Engaging Mobile Consumers: Comparing Beacons and Magnetic Positioning for Indoor Advertising. Report. Report

Engaging Mobile Consumers: Comparing Beacons and Magnetic Positioning for Indoor Advertising Report Report

Report Engaging Mobile Consumers: Comparing Beacons and Magnetic Positioning for Indoor Advertising In an apples-to-apples comparison for indoor advertising between Bluetooth beacons and magnetic, the benefits are striking for magnetic positioning. With a higher level of accuracy, magnetic has the ability to generate superior contextual relevance and increase advertising conversion revenue, all with a total cost of ownership significantly lower than Bluetooth. February 2015 Jon Rosen, Senior Analyst, Opus Research Derek Top, Research Director, Opus Research Opus Research, Inc. 350 Brannan St., Suite 340 San Francisco, CA 94107 www.opusresearch.net Published February 2015 Opus Research, Inc. All rights reserved. 2

Engaging Mobile Consumers Table of Contents Engaging Mobile Consumers: Introduction 4 Opportunity for Mobile Engagement Creates Value 4 Key Attributes of Indoor Location Technologies 5 Wi-Fi 5 Bluetooth 5 Beacons/BLE 5 Magnetic Positioning 6 Why Indoor Technology is Important 6 Head-to-Head: Comparing Beacons and Magnetic Positioning 7 A Primer on Beacons 7 A Primer on Magnetic Positioning 7 Applications for Mobile Positioning Apps 8 Blue Dot 8 Fastest Route / Shopping List 8 Product Proximity Advertising 8 Breakdown of Large-Scale Retail Store Implementation 8 BLE/Beacons 9 Magnetic 9 Chart: Implementation Comparison 10 Living Up to the Hype 10 About Opus Research 11 3

While much has been said about the rapid growth of e-commerce, consumers are still flocking to brick and mortar stores -- and spending far more money while they re at it. Research firm emarketer predicts that e-commerce will represent a small portion (less than 10%) of overall U.S. retail sales in 2017, with $440 billion in Web sales compared to $4.9 trillion in non e-commerce revenue. Since the vast majority of retail purchases still occur stores, the need to improve on the in-store experience is a highimpact opportunity. One key factor is that the purchase-decision process increasingly flows through smartphones. Another recent study from emarketer estimates that there were 145.9 million U.S. mobile shoppers in 2014, up 23 million from 2013. The location of individuals carrying smartphones (ios and Android) can be identified inside venues, retail stores, hospitals, malls, airports and other indoor spaces. The value of the resulting, anonymous traffic analytics is unprecedented, but direct, mobile engagement presents a host of opportunities and challenges for retailers: How is mobile changing the path to purchase? What can retailers do to enhance the in-store purchase process? What relevant shopper information is critical for e-commerce? How can a retailer create personalized offers without seeming intrusive? When integrated with real-time indoor location technologies, location-driven mobile engagement allows retailers, brands and other venue owners an opportunity to connect shopping behavior with immediate, contextually relevant engagement through a mobile app. An example would be a shopper who visits and dwells in a store s computer department. Data can be gathered to learn where and when they entered store, how long they were in that department and the other departments they visited. Promotional messages can be delivered to their smartphone to offer discounts and other resources that are most likely to interest that individual customer. Product data and comparisons, discounts and other information can move the customer into a buying decision. When correlated with that shopper s previous purchasing behaviors, a further-tailored, higher-value engagement message can be delivered. Opportunity for Mobile Engagement Creates Value Given the opportunity presented by mobile consumer engagement, as many as 200 firms are vying for position in the emerging indoor location and proximity marketing arena. Multiple technologies abound for indoor location and consumer engagement in stores, malls, stadiums, airports and other venues. The technologies include cameras, Wi-Fi sensors, Bluetooth beacons (e.g., Apple ibeacons), inaudible sound waves, LED lighting signals and magnetic positioning, among others. Each technology has varying attributes that are relevant for location tracking. These criteria include accuracy, coverage, price, maintenance, privacy and more. For the purposes of this paper, Opus Research identifies the most prominent examples of indoor location services accomplished through three categories: sensors (Wi-Fi and traditional Bluetooth), beacons (Bluetooth Low Energy transmission to a smartphone via a mobile app), and magnetic (distortions of the compass in physical space that inform location). Important to this discussion is to identify key differentiators between proximity and positioning solutions: 4

Both beacons, magnetic and other technologies can deliver proximity solutions. When a shopper with a corresponding mobile application passes through a zone, the phone s application is made aware of the person s entry into that specific zone or micro-fence. At that stage, the app can engage with an alert, an advertisement or a message designed to create value for the consumer and the venue. The message is related to the zone and thereby targeted to the consumer s interest and behavior. Proximity engagement is considered to be a significant means of increasing revenue, customer conversion and customer satisfaction. The phone becomes a targeted communication medium in a highly relevant context. Magnetic and some other technologies (with the exception of beacons) can enable positioning solutions. Positioning solutions are more sophisticated, require greater accuracy and reliable, real-time attributes, and enable a greater number of high-value location solutions. Positioning can display the user s location on a floorplan, just like a moving blue dot on a map. Positioning can identify a user s precise indoor placement, as precise as one meter or less. They can enable You Are Here applications, wayfinding, turn-by-turn solutions and more. Key Attributes of Indoor Location Technologies Wi-Fi Stores are rapidly adopting public access to Wi-Fi in order to enable mobile apps and increase customer satisfaction. When adding Proximity solutions to public Wi-Fi systems, additional access points, and occasionally different, more costly access points are needed. These solutions can be expensive, and there are limiting factors in data collection and position between ios Android handsets. BENEFITS: Accuracy claims vary from 1 to 5+ meters; leverages existing infrastructure. Wi-Fi is an established sensor technology, practical to maintenance and compatible with almost all smartphones. CHALLENGES: Requires significant infrastructure costs: stores may have between 4 and as many as 50 devices to deliver departmental accuracy. (Note: aisle-level accuracy is impractical in terms of cost.) Devices can cost $100 to $2000 per sensor and installation typically requires low power, some 110v wiring and Ethernet cabling or POE (Power Over Ethernet). The installation/deployment cost can exceed the device cost. Requires a commitment to a specific sensor technology for some period of time; hardware technology is somewhat static. Bluetooth Bluetooth 2.0 or classic Bluetooth is the same technology that is used to connect a mobile phone to a car or headset. It s often used as an incremental or supplemental sensor for proximity and positioning. Bluetooth requires power from low voltage cabling or POE. BENEFITS: Bluetooth is often selected for it s low cost and accuracy. Established sensor technology, reasonable/practical cost and maintenance, compatible with almost all smartphones. CHALLENGES: Requires infrastructure costs: stores may have between 15 and as many as 50 devices to deliver departmental accuracy. Requires a commitment to a specific sensor technology for some period of time; hardware technology is somewhat static. Beacons/BLE Apple (via ibeacon) has popularized the use of small, battery-powered (or wired) devices that transmit Bluetooth Low Energy (BLE) signals. Beacons can be sourced to support ios and Android devices. Generally placed throughout venue for location, outside, or in-aisle. Beacons deliver a location signal and phones can reasonably estimate distance based on received signal strength emitted by ibeacons. If three or more ibeacons are in range and have a known location, position can be determined, though this is academic (CONTINUES) 5

more so than practical. Bluetooth beacons are generally considered a proximity solution and not effective as a positioning solution. BENEFITS: ibeacons are very inexpensive (<$50), cost almost nothing to install and some can be a somewhat secure, simple and easy to deploy. Beacon compatibility is built into both the ios and Android operating system. CHALLENGES: ibeacons are almost exclusively used for notifications and not for positioning. They deliver a data set that indicated in zone versus an accurate position. Most are battery operated and require periodic battery maintenance. Beacons are often affixed with tape and are highly susceptible to removal. They can vulnerable targets for hijacking as well. Magnetic Positioning Buildings are constructed with materials that distort the readings on a smartphone s compass. Steel beams, wall studs, and other materials disrupt the earth s magnetic field, which, through magnetic positioning software is detected by the magnetometer a sensor available on most popular smartphones. Through the use of magnetic positioning software, these fields are mapped (or fingerprinted) and associated with points on a floorplan to enable indoor location services. BENEFITS: Typically as accurate as 1-2 meters. Essentially no infrastructure cost; no cost for hardware, no cost to implement (install and wire) and no cost to maintain. No commitment to and reliance on a sensor technology investment. Application is driven by the phone and not at a server to reduce failure points and security exposure. Effectively crowd-sourced, creation of a map that becomes reference points for where the consumer is when shopping. Fingerprint data is stable and accuracy improves over time; reference points self adjust when aisles change; dynamic. CHALLENGES: Early-stage, still in pilot phase in the U.S., rolling out commercially in Asia and Europe. Some consumer behavior is required to jump start accuracy. Accuracy issues varies subject to the type of building but 1-2m is expected with 90% confidence level. It s new enough that it requires real-world test cases to generate consumer (retailer) confidence. Why Indoor Technology is Important As mentioned, physical stores and malls aren t going away, and they serve as a critical role in the purchase path. In addition to the purchases made in stores, a notable percentage of online purchases are preceded by in-store visits. And in-store mobile use a critical opportunity for shopper engagement is prevalent across all age groups. Key data points: A report from the International Council of Shopping Centers (ICSC) shows total shopping center sales for 2012 topped $2.4 trillion, up from 2011, and that shopping centers account for more than half of all retail sales in the United States. An OpinionLab study of 1,103 consumers found that Millennials (ages 18 to 29) are, in fact, the only generation that prefers shopping in malls to shopping online. comscore reported that in April 2014, 35% of U.S. Internet users showroomed (influence of mobile devices on retail shopping), including nearly half of Millennials and even 28% of seniors 65 and older. In a more recent Q3 2014 comscore survey, 44% of smartphone owners said they participated in showrooming. Considering these facts, in-store mobile engagement can create a dynamic and enhanced shopping experience, beginning with offering customers highly contextual promotions and discounts. They can increase conversion and revenue by delivering just the right information so customers can make an in-store, informed decision versus leaving and buying online or somewhere else. 6

Showrooming, or the act of visiting a store to touch and feel a product only to leave and purchase online, while common includes the misconception that this behavior is absolute. If price and availability were superior in-store, shoppers have shown a desire to purchase on-site. Location technologies can help identify this behavior and inform retailers where and when to apply resources to convert these shoppers. INDOOR SHOPPING APPLICATIONS, ENABLED WITH LOCATION TECHNOLOGY, BRIDGES A KEY GAP BETWEEN IN-STORE AND ONLINE. Head-to-Head: Comparing Beacons and Magnetic Positioning Over the past few years, location technologies such as Wi-Fi and Bluetooth 2.0 have tempted retail mobile loyalty professionals and mobile marketers. With the ability to precisely determine where a mobile user is in a store, these technologies can enable very contextual messaging. For the retailer, this means targeted messaging and more revenue; for the advertisers, this means more valuable inventory. Unfortunately Wi-Fi and Bluetooth solutions are expensive and require a large effort within the retail organization to procure. As a result only a few retailers have participated. A Primer on Beacons The advent of beacons has taken installation costs down to an almost insignificant amount, and has spurred tremendous movement to trial and in some cases adopt beacons as a location resource for mobile. inmarket s recent study shows consumers are finding significant value in beacon-enabled experiences. Interactions with advertised products increased by 19x for users who received a beacon message. In-store app usage was 16.5x greater for users who received a beacon message, and shoppers who received a beacon message were 6.4x more likely to keep an app on their phone, versus those who did not. Beacons have received much of the location technology attention lately due to the high profile of Apple s ibeacon. Beacon technology is being deployed by several high-profile entities such as Apple stores, Major League Baseball stadiums in the U.S., and retailers such as American Eagle Outfitters and Alex and Ani, among others. Yet beacons are not a replacement for location sensors and perform different functions. They only work with mobile applications and they can only detect and inform a mobile app as to the fact that the handset is within a general range of the beacon. Beacons cannot provide positioning and cannot support a moving blue dot for high value resources such as in-store navigation, precise XY or XYZ shopper coordinates or the engagement and analytics tools that require those features. A Primer on Magnetic Positioning As mentioned above, magnetic positioning uses the Earth s geomagnetic fields to precisely locate individuals within indoor spaces. It enables the smartphone s compass to position the individual within a location who s magnetic footprint is created through the application and crowdsourced behavior. Once this simple step is completed, accuracy and floor plan changes are accomplished organically and over time. This requires no hardware installation and minimal ongoing maintenance. It s compatible with both Android and ios devices. IndoorAtlas recently showed Opus Research a demo of how indoor positioning can be used for product proximity advertising in the use of a blue dot search the mall of equivalent of you are here location awareness. 7

Applications for Mobile Positioning Apps Blue Dot Blue Dot is the term for the familiar blue You Are Here icon indicating the mobile app is informed as to your precise location and can move with the shopper. Blue-dot awareness allows an app to display shopper location within indoor maps of the store at the aisle or even shelf level. It enables wayfinding, product or brand promotions delivered in a real-time, appropriate context. Beacons cannot effectively deliver blue dot features. Magnetic offers blue-dot navigation directly to an area or product in an aisle or on the shelf if shelf/product data is made available from the retailer. In certain store types such as specialty retail, big box, home improvement and others, the customer experience benefits of in-store product navigation are clea, as are the financial benefits to retailers and brands. Fastest Route / Shopping List Retailers are rightfully concerned that shoppers find everything they set out to buy. Shopping list items in grocery or retail apps can be mapped to precise in-store floor locations so shoppers leave with everything they came for which is not always the case. According to Accenture, increasing basket size by one item for the customers shopping for one to three items could result in approximately a 4 percent sales increase. With blue-dot search, basket size and conversion rates show measurable increase. For example, an IndoorAtlas proof-of-concept store reports a 9.2% increase in basket size. When many retailers operate on low single-digit margins that s a big deal. Product Proximity Advertising Stores want your attention during the indoor purchase path, and so do brands. Brands are eager to advertise and promote inside the store and yet the opportunity is valid when the right brand is messaged to the right consumer at the right time. Location data brings relevance to a new, real-time high likelihood with location services. Both beacons and magnetic positioning require a mobile app on the phone and active, and better performance is achieved when the phone is physically out-of-pocket. There is no passive tracking that is achieved without a mobile app present and turned on. Breakdown of Large Scale Retail Store Implementation When evaluating differentials between magnetic positioning and BLE/Beacons, we take an example of a retail department store with 500 locations, each store with an approximate size of 100,000 square feet. This is standard size for big box or retailer and one store type where indoor location solutions are high value. In our department store example, the floor plan is center-aisle comprising 60% of the store, the remainder is formatted as perimeter aisles. The use cases and location/coverage and accuracy requirements are the same, and typical with aisle-level and 2-meter location accuracy. 8

BLE / Beacons: IMPLEMENTATION: Beacons are typically affixed with sticky tape or similar. Several beacons are places near the entrance, additional beacons are placed at approximately 3-4 per aisle, with 40 or more for the end caps. In all, each store requires100-120 total beacons. Time to install is a single day and configuration should take only several hours. Implementation is fast, but still requiring approximately ten hours or 625 man-days for the chain. INFRASTRUCTURE COST: $20 or more per beacon for hardware, or $1.2M for the chain. MAINTENANCE: Beacon batteries can last between 9-18 months and must then be replaced. Beacons must be placed in the open and not hidden. Some will be removed by accident so a means to manage beacon failure must be in the software and easy to manage. If the assumption is that hardware changes and beacon and battery replacements is 3 hours per month per store, that represents 900 man-days per year. A means to accommodate errors in user experience and data collection must be present. Beacons must be moved each time shelves and fixtures are moved and beacon locations and ID s must be adjusted in the software so they deliver the proper data and product/location correlations. Operational Benefits ANALYTICS: When a customer walks through the store with the mobile app turned on, data regarding their location is generated and transmitted to the server to enable analytics to the extent of the accuracy attributes of the system. Accuracy is typically 3 to 10 meters or 9 to 30 feet. ENGAGEMENT: When a consumer passes by a beacon the beacon s location ID is passed to the mobile app and, based on that ID and other behavioral factors a message may be displayed to the consumer. Blue dot and wayfinding are not available. Magnetic: IMPLEMENTATION: No hardware installation is required. An employee armed with the mobile app will walk through the store and create a footprint of the store s magnetic properties layered on its planogram. This takes approximately 1 trip or an equivalent of 4 hours in order to generate 1-2 meter accuracy. No additional time is allocated for hardware placement. INFRASTRUCTURE COST: $0 MAINTENANCE: There is no movement or replacement of batteries or devices. No means to accommodate errors in user experience and data collection due to hardware failure is required. Store format changes will require a single employee walk the store for several minutes. At one hour per store per month this represents 300 man days per year. Operational Benefits ANALYTICS: When a customer walks through the store with the mobile app turned on, data regarding their location is generated and transmitted to the server to enable analytics to the extent of the accuracy attributes of the system. 1-2 meter (3-6 ) accuracy is achieved. ENGAGEMENT: The customers specific path is passed to the mobile app and, based on that ID and other behavioral factors a message may be displayed to the consumer. Because of the accuracy and true real-time nature of magnetic, Blue Dot and wayfinding is enabled. 9

Implementation Comparison Note: Table below is a direct cost and performance comparison of an example retail department store with 500 locations, each with an approximate size of 100,000 square feet, between Bluetooth/BLE and magnetic solutions. OVERHEAD * Bluetooth Chain-Wide Magnetic Chain-Wide Number Of Devices 110 55,000 0 0 Device Cost/ea $20 $1,200,000 $0 $0 Installation 10 5,000 0 0 Man-Hours Maintenance (Hours/ 36 18,000 12 6,000 yr) Hardware cost $120 $60,000 $0 $0 (batteries)/yr Replacement Cost/yr $440 $220,000 $0 $0 Estimated $100 $50,000 $0 $0 Implementation $ Estimated Maint. $/yr $100 $50,000 $0 $0 ANNUAL COST $660 $330,000 $0 $0 PERFORMANCE Bluetooth Magnetic Accuracy (meters) 3-10 1 Proximity Yes No Positioning No Yes Wayfinding No Yes Vulnerable Yes No Editor's Note: The above tables compare Bluetooth 4.0 (BLE) beacon technology with magnetic in the following key areas: Infrastructure overhead, cost to implement, and cost and effort to own and operate From a performance standpoint it compares the key metrics required to define value as a location solution, including: accuracy, proximity, positioning, wayfinding and vulnerability. Summary: Living Up to the Hype The current media hype surrounding indoor location technologies (including beacons / ibeacons, WiFi, and magnetic positioning) promises a level of mobile consumer engagement never seen before. Retailers, venue and mall owners, supermarkets and brands will have the opportunity to connect with consumers at the right time, with the right message, to the right audience, and in the right place. Proximity and indoor positioning solutions enable mobile consumer engagement and indoor advertising. In an apples-to-apples comparison between key technology components Bluetooth BLE beacons versus magnetic the benefits are striking for magnetic positioning. The solution, as provided by IndoorAtlas, allows for greater location accuracy, better messaging and analytics, and an all-in-one infrastructure which helps lower total cost of ownership. With these benefits, retailers will soon recognize magnetic positioning as a top-of-mind technology for indoor location. 10

About Opus Research Opus Research is a research-based advisory firm providing critical insight and analysis of enterprise implementations of software and services that support multimodal customer care and mobility strategies. Opus Research calls this market Conversational Commerce with tailored coverage and sector analysis that includes: Self-Service & Assisted Self- Service, Voice & Call Processing, Intelligent Assistance, Indoor Location Analytics, Mobile Search and Commerce, and Voice Biometrics. www.opusresearch.net For sales inquires please e-mail info@opusresearch.net or call +1 (415) 904-7666. This report shall be used solely for internal information purposes Reproduction of this report without prior written permission is forbidden Access to this report is limited to the license terms agreed to originally and any changes must be agreed upon in writing The information contained herein has been obtained from sources believe to be reliable However, Opus Research, Inc accepts no responsibility whatsoever for the content or legality of the report Opus Research, Inc disclaims all warranties as to the accuracy, completeness or adequacy of such information Further, Opus Research, Inc shall have no liability for errors, omissions or inadequacies in the information contained herein or interpretations thereof The opinions expressed herein may not necessarily coincide with the opinions and viewpoints of Opus Research, Inc and are subject to change without notice Published February 2015 Opus Research, Inc All rights reserved 11