What is Geofencing?

Geofencing is a location-based service that activates when a device enters or exits a specific area marked by a virtual boundary. So, how does geofencing work?

With the help of location-based technology (Wi-Fi, RFID, GPS, and cellular), the geofence software detects when a device (mobile, laptop or tablet) has entered the specific virtual territory (geofence) and extracts information.

Based on that information, the software can activate a pre-programmed response. These responses come in different forms, including alerts, pop-ups, in-app messages, or targeted advertisements.

Geofencing has various use cases, pros, and cons, and in this article, we will cover everything you need to know about it.

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How does geofencing work?

Geofencing is a location-based technology that allows businesses or services to create virtual boundaries around a specific geographical area. These boundaries, also known as "geofences," can be set up based on various parameters, such as a radius around a point (circular) or more complex shapes like polygons. 

Once a geofence is established, any device with location-tracking capabilities can interact with it as it enters or exits the area. Geofencing relies on a combination of technologies to determine when a device is inside or outside these virtual perimeters.

Several technologies work in tandem to make geofencing possible:

1. GPS (Global Positioning System)
   GPS is the most widely used technology for geofencing because it provides precise location tracking by using signals from satellites. By integrating GPS data, devices can pinpoint their exact position on Earth, allowing businesses to define the boundaries of their geofence with a high degree of accuracy.
2. RFID (Radio Frequency Identification)
   RFID is often used in proximity-based geofencing. Small RFID tags are placed on objects or in specific areas, and as a device comes into range of these tags, it can trigger certain actions (such as sending an alert). While not as widely used for broader geofencing, RFID is useful in specific applications like inventory tracking or retail.
3. Wi-Fi
   Wi-Fi-based geofencing uses the Wi-Fi networks in a particular location to determine when a device enters or exits a geofence. When a device connects to a specific Wi-Fi network, it triggers actions such as notifications, promotions, or data collection. This technology is particularly effective in urban environments where GPS signals might be weak, and Wi-Fi is more accessible.
4. Cellular Data
   Cellular-based geofencing uses the cellular towers that a device connects to for location detection. By triangulating signals from nearby towers, cellular geofencing can offer location accuracy within a range of a few hundred meters, which is useful for broader geofencing applications such as targeting mobile users in a specific city or region.

Once these technologies collect location data, businesses can define virtual boundaries and set up specific triggers that happen when a device crosses these boundaries.

Types of geofencing

To define these virtual boundaries, you should be aware of the types of geofences that exist:

1. Circular and radius geofences

Circular and radius-based geofences are defined by selecting a center point and specifying a radius around it, thus creating a circular boundary around the chosen location.

For example, Walmart sets up a circular geofence with a 300-foot radius around its location. When customers enter this circular area, they receive a notification about a discount. 

The circular shape means that some areas outside the store, like nearby streets or other businesses, might also be included in the geofence. Even though circular geofences are easy to step up, they can be imprecise when buildings or properties are nearby.

2. Polygonal geofences

Polygonal geofences use multiple points to create a more accurate boundary around a specific area, ensuring more precision than circular geofences.

For instance, Coachella sets up a polygonal geofence around their outdoor festival. By marking the corners of the event space, the geofence precisely covers the festival area, ensuring that only attendees within the defined boundary receive notifications about schedule updates.

Polygonal geofences can closely match the shape of irregularly shaped areas, but this fact makes them harder to implement.

3. Latitude and longitude geofences

Latitude and longitude geofences rely on precise geographic coordinates that define a square or rectangular boundary around the targeted location.

For example, a construction company uses latitude and longitude coordinates to set up a square geofence around a job site, ensuring that only those entering the exact area receive safety alerts and updates.

Latitude and longitude geofencing is precise when defining square or rectangular areas but may capture unintended areas like nearby roads or parking lots.

Apart from these static, location-specific, and tied to fixed geographic coordinates geofences, there are dynamic geofences, such as:

• User-based geofencing: You can tailor these geofences to the user’s movement rather than location. For example, a fitness app sets geofences around certain areas and sends alerts when the user enters a predefined route.
• Time-based geofencing combines location-based triggers with specific time intervals, activating the geofence only within a certain time frame. For example, a coffee shop only sends text messages for its breakfast bundle from 8 to 10 a.m.
• Event-based geofencing: This type of geofencing activates based on specific events, not just entry or exit from an area. For example, a smart home triggers events like turning on lights or adjusting the thermostat once the owner unlocks the door.

Main benefits of geofencing (in marketing)

1. Driving relevant traffic

Stores can use geofencing for targeted marketing campaigns. During a 10-day period, East Coast Wings says the company had around 135K unique web visits with location-based marketing during the Superbowl. 

Apart from the customers who intentionally visit your brick-and-mortar store, the most promising potential customers are those nearby. 

Those customers need convincing, and with targeted marketing campaigns, you will drive relevant traffic to your store, with a high chance of making a profit.

2. Valuable data 

Geofencing analytics can quickly and easily provide valuable data about your customers, traffic patterns, stay durations, and messaging effectiveness. You can use this information to tailor marketing campaigns and ads to attract/retain customers.

3. Relevant attribution 

It is difficult to track and attribute conversion accordingly if you are running multiple targeting campaigns, such as Google and Facebook ads. Platform analytics show that an ad has influenced a purchase, but what if the customer would have bought the product anyway? 

How do we truly measure the effectiveness and attributions of ads?

With geofencing, it is easier to perform A/B tests and determine whether your activity influences the customer to enter the store, since you get an immediate response.

Learn more about improving app engagement and revenue with geolocation targeting.

Challenges and considerations of using geofencing

While geofencing offers numerous benefits, including targeted marketing and enhanced customer engagement, there are also challenges and considerations businesses must take into account when implementing this technology. Being aware of these issues can guide businesses on how to use geofencing responsibly, while also respecting user preferences and maintaining legal compliance.

1. Privacy concerns

One of the most significant challenges with geofencing is the privacy of user data. Geofencing relies on location data, which can be highly sensitive. If not handled properly, it could lead to concerns about users being tracked without their consent or awareness. 

Many users are wary of sharing their location data, and businesses need to be transparent about how the data is being used. Implementing clear privacy policies and offering users the ability to opt out of location tracking are essential steps in addressing these concerns.

Example: If a customer receives a push notification while walking near a store, they may be uncomfortable knowing that their exact movements were tracked without their consent. This is why businesses need to make sure users are informed and have control over how their location data is used.

2. Technological limitations

Geofencing technology, while powerful, is not without its limitations. GPS, Wi-Fi, and cellular data can sometimes be unreliable or inaccurate, particularly in densely populated urban areas or indoors, where signals can be obstructed. 

Inaccurate location data could lead to poor targeting, such as sending notifications to users who are not in the intended vicinity or missing opportunities to engage with users who are nearby but not tracked properly. To overcome this challenge, businesses may need to invest in additional technology or use multiple methods to ensure more accurate location tracking.

Example: A retail store may set up a geofence around its location to offer a discount, but if GPS signals are weak inside a shopping mall, the store might miss out on potential customers who are nearby but don’t receive the notification due to inaccurate location data.

3. User consent and opt-in requirements

Another consideration for businesses using geofencing is the need for user consent. Many countries have strict regulations surrounding the collection and use of personal data, particularly location information. In the European Union, for example, the General Data Protection Regulation (GDPR) mandates that businesses must obtain explicit consent from users before collecting location data. In the U.S., while regulations vary by state, many jurisdictions require businesses to inform users about data collection practices and allow them to opt out.

Example: Before sending a promotional message based on a user’s location, businesses must ask users for permission to access their location data, typically through a prompt on their mobile app or website.

4. Battery consumption and performance issues

Geofencing relies on continuous tracking, which can be resource-intensive for mobile devices. This often leads to increased battery consumption, which can negatively affect the user experience. Users may be reluctant to enable location services if they find that it drains their battery quickly. To address this, businesses can optimize geofencing settings to only trigger notifications when necessary or offer users control over how often their location is tracked.

Example: A user might disable location services for an app if they notice that it consumes a significant amount of battery power, reducing the effectiveness of geofencing for future interactions.

How to use Geofencing in marketing

Geofencing has various implementations, from using it to control and monitor drones to Apple sending you safety alerts. One of the not-so-recent practical implementations is in marketing. 

If you want to streamline your marketing efforts, here are five proven ways to use geofencing in marketing:

Ads (social media and web)

Reveal Mobile has surveyed 1000s of marketers and brands on using geofencing for ads. The majority (39%) say geotargeted audiences perform better than other targeting tactics. Therefore, use geofencing to target nearby customers with timely personalized ads and stop wasting money on low performing campaigns.

The director of Johns Hopkins Hospital used geofencing to set up a virtual area around the location where specialized neonatal nurse practitioners lived or worked. They targeted these nurses with social media ads urging them to apply for jobs at their hospital. After implementing this tactic, they received four replies every week.

Third-party app

Combine geofencing and ads to promote your services to potential customers on relevant third-party apps.

For example, McDonald's ran ads on Waze (a popular GPS navigation app) to target nearby customers who use their app, which resulted in 6.4 mobile impressions.

Decide whether specific third-party ads or “general” platforms like Facebook/Google are more relevant for your ICP. In some cases, third-party apps can impact potential customers more due to better timing or specific customer needs.

Push notifications

Geofencing is a sneaky way to steal your competitor's traffic at the last minute by providing a better deal to your mutual customer. However, that deal must be better and come at the right time —the moment they plan to go to your competitor.

Push notifications can increase engagement by up to 88% and boost retention rates three to eight times, so they are an excellent tool for targeting your competitors with geofencing.

Burger King pulled off one of the most popular “geofencing heists.” Apparently, customers within 600 meters of McDonald’s received a notification for a $1 offer at Burger King.

The results? Around 1.5 million people bought the product during their campaign.

In-app messages

Another practical implementation of geofencing for marketing are in-app messages. With an average open rate of 75%, they are a great medium for customer retention.

Starbucks’s in-app messages profoundly impact customer frequency, with 71% of app users visiting Starbucks at least once a week, compared to only 31% of non-users. Starbucks implements geofencing to send messages to customers in the area, and offers unique discounts and promotions that keep people coming through the door.

Texts

Text can be even more convincing than online notifications since few brands use SMS geofencing. Pizza Hut found SMS geofencing 2.6x more effective than online advertising after running its 15-month-long campaign.

Tips on implementing geofencing

The average US phone receives 46 push notifications every day, so to prompt the reader to take action, you need to stand out. Follow these four implementation tips to master your geofencing no matter the marketing channel you use:

1. Irresistible offer 

Your marketing message will either make the reader look at the phone or stop them from endless scrolling, so it has to be worth it. In the sea of 46 daily notifications, your offer needs to stand out and make the reader take action.

Therefore, it can’t be a plain message but short, concise and with a limited time offer. Use time-sensitive language like “limited time offer,” “ending soon,” or “only a few left.” Make sure to offer an exclusive deal they don’t want to miss out on. 

Think of the $1 whopper from Burger King as the best example of an exclusive, irresistible offer.

2. Custom links

Custom links are a great way to track the effectiveness of your geofencing marketing campaigns. By assigning unique URLs to each geofence or ad variation, you can monitor click-through rates, conversions, and other important metrics for each specific location or audience segment. Learn more about best URL shorteners.

3. Timely notification

Geofencing notifications can be set to alarm users when entering or leaving your targeted zone. Depending on your ICP and industry, you need to decide which point in time can cause customers to swerve off their track and go to your store. For example, Starbucks' logic is that once people enter the zone, they are in a rush and might need to grab a coffee on the go. Once they leave the zone, it may be too late to go back.

4. Rich media

To grab your customer’s attention, visualize your special offer. You can ensure your message doesn’t go unnoticed with images or short clips. Just remember how McDonald’s makes their products much larger in ads than in real life, making them appear more attractive to customers.

How to measure and analyze geofencing campaigns?

The average CPC (cost per click) for location-based audiences is around $5.40, so many marketers wonder if the investment is justified. By measuring and analyzing your geofencing campaigns, you can easily conclude if they are effective for your business and audience.Here are the top four metrics to track:

• Impressions and reach — Track how many people you have displayed your campaign to and how many of them have actually seen it. You can find these numbers in your geofencing provider’s platform or ads manager and use them to determine the visibility of your campaign and the potential audience size. Factors that can influence these numbers are low-populated areas, improper virtual boundaries, and technical difficulties.
• Click-through rate (CTR) —  Measure how many people (out of those who have seen the campaign) have clicked on it. The average CTR is around 4% for various industries, but the main factors influencing your results will be the number of impressions and the campaign itself. Make sure to look at our tips section to maximize your geofencing campaigns.
• Conversion rates –  This metric tells you how many people performed the desired action after being exposed to the campaign. For geofencing campaigns, the desired action varies from in-store purchases to web purchases or coupon redemptions. To accurately measure conversion rates, compare them to historical data or control groups (areas not targeted by geofencing) to assess true effectiveness.
• Return on ad spend (ROAS) – Calculate the revenue by dividing the revenue directly attributable to customers who interacted with your geofencing ads by the costs of running ads. For example, a ROAS of four means that you generate four dollars in revenue for every dollar spent on geofencing ads. If you’re spending more on the campaign than its revenue, you need to optimize your campaign creatives, targeting, geofences, or timing.

Drawbacks of geofencing

Geofencing has proven a valuable marketing asset, but it still has some limitations. Here is an overview of some geofencing drawbacks so you have a full picture:

• Dependent on physical location – Geofencing (unlike geotargeting) depends on the physical presence of a device in a strictly defined location. Therefore, relevant customers won’t be targeted even though they are in the same city/country.
• Tight location radius – All types of geofences require you to outline your target area, which allows a lot of space for people to be nearby but not in the exact area, potentially not receiving your notifications.
• Salesy – Geofencing in marketing is mostly used as a direct strategy, meaning users get a short offer delivered to their device. Some notifications may turn out to be salesy, especially for customers who aren’t your ideal customer persona (ICP) but have happened to be in the targeted location. Even your ICP can find the “salesy” approach off-putting.
• Targets everyone in the defined area – Not everyone that is nearby your store is your ICP or has an intent of buying. Some leads react better to other types of marketing campaigns with a less direct approach.
• Privacy concerns – People rarely read fine print, so even though they sign up to receive notifications, make sure your data processing rules are clearly stated.

Geotargeting vs. geolocation vs. geofencing – these three words may start with the same prefix, but they aren’t interchangeable. Here is an overview of the main differences:

In a nutshell, geofencing refers to setting a virtual boundary around a specific location, triggering actions like notifications when someone enters or exits the area. Geotargeting is used to display content or ads to users based on their location, often at a broader regional level. 

Geolocation implies determining a user's physical location using GPS, IP address, or other technologies, which can be used for both geofencing and geotargeting. Learn how a geolocation software can improve your sales efforts.

The key difference lies in how each uses location data: geofencing is better for triggering actions within a defined area, while geotargeting and geolocation are for tailoring content or services based on a user's location.

We have written more about geofencing and geotargeting in this article. However, if you need geo targeting and geolocation to boost your website conversions, Geo Targetly is the right choice.

With Geo Targetly, you can easily deploy location based website redirects, links, content, popups and more. 

With advanced location segmentation, flexible rule management and an easy one-time JavaScript code integration, your multi-location or multilingual business will show the right content, pricing, or ads to the right audience.

‍Test Geo Targetly 14 days for free, and join more than 2000 small businesses and enterprises that use our services to maximize website conversions.

Geofencing statistics

With more and more businesses using geofencing to create personalized, location-based experiences, it's becoming clear just how powerful this technology can be. Geofencing is helping brands engage customers in real time, grow sales, and build stronger loyalty. To give you a sense of just how impactful it is, here are a few eye-opening statistics that showcase its growing role in marketing today:

• Increased Sales and Engagement: 90% of marketers have found that location-based marketing leads to more sales, improved customer engagement, and a better understanding of their target audience.
• Enhanced Click-Through Rates: Mobile ads using geofencing achieve click-through rates twice as high as the industry average, indicating more effective user interaction. 
• Smartphone Compatibility: Geofencing technology is compatible with 92% of smartphones, making it accessible to a vast majority of users.  
• Consumer Expectations: Over 75% of consumers anticipate personalized experiences, including tailored advertisements, highlighting the demand for location-based marketing strategies.  ‍
• 52% of global marketing budgets are now dedicated to location-based marketing
• Around 72% of consumers that did a local search beforehand, visited a store within five miles.
• The global geofencing market size is projected to grow to USD 13.00 billion by 2032.
• Around 80% out of 700 surveyed location data buyers said location data made marketing campaigns more effective.
• The average cost per impression for location-based audiences is $4.36, while the CPM for Facebook ads is almost double.
• The top performing CTA among geo-targeted advertisements is “learn more”.

These statistics show that geofencing is not just a trend but an essential tool that businesses can use to improve their marketing efforts and deliver better customer experiences.

Frequently asked questions

What is the difference between GPS and geofencing?

GPS provides precise location data using satellites, while geofencing uses GPS, RFID, cellular data, and Wi-Fi to create virtual boundaries, extract information, and trigger actions when a device enters or exits these boundaries.

Does geofencing track your location?

Geofencing does not continuously track the device’s location, but monitors when a device has entered or exited predefined geographic areas.

How effective is geofencing?

Geofencing is effective in terms of monitoring devices and notifying them when they are in physical proximity to specific locations. However, the effectiveness of using geofencing as part of marketing campaigns is different for brands and audiences. 

Where can I get geofencing software?

Geofencing software is available through various providers such as GroundTruth, Radar, and PlotProjects. 

Does geofencing require an app?

Geofencing typically requires an app or platform to manage and implement the virtual boundaries, some services can integrate with existing apps or use web-based solutions.

How accurate is geofencing?

Geofencing accuracy depends on the technology used, such as GPS or Wi-Fi, and the type of geofence, which can range from a few meters to several hundred meters.

What is the purpose of geofencing?

The purpose of geofencing is to create virtual boundaries around a specific location and trigger actions or notifications when a device enters or exits these areas. This technology is primarily used for targeted marketing, providing relevant content or offers to users based on their location. It can also be used for tracking assets, improving customer engagement, and collecting valuable location-based data.

Does geofencing track your location?

Yes, geofencing works by tracking the location of a device, usually via GPS, Wi-Fi, or cellular data. When a device enters or exits a defined geofence, it triggers an action, such as sending a push notification or updating data. However, for privacy reasons, businesses typically require user consent before collecting and using location data.

What are the disadvantages of geofencing?

While geofencing offers many benefits, it also comes with disadvantages. These include privacy concerns, as location tracking can make users feel uncomfortable if they aren't informed or haven't given consent. Additionally, geofencing can be inaccurate due to limitations in GPS, Wi-Fi, or cellular data, leading to missed opportunities or poorly targeted notifications. Geofencing also relies on battery consumption, which can drain a device’s battery if not properly optimized.