Will Location Analytics Change How Midsize Interacts With Customers?

By | Nov 12, 2012

Location analytics may bring added value to organizations' data mining activities by offering broader and more detailed ways to look at customer behavior. By looking at what people do, what paths they take, and what they buy, it may be possible for companies to better target marketing efforts in real time or near real time. According to an article in the MIT Sloan Management Review, geographic information systems (GIS) technology is being used along with social, CRM, and public and private data sources, linking them with location data to better predict trends. This information can then help to drive business decisions and potentially change how business interacts with customers.

The interest in using GIS technology in the commercial world isn't surprising. GIS technology has long been used in urban development for the building of roads, housing, and government services. Commercial entities have used the technology to decide where to build retail outlets to best serve potential customers. A dozen years ago, commercial interest in GIS was further driven by the thought that every car would have a global positioning system (GPS) built into it, so why not exploit that information somehow? But now, global positioning is tied to every person by way of a cellphone, so location data is much more personal and potentially of much greater interest.

Midsize business and their IT shops may be particularly interested in location-based analysis if the information gleaned can be used in a targeted way and in real time or near real time. Location-based analytics can be thought of in terms of updating and digitizing old methods of customer engagement. Think about the old sandwich-board-style marketing, where specials were advertised very locally to the business in order to bring foot traffic into a small or midsize retail shop. With location analytics, marketing goes digital and is more refined. Knowing who is located near the business and why they are likely in the neighborhood can trigger a coupon or other incentive pushed to the customer's cellphone. For example, if the yogurt shop knows that a previous customer is down the block at the dry cleaners, why not send that customer a coupon for a half-off frozen yogurt, good for the next hour? This may seem similar to a general social media marketing approach where a limited time offer is tweeted or posted on a social page, but it differs in its timeliness and specificity to customers located nearby. This is an important difference; if location-based data allows better and real-time targeting of potential customers, the IT analyst should be able to confirm this with further business analytics, and marketing dollars can then be spent more effectively.

The systems to crunch the data already exist from vendors like IBM and ESRI, as do a number of data sources. For IT, the challenge will be to work dynamically with marketing and business management to choose the tools and data sources, and then shape how the data will be used. Simply layering various data sources on top of location data isn't enough; validation of the data is critical in terms of understanding how discovered trends will affect and drive business. Additionally, any type of customer-facing system has to be user friendly and not too "spammy" in nature. Finally, as this location-based approach has a real ability to change how a business interacts with its customers, it is very important for IT to have ways to identify which data trends are most useful to know and how success might be quantified.

This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet. Like us on Facebook. Follow us on Twitter.

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