European brands are looking with anticipation at the success of location-based advertising in the US, but consumers in Europe may be more reluctant to engage.
The technology is there thanks to rising sales of smart phones with GPS functionality, but EU legislation on privacy and consumer protection has made brands wary.
The advantages however, are immense; location-based services have the potential to create new connections between consumers and brands, boosting positioning, preference and store traffic.
For many brands, a presence in the new consumer mobile communities is essential for brand positioning. For example, you can find brands like Levis, H&M and Starbucks on foursquare.com.
These are all brands that want to be present in the early adopter space. As location-based communities grow, these brands will also benefit from being present among more mature and broader consumer audiences.
Positive word of mouth in the social media space is proven to build brand preference. Programmes that persuade consumers to share location - "get a free coffee if you share your present location/ experience with a friend" - will enhance preference building.
Finally, location-based services offer a highly effective way to increase store traffic and sales. For example, an additional discount can be offered to loyal customers who have signed in to your location five times a month.
In the US, take-up of location-based services has been driven by use of mobile rebate vouchers that encourage consumers to engage. Advertisers such as Starbucks already encourage consumers to "check-in" to their Starbucks online community so they can send mobile vouchers as consumers pass the chain’s outlets.
The three biggest location platforms come from a different heritage and as a result offer a different opportunity for brands:
Facebook Places comes out of a social network and consumers need to actively sign in to allow brand communication. Apps, however, need less permission, and weather apps, petrol station apps and public transport apps automatically register a consumer’s location in order to provide the local weather, the nearest petrol station or the timetable for the nearest bus or train station.
Google’s search experience is driving its location-based services. The new click-to-call function on mobile AdWords allows advertisers to add a phone number to their data and can provide not only a Google Map but also directions to the closest store. By searching for Starbucks you have effectively allowed Starbucks to give you the closest location or a phone number.
Foursquare comes from a gaming heritage. You get points if you "check in" to Heathrow Airport and show the world that you have now been at the airport 10 times within the last month. Although it attracts a highly educated, tech-savvy audience, the numbers are smaller.
MediaCom expects these location-based services to take off, but there is strong consumer resistance outside the core younger market.
Older or less tech-savvy consumers in particular are currently unwilling to give their location to brands. To overcome this hurdle familiar brands such as Facebook - where such consumers might already have a profile - will have to provide serious reassurance to get them to sign up to Facebook Places.
Facebook’s status as a global brand makes its battle for acceptance easier while the need to actively check-in to "find local deals" also creates a further sense of security, for example.
Ten years ago banks in the Nordics started to offer "online shopping" on their websites. The banks operated as "trusted brands" and the advertisers who were allowed to sell online on the bank site were carefully selected by the bank. Ordinary and initially doubtful consumers effectively became familiar and comfortable with online shopping via their bank’s homepage.
Although banks are no longer the trusted partners they once were, a similarly upstanding third-party could act as a catalyst that takes location-based services mass market.
Carsten Lind, EMEA head of insight, MediaCom