How will beacons affect my stores?

An overview of beacons and how they can power your retail business.

11th August 2015, by Yash Kothari

At Apple’s Worldwide Developers Conference in 2013, Craig Federighi, Apple’s Senior Vice President of Software Engineering, introduced the iBeacon. Apple pushed their technology as a new way to communicate between the real world and smartphones. They positioned it specifically as a tool for brick and mortar businesses like retail, as a way for them to communicate with their customers while they shopped inside a store. As a marketing tool aimed at the shopper, beacons have the ability to spur one of the most powerful retail revolutions yet. But before that, let’s get an understanding of how beacons work.

A beacon is a new type of device that can communicate with a smartphone that is within range. For example, a store owner can program a beacon to send a promotional offer to a customer as the customer approaches the area. Beacons create a whole new way of location-based pre-programmed communication.

As far as the actual hardware of the beacon is concerned, it is straightforward. Beacons are small enough to fit in the plam of your hand. Their average price is about $35. Beacons can last two years on one watch battery; this long battery life is enabled by the use of Bluetooth Low Energy to communicate with smartphones.

For a retailer, they open up a whole new way of communicating and interacting with your customer. No longer do you have to fully rely on associates to communicate the brand. With beacons, you can create a standardized method for location-based communication inside your store.

As a marketing tool, this is powerful. For instance, Lord & Taylor installed beacons in merchandising areas at 130 stores where they can interact with customers by sending them location-aware alerts, updates on new merchandise, and specific time-based offers. As beacons become even more powerful, companies will be able to personalize these touchpoints according to customer demographics and interests. This can discourage showrooming and create a more intimate relationship with the customer.

Yet before you start installing beacons right away, there are a few caveats to be aware of. The first is the danger of creating a disruptive customer experience. Beacons are not well suited for all types of stores; for instance, customers inside a luxury retailer would not want to be constantly disturbed by offers while they browse. Optimizing the beacons as a part of the customer experience will take time, experimentation, and several A/B tests.

The second major caveat is that beacons do not provide accurate customer data. One of the major limitations of using beacons to communicate with the customer is that the end customer must have your store application installed on their smartphone. For instance, for Walmart to communicate to a customer via beacons, that customer must have the Walmart app installed on their smartphone. When you factor in the likelihood that a customer has a store’s app installed on their smartphones, the effective user size can become quite limited. Furthermore, there could be an element of self selection bias; it would be akin to collecting data only from a store's most loyal customers. Thus relying on data produced by beacons to inform merchandising or operations decisions can hurt the store.

That does not mean that beacons are not powerful - Craig Federighi’s announcement in 2013 was an important one for the retail world. Beacons could change the way retailers communicate with their customers; however we should not expect them to be the analytics solution that some hope them to be.

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