Human hand holding smartphone connected to the iBeacon system: a drinks voucher offer is displayed on the screen.

Analysis: understanding the Big Beacon picture

Virgin Atlantic’s recent announcement that it would install Apple’s iBeacon technology around Heathrow airport is the start of something much bigger.

The airline brand will install Apple’s iBeacon technology around the airport so that it can pinpoint customers via their smartphones, and send them personalised information. The system works by using tiny radio beacons, which communicate with phones running the right applications using the Bluetooth Low Energy (BLE) protocol.

It’s a low-powered, transmit-only device that broadcasts its ID to nearby devices. When an enabled app picks that up, it means that the app knows a phone’s exact location in a building.

This is big news because in-building micro-location is the last frontier for companies already intoxicated by the possibilities of mobile marketing. For years now, we’ve been able to use consumer GPS technologies for around 10 metre accuracy. The commercial Skyhook service offers the same accuracy, but with improved in-building performance. But this is still not reliable or accurate enough for micro-location, which would be able to accurately locate people a couple of feet away from a transmitter.

It’s also important to remember that although Apple might have piloted iBeacon in its products, it isn’t exclusively an Apple technology. Others are ardently developing hardware implementations. Motorola announced an in-store radio communications platform of its own for shoppers that includes iBeacon support; Estimote also has its own compatible beacons, and others will surely come.

Retailers are interested, too. Manufacturers are rapidly pushing the technology – which can be embedded in everything from tablet devices through to tiny button-sized hardware transmitters – into retail outlets in the US.

One interesting aspect of this is who’s pushing them. Mobile shopping app firm inMarket pushed them into over 200 Safeway and Giant Eagle grocery chain outlets, for example, while ThirdShelf, a Montreal firm that provides back-end analytics and mobile loyalty apps for retail clients, has also been busy showcasing the possibilities of in-store beacon technologies.

The other group pushing micro-location technology is brands who are eager to build a rapport with their customers at the point when they have their wallets out. Virgin Atlantic’s impetus to get beacons into Heathrow is a prime example, and in the US, food manufacturer Zatarain’s is pushing promotional messages such as recipes directly to shoppers via inMarket’s platform when they get near its products on the shelf.

This begins to show the possibilities of beacon technology, which are beyond the dreams of most marketers. Having an app identify where it is makes your phone's ID available to the brand or retailer’s back-end systems, which can reference your customer records from it. That’s how the app will be able to offer you coupons on those jeans that would go well with that top you bought last month, and how a store could identify you as a high-value customer based on past purchases, and have hordes of gushy, commission-hungry shop assistants scurrying – heaven help us – to your aisle.

But will customers load these apps in the first place? Privacy is one concern. Once made fully aware of just how closely they’re being tracked, they may not want beacon-capable apps on their phones.

Retailers will have to offer significant value to overcome such fears. Loyalty schemes including coupons and rewards for repeat visits could be one solution, but loyalty apps haven’t done so well on mobile phones, according to LoyaltyOne, a research firm in Canada. It said last year that only 20 per cent of loyalty apps are used regularly on their phones.

The clincher here could be mobile payments. Apps that offer the chance to pay online in addition to offering loyalty rewards can do well in certain niches, such as high-frequency, low-value industries such as food. Mobile purchases now account for over 10 per cent of beverage chain Starbucks’ revenue, after the company introduced a mobile app that also offered loyalty rewards.

Brands and retailers have been vying for people’s home screen real estate because it’s such a valuable channel for their attention. Beacon technology – easily extendable into different brands’ own apps – could be the third component in a holy trinity for mobile apps, which will finally draw customers into their web.

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