Geofencing: Definitions, Pros and Cons, Use Cases and More

Why is geofencing popular and so useful?

Geofencing isn’t new, but the ubiquity of mobile devices and their embeddedness in our lives now makes it a key enabler in how businesses market to us and how industry creates value-adds to safety, security and convenience in our daily activities. Since everything we do revolves around where we are at any given moment, geofencing technologies dovetail perfectly into how we move and live.

Going to the airport? Chances are, geofencing – through text or another app you have on your phone – will aid you in your time there, perhaps advising you of your departure gate, updating you on delays or reminding you to check your luggage. At the supermarket? This assistive technology combined with artificial intelligence (AI) may suggest a new and complementary purchase to your usual shopping list.

Geofencing, along with geotargeting and geolocation, help create efficiencies that benefit a business and its customer base, as the technology offers up timely and location-specific information that can be acted upon immediately.

Whether you’re managing a warehouse and monitoring permissions to enter specific areas or enabling a geo-specific service like online gambling which depends on state and regional laws, or executing location-based digital marketing, you need to understand how geofencing works as well as its advantages and disadvantages as you look to ensure that your technology works as designed.

What is geofencing?

Geofencing technology uses a global positioning system (GPS), cellular data, radio frequency identification (RFID) or Wi-Fi to initiate specific actions when a device crosses into or out of a predetermined geographic area that has a virtual boundary. This boundary, called a geofence, corresponds to and contains a real-world geographic area.

This increasingly popular technology has a wide spectrum of use cases from tracking company vehicles and employees to digitally marketing to individuals via push notifications or promotions as they near specific geographical locations such as malls, airports and other venues. (For more on this, see “How is geofencing used?” below.)

Consider this geofencing example. As a shopper walks through a physical mall and enters a specific store, he receives a text that alerts him to a discount that he can apply in store today only. While in the store, he may also receive additional messages triggered by beacons that respond when the shopper is in very close proximity to a specific product. Geofencing technology was triggered as the man walked into the store. Beacon messages, using Bluetooth Low Energy, are responsible for the messages received as he moves around the store.

Types of geofencing and how they work

There are two primary types of geofencing: active and passive. Active geofencing depends on having the user's mobile app open. This app typically works with the user’s GPS service. In active geofencing, operators can push ads or customize messages directly to a shopper, for example. On the other hand, passive geofencing does not require an application to be open; it runs in the background and doesn’t use GPS. As the name indicates, passive geofencing is primarily used to collect customer data (where they shop, time in store, etc.).

In addition to active and passing geofencing, there are primary ways in which organizations use the approach to target users for various use cases: radius targeting and polygon targeting.

Radius targeting - Rather than choosing a broad location like a city or region, radius targeting lets you select a geographic location as a center point target, and then creates a radius around it.

Polygon targeting - Polygon targeting selects a specific shape and size for the area the message or add will target, like a rectangle, square or triangular area.

While the underlying geofencing technology is complex, visualizing how it works at the macro level is not.

A simple description of how geofencing works:

  • An operator creates a geofence on a virtual map like Google

  • The starting reference position of a mobile user is marked

  • Cellular data, GPS, Wi-Fi or Bluetooth beacons calculate a user’s position as they move

  • The user’s phone software continues to update position while referencing the geofence to tell whether the device has crossed into or out of the geofence area

  • Depending on the type of geofencing being used – active or passive geofencing – the technology will either send a message or ad to the user, or simply collect data on where the shopper travels, time spent there, etc.

What is the difference between geofencing, geotargeting and geolocation?

These three terms may seem similar, but geofencing, geotargeting and geolocation have significant distinctions in how they work.

Geofencing - Creates a fence around a specific area or geolocation. Any device that passes through the fence can be targeted for advertising or an alert/notification of some sort, depending on the use case.

Geotargeting - Establishes a wider geographical location such as a section of a city or a county. For geotargeting, only specific categories of leads are targeted.

Geolocation - Sets limits for offers/products, such as when a person is within a few feet of a specific display at a store. It targets at a personal/granular level based on the person’s physical location.

How is geofencing used?

Organizations and industries are coming up with new ways to apply geofencing technologies. The following list of geofencing use cases give examples of the power and flexibility of this technology:

Marketing research: Data is collected and used for research purposes. For example, research might show how frequently a customer enters a store, time spent in the store, even where they linger most.

Direct marketing: Used in conjunction with other forms of marketing such as content marketing, display advertising, video advertising, search engine advertising and more. Operators can send direct messages and ads to users when they are very close to points of purchase, increasing the chances of conversion.

Customer tracking: Beacons can guide customers to specific in-store areas to promote complementary items to those already in cart, or that are thought to be of interest based on collected shopper data.

In-store automation: Paired with artificial intelligence to provide optimum experiences for shoppers.

Logistics management: Used to track resource-oriented data, such as vehicles in the field, entrance of employees into restricted areas or in place of time cards.

Tracking competitors: Retailers can keep track of shoppers who visit competitor’s stores and send competitive ads to lure shoppers to their brand.

People/pet tracking: Operators can mark physical locations with a virtual boundary. When a person or pet enters or exits this area, a notification alerts the operator.

Industry-specific safety and access tracking: Stores can use RFID to track movement of goods beyond a sensor at the door. An industry-specific example, the use of confinement geofencing can keep taxis operated by the same company in pre-set coverage areas. Or, in the mining industry, the technology can notify operators if employees are in a blast zone.

Law enforcement: Law enforcement is beginning to use tracking technologies for people who have committed a crime, though this is limited depending on country, state and regional laws.

Challenges of geofencing

We’ve seen that there are many geofencing benefits and use cases. Still, there are geofencing challenges to consider.

Privacy - For geofencing technology to do its magic, users need to share some of their information; some of it will be stored by location-based companies. Legislation, such as the General Data Protection Regulation in Europe and California Consumer Privacy Act, have specific guidance for companies that house data to ensure that it is safely stored. In addition, firms that store data must be sure to clearly advise users on how they can opt-out of having apps collect specific data.

Getting the messages right - Retailers must keep up-to-date user data, as incomplete records can lead to users receiving messages that are not relevant to them. This results in a loss to the sender and can be an aggravation to the recipient.

Maintenance - Geofencing requires oversight and regular maintenance. Geofences require a well defined virtual perimeter, which means each area has to be set up individually and removed if you change plans or close down a specific project. In addition, depending on the technology you use, there can be bugs. It’s important to test your projects with real people on real networks in the areas that you are fencing.

Inherent inaccuracy - Radius targeting, which allows operators to put a radius around a target, can include unintended areas due to the shape of a circle (imagine a rectangular shaped mall, for example within a radius). For this reason, operators often use polygonal targeting, where shapes may better match the intended target area. Still, polygon targeting has several feet of variance as well. Operating systems changes can also impact how geofencing technologies operate.

Battery drain - It’s widely known that GPS on mobile devices takes its toll on the battery charge. For this reason, many users will disable tracking to save battery life. With GPS off, certain types of push notifications cannot be used.

Establishing and testing industry-specific geofencing

Like any application, geofencing technologies require rigorous testing, almost always outside of a lab and typically with real people in specific real-world situations.

Here’s an example of the need for highly accurate testing in the gambling industry, where there are legal ramifications around how well the technology works.

Where gambling is legal around the world, it’s regulated by country, state, province, etc. This raises significant compliance issues for online gambling, as operators must adhere to border restrictions at national levels, and at micro levels within a given country. Gambling operators must ensure that their apps work within borders where gambling is legal, but not beyond such borders into areas where gambling is not. This geofence compliance can be very complicated to test, as the customer base uses a large spectrum of mobile devices, various versions of iOS and Android operating systems, and different networks for the devices.

For gambling operators to stay compliant, they must:

  • Test regulated regions

  • Confirm border compliance

  • Ensure betting works within a specified area

  • Test registration of new players inside/outside of borders

  • Complete comprehensive in-person testing within border region

For example, a sportsbook vendor may require testers who live within a local border to register for their online sportsbook. It would want to test to ensure its customers could place bets when located 1 and 5 miles within the border, but not when located 1 and 5 miles outside the border.

Geofencing tips

From a technical standpoint, there are few key points to keep in mind when creating a strategy around use of geofencing technology:

  • Develop a plan - It may seem obvious, but as mentioned above, setting up and maintaining geofences can be tedious. In addition, it’s key to regularly check what you’ve established. It can be helpful to consult with a firm that is experienced in helping organizations set up geofencing projects, particularly one that has specific experience in your industry.

  • Use real-world testers - Whether you’re starting small or with several projects around the world, it’s vital to have real users test your products. With the right team, you can quickly test on a wide variety of devices, OSes, networks and in various languages around the world. And, importantly, it’s not enough to test once and be done, as new devices, OSes and technologies can impact existing projects.

Find out more about Applause and how we can help with geofencing, geotargeting, and geolocation execution and testing.
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Paul Hoffman
Senior Content Manager
Reading time: 15 min

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