Starbucks and L'Oreal set to use geographic marketing

A large part of location-based services revenue will come from advertising

Companies will use 'geofencing' to target customers

Starbucks and L’Oreal have said they will use Global Satellite Positioning (GPS) technology for location-based services (LBS) marketing.

The technology, developed by US-based company Placecast will allow companies to ‘geofence’ or target customers when they are in close proximity to the companies' stores. The technology will send out text messages with promotional codes offering discounts for products.

“Our experience in social media has taught us that customers want to find Starbucks in new ways. We’re one of the first companies in the UK to use this technology to offer discounts for customers who are close to supermarkets and our coffee shops,” tells Ray Conway, Starbucks UK & Ireland’s director of Consumer Packaged Goods.

This service will be launched on mobile network provider O2, where its customers will receive the promotions if they have opted in for the ‘O2 More’ service.

"Location-based marketing has been talked about for the past few years and it is now a reality," tells an O2 spokesperson. When asked if any other companies had approached O2 about the service, the spokesperson said: "We are in discussions with a number of potential customers and will announce them in due course."

Gartner analyst Annette Zimmermann, who specialises in mobile devices technology, explains how use of the technology will continue to grow: “Gartner forecasts on LBS suggest that we will see the revenue generated from advertising grow significantly as a proportion of overall LBS revenue.

“I met with Placecast in the US, where it currently has campaigns with BMW and Northface. Its data to measure success was showing some very high double-digit percentages of customers who went on to purchase a product after receiving a text.

“By 2012, we expect 37 per cent of total LBS revenue to be generated by advertising,” says Zimmermann.