December 9, 2015
Many researchers believe digital technologies will influence a large portion of the 1.1 trillion dollars of in-store retail sales. Beacons is considered to be one of the major technologies in this equation. Financial Institutions such as banks have also started using beacon technology to boost customer engagement and explore new revenue streams.
One of such big financial institution is Wells Fargo which launched its beacon program for its business customers last year. It recently tweeted, reminding its customers about its beacon offering to support merchants during the year’s busiest shopping season.
There is a lot of speculation regarding the adoption rate of beacons. Despite receiving widespread media coverage over the last several years, beacons are yet to penetrate the everyday shopping experience. But there are lots of innovation and activity going on within this technology which promises us a bright future. Let us look at the definition and some of the use cases of beacons.
Beacon technology is expected to revolutionize the customer’s retail experience. It has potential to integrate all steps of consumer’s retail experience from product selection to payments to rewards – Anonymous study participant (retailer)
What is a beacon?
A beacon is a super-small computer with a long battery life that transmits location information to a mobile device, such as a smartphone or tablet. If the owner of the device has installed the sender's app and opted in to receive messages from the sender, beacons enable location-based marketing.
Retailers, event organizers, transit systems, governments, schools & universities, and even banks are expected to employ beacons to communicate with consumers in an up close and personal manner. With beacons strategically placed around their facilities, businesses can deliver customized, personalized messages and offers in real time directly to consumers' devices when they enter the beacon zone.
Use Cases of Beacon:
- Most of the client-side marketers and marketing tech companies today are looking to map and track a customer during the entire purchase process. They are using various sources for connecting the dots. According to an eMarketer report titled Beacons for Retailers: Beyond the Hype, the usage of beacons as a way of data collection based on in-store shopping behavior is a new strategy that marketers are looking at.
- By applying beacons & big data, businesses can recognize what a customer values and provide offers that are specifically relevant. Beacons can be used to reward loyal shoppers with news about sales and special offers; provide maps and guides for malls, offices, and airports; notify passengers of departures, delays, gate and platform assignments; and automatically silence cell phones in movie theaters
- Stakeholders are looking beyond the proximity marketing aspect and want to leverage these BLE beacons to enable proximity payments. There are certain reasons behind the optimism for beacon-based payment experience:
1. The BLE beacon does not require the customer to learn any new habits. Since this is a passive (not user-initiated) experience, the early implementations maximize the benefits of this push model without compromising on security and the potential for abuse.
2. It allows for seamlessness between the online payments experience and the in-store payments experience. Tapping a confirmation box on the mobile phone screen is hopefully the only experience that the consumer will have to face whether online or in a store.
3. It does not require any POS (point-of-sale) changes. Yes, new POS systems will find a way to create a new market, but unlike NFC, this will allow for bypassing the incumbents in the payments acceptance value chain, similar to barcodes.
Challenges faced by beacon technology:
There are certain challenges that retailers and beacon companies face which are resulting in the fallback of the technology. Here are some of the challenges:
- There are a number of layers of permissions that consumers must allow, such as: Bluetooth must be turned on, location services must be accepted for the app, the phone and operating system must be current, and customers must also opt in to receive notifications from the retailer or business.
- Companies/businesses should consider an emerging SDK (software development kit) network that leverages other apps for finding your beacons and locations. The technology should be made compatible with both iOS and Android.
- Security concerns regarding the scanning of existing beacons technology by intruders who can also target retailers who are exposed.
- Poor User experience: According to a recent survey conducted by Oho interactive with 35 of the top beacon CMS and hardware providers, nearly half of companies claimed poor user experience as one of their top concerns.
- Deployment of the Technology: there are a number of factors, right from deciding on how many beacons need to be deployed (and where) to optimizing alignment of multiple beacons in order to reduce interference.
Predictions and statistics about beacons:
Let us look at some statistics about proximity marketing and how far the player have been able to move in 2015:
- Active beacons in the US: around 35,000+
- Around one in five marketers used beacons for marketing
- Beacon adoption among retailers: around 3%
- Retail sales influenced by beacons: USD 1.3 billion plus
- Marketing spending through beacons as a percentage of US marketing spending: 0.07%
Source: LTP Report
According to Adobe’s digital index report, 18% of mobile marketers were already using Apple iBeacons till January 2015 and the figure is expected to reach 36% during 2015. The report also points out that 49% of marketers use device positioning to deliver content while 48.8% plan to add these capabilities over the next 12 months. As for consumer adoption, 33% of mobile users take advantage of mobile assisted in-store shopping.
In addition, in a recent podcast published by LTP which talked about the FinTech predictions of 2016, mobile payments guru Nick Holland made the following prediction about beacons: In 2016, we might see a lot more activity around beacons enabling notifications of the customer entering the store, and that effectively being the start of the checkout process. I think we can see some activity there with tons of money going into this space. We have got Google in this space; we have got PayPal in this space. These companies are desperate to extract information like; who you are, where you are, when you arrived and ultimately what you are buying as a result of being in that place. There is another dynamic here that banks potentially have earned—the goldmine of data of what consumers are actually purchasing. The information which can be derived from consumer behavior can be revolutionary.