Marketers and advertisers have a massive opportunity to engage consumers based on their location data derived directly from their mobile device.

Last year, the number of worldwide smartphone users exceed 2.5 billion. And this has contributed to the rise of location-based services. LBS provide information to mobile users about their geographical proximity to different businesses and improve the product discovery process via mobile devices.

According to LBMA 2017 Global Location Trends Report, 25% of marketing budgets are spent on location-based marketing and over 50% of brands are using location data to target customers.

Technavio’s market research reports that the global location-based advertising will develop at a compound annual growth rate (CAGR) of 40% from 2016 to 2021.

Recently, Facebook also introducing a location-based ad tool that allows advertisers to target users based on their offline activities including visits to brick-and-mortar stores, in-store purchases, and calls to businesses. The release of the tool reflects the growing number of companies emphasizing location based-advertising services.

Regarding the effectiveness of location-based advertising, a recent study on 3,644 different coupon promotions offered by more than 3,000 stores located in a large Western European concluded that:

1. The sorting offers by distance dominates random sorting. Also, not providing the exact distance information can increase advertising effectiveness since distance information makes transportation costs more salient.

2. More precisely, geographical distance has a negative impact on consumers’ coupon response behavior. Increasing the distance by one kilometer decreases the probability of choosing a coupon from 4.6 to 19.4 percent.

3. In terms of the trade-off between distance and discount, increasing the discount by one percentage point has the same effect as decreasing the geographical distance in the range between 732 and 118 meters.

4. The display rank has a negative and significant effect on the choice of coupons. Decreasing the display rank between 0.070 and 0.094 units has the same effect on coupon response as increasing the discount by one percentage point.

Next, we present you two case studies of successful location-based advertising campaigns.

Release More Happiness - enrich the customer shopping experience by using location-based advertising

To increase the sales of its Lacta brand, Mondelēz developed a campaign called "Lacta: Release More Happiness" that impacted users who were at the critical place for buying chocolates: supermarkets. Using contextually-aware location data, the campaign targeted customers in the buying moment via smartphones.

Mondelēz bet on a fully mobile campaign because it was the best way of getting close to the target population during the entire shopping process in a supermarket.

The campaign sought to impact users inside selected supermarkets. The users were divided into two groups. The first group was comprised of users who were inside one of the selected supermarkets, who were shown ads that stimulated Lacta chocolate purchases. The second group were users of the Meu Carrinho ("My Cart") app in selected supermarkets, who received push notifications inviting them to share their favorite Lacta chocolates. Upon clicking the ad, the app user was redirected to his or her smartphone camera, in order to photograph their favorite chocolate. After the photo was uploaded, image- recognition technology identified which chocolate was photographed and the user would receive a dessert recipe using that chocolate.

In just 17 days, more than 81,000 people visited one of the selected supermarkets. More than six million impressions were generated, and 21,000 people visited chocolate aisles in the selected supermarkets. Three hundred forty-eight recipes were generated. The ads were clicked on around 120,000 times.

BMW Driving Moments That Matter- the winning formula for increasing  visits- “Time + Location + Message”

BMW used a location-based mobile strategy to send consumers to local dealerships. This nationwide hyperlocal campaign allowed the brand to communicate with consumers at a time and place when they would be receptive to BMW's messaging.

BMW chose to leverage mobile for this campaign so that it could reach the target audience while they were on the go and in the vicinity of a dealership. BMW knew that its location-based partners could help to identify when its target audience members were in the proximity of a local dealership by using geo-location services.

In order to reach KPIs related to increasing dealership visits, the brand decided that the winning formula was “Time + Location + Message.” Its creative spoke to the emotional experience of automobile purchasing at a time and location when the target would be more likely to be motivated to visit the dealership.

BMW started with a broad targeting strategy focused on finding and learning about the target audience and then refined its real-time programmatic media buys to optimize toward the audience that was most receptive to its messaging. Throughout the life of the campaign, BMW continued to optimize based on learnings and key insights of what mobile apps consumers were using and their evolving behavioral patterns when they shopped for a new car.

The results of the campaign showed success beyond expectations. The campaign generated a 112.8 percent lift in physical dealer visits, equating to 334,548 incremental visits.