers demand and expect it. If over 50 percent of consumers who walk past a store want an offer, why not give it to them? The statistics keep increasing on how we all prefer to use mobile devices for shopping, so it is time for business owners of every size to wake up and not be left behind.

Retail Relevance In-store

Despite beacon technology’s relatively slow growth, there is no denying it will continue to adapt with the retail climate. Ultimately, beacons will provide valuable information and services to retail businesses, allowing them to drive sales through targeted marketing efforts while gaining greater insight into their customer base. The use of beacon and geofencing technology is quite possibly the best method smaller retail businesses can work against the encroachment of e-commerce brands like Amazon. Customers will appreciate the personalized shopping experience beacons provide. It will lead to increased foot traffic and build loyalty. And when the intent to purchase is high, customers can be engaged and in real time.

Retailers should never forget how much customers love using their mobile devices. Beacon technology can make it as easy as possible for customers to receive deals and other relevant information. As for the customer, they will continue to do what they normally do – look down at their phone for somewhere to go or something to buy. If you aren’t using beacon technology to market your business, what are you waiting for?