Geofencing: What Is It and How Does It Work?

by Frankie Karrer

8 Min Read

Imagine being able to digitally advertise to your ideal consumers based on where they’ve been in the real world. It may seem like a business owner’s dream — but with geofencing, it can be a reality.

“What is geofencing?” you may ask. Below, you’ll learn everything you need to know about this location-based marketing strategy, including how to leverage it to build your brand.

What Is Geofencing?

Geofencing is a location-based digital marketing tactic that allows you to send messages or ads to users within a defined geographic area. Typically, it’s a marketing method that targets smartphone users in particular, as these devices allow you to gather the real-time location data necessary for triggering location-based content.

Geofencing vs. Geotargeting

Geofencing and geotargeting are both location-based strategies, but there are a few subtle differences that set the two apart.

Geotargeting involves delivering content to users based on their general location, such as a city, region, or ZIP code. Generally, geofencing is more useful when your goal is to focus on a narrowly defined area to trigger immediate actions.

How Does Geofencing Work?

Geofencing operates by establishing a virtual perimeter (or “fence,” hence the name) around a real-world geographical area. When a device enters or leaves that designated area, it triggers an action such as sending a notification or displaying an ad. The process relies on mobile devices’ GPS, cellular data, or Wi-Fi signals to accurately pinpoint their locations.

As an example, let’s say that you own a restaurant and have your own app. When the app’s users approach your establishment, you can encourage them to stop in and grab a bite to eat with geofencing.

By creating a digital perimeter covering a one-mile radius around your store, your app will send users a push notification highlighting your daily specials whenever they enter that area. You can even sweeten the deal by including something like a discount of 5-10% off their next order.

Benefits of Geofencing for Marketers

With proper geofencing initiatives in place, businesses like yours can achieve the following:

More Targeted and Efficient Advertising

Advertising waste can bust your budget and crush your bottom line. Using location data, on the other hand, significantly cuts down on ad waste by allowing you to target niche groups — specifically those who are within close proximity to your place of business.

Increased Relevance and Personalization

Creating location-based target areas also facilitates greater personalization and relevance, especially when using a branded mobile app to deliver your location-based ads.

For instance, if customers order through your app and consistently purchase the same few items, you can take advantage of that data to feature their go-to dish or product in your ad as soon as they get close by.

Enhanced Engagement and Conversion Rates

Proximity-based messaging encourages immediate action, which leads to higher engagement rates and more opportunities for conversion. Customers are more likely to make an impulse purchase or visit your store if they’re targeted when they’re in the neighborhood.

Better Analytics and Insights

Geofencing can offer a trove of valuable data about your customers and their preferences, which can, over time, give you a feel for what types of ads work and which don’t. Use these insights to refine your marketing strategies, refocus your target area, and create more impactful campaigns.

Competitive Advantage

Since it works to offer a more personalized and engaging customer experience, geofencing can differentiate your brand from its competitors and keep your business top of mind — even if a consumer is near another store.

Common Applications for Geofencing

There are many exciting ways to incorporate geofencing into your marketing mix. Some common approaches are as follows:

Branded Apps

If you run your own mobile app, geofencing is the natural next step in your marketing journey. Use it to deliver in-app notifications when subscribers enter your digital area. Target, Starbucks, and countless other brands use geofencing alongside their mobile apps to stay connected to consumers and drive more business.

Third-Party Apps

Even without your own unique app, you can still leverage geofencing to drive sales and grow your business. Many third-party applications allow businesses to deliver ads and notifications through the same approach. For instance, a restaurant could partner with a map app to offer customers coupons when they enter your designated area.

Text Engagement

You don’t need your own branded mobile app or even a third-party alternative to serve up location-based ads — simply create a virtual perimeter around your store and deliver text messages when potential customers approach.

When running social media ads, remember to take advantage of positional data and targeting tools. Create a radius or custom perimeter around your business and serve up ads to niche audiences.

Web Advertising

Use location data and digital perimeters to deliver web-based ads to specific audiences. You can target cities, ZIP codes, or broader regions — no matter which you choose, it’s all about connecting with consumers who live and work nearby.

Connected TV Advertising

CTV advertising and OTT advertising offer precise geotargeting capabilities as opposed to those for geofencing, but you can still target consumers with laser-like accuracy, zeroing in on specific ZIP codes or radiuses.

MNTN Performance TV, in particular, allows you to target CTV consumers in three ways: You can engage in regional or city-based targeting, create a custom radius around a geographical point (i.e., your store), or set up campaigns aimed at specific ZIP codes.

Learn more about CTV targeting and OTT targeting

Best Practices for Geofencing

You may be ready to start geofencing, but there are a few things to consider first:

Defining Clear Objectives

Geofencing is a relatively straightforward concept, but it still involves more than simply creating a digital wall and running your ads. Before you spend a single dollar on location-based marketing, you need a game plan and some clear objectives in mind.

Avoid broad statements like, “I want to sell more products.” If your objective is sales-related (and there’s a good chance it probably is), give yourself a concrete finish line, such as boosting your in-store transactions by 10%.

Understanding Your Target Audience

Once you define your goal(s), it’s time to shift your attention to your intended audience. Ask yourself who it is you want to connect with, along with what they’re interested in, then determine how to leverage those interests to create a winning campaign.

For instance, if your plan is to advertise on social media, you’ll need to know which platforms are most popular among your target audience. Similarly, for CTV campaigns, you should determine which platforms and types of shows are favored among your key audience segments.

Respecting User Privacy

Geofencing requires considerable amounts of user data — specifically location data — and even though consumers are accustomed to having brands gather that information, they are also apprehensive toward secretive or dishonest data collection and sharing practices.

The bottom line is as such: Be honest and open about what data you are gathering and what you intend to use it for.

Creating Compelling and Relevant Content

Your content needs to be engaging, educational, and entertaining. You also want to try to make customers laugh, as laughter is one of the best tools for boosting engagement and recall. According to Forbes, 90% of people are more likely to remember an ad if it is funny.

That said, your ad also needs to be on brand, so maintain tonal consistency across all advertising channels — even when engaging in geofencing or other targeted marketing.

Optimizing Timing and Frequency

When you deliver an ad is just as important as what ad you run. You don’t want to overload people with ads, but you do need to display your content frequently enough to keep your brand top of mind. The best marketing tools allow you to set up custom rules designed to avoid oversaturation.

For instance, let’s say that one of your loyal customers has downloaded your branded app. They also pass through your geofence every morning and every afternoon on the way to work. Without setting up timing and frequency limitations, that customer would receive push notifications twice per day, which would get pretty annoying and may even urge them to delete the app altogether. Set frequency limits so you don’t overload people.

How Accurate Is Geofencing?

Geofencing is incredibly accurate, and the best tools allow you to draw custom areas on a map and run campaigns in those designated spaces. Some platforms even allow you to set up multiple geofences at once, such as one around each of your retail locations.

Location-Based Marketing With Performance TV

With MNTN Performance TV, running location-based marketing campaigns becomes easier than ever before. Our CTV platform gives businesses access to premium ad inventory on top streaming channels, connects with world-class creatives to assist in content design, and offers robust analytics tools to help them get more out of each campaign. That’s compared to traditional television advertising, which requires businesses to serve up ads to an entire designated market area (DMA), regardless of more niche interests.

Geofencing: Final Thoughts

Geofencing can be a powerful addition to your marketing mix. It allows you to target niche audiences and cut down on advertising waste. Stop casting a wide net and use location-based strategies to make every ad count.