Leveling the Playing Field: Mobile Location Analytics

by Goulston & Storrs PC
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As brick-and-mortar retailers face increasing challenges to compete with their online counterparts, a new tool is helping to level the playing field: mobile location analytics. Traditionally, online retailers have had an advantage over brick-and-mortar stores from the voluminous data that could be gathered while customers perused the retailer’s website. This has allowed online retailers to track, among other things, precisely how many customers are visiting their website and when, which websites those customers are being directed in from, which items customers are viewing and for how long, and which customers are buying what products. By better understanding customer behavior, online retailers can tailor their websites in order to funnel customers to the most profitable items, to offer customized advertisements and shopping experiences based on a customer’s prior browsing or purchasing history, and otherwise to enhance their website in ways that maximize customer acquisition and retention and ensure maximum profitability. Now, mobile location analytics is transforming brick-and-mortar retail by providing access to similar information about customers, which is allowing the retailers to improve their stores and the shopping experience for their customers in the same way web analytics has been doing for online retailers for years.

Mobile location analytics (MLA) generally refers to the study and analysis of location data that is gathered from cell phones, tablets, smart watches, and other mobile devices. Every mobile device with Wi-Fi or Bluetooth capabilities is assigned a unique identifier by the manufacturer, called a MAC address, which is constantly broadcasted whenever the Wi-Fi or Bluetooth function is enabled. Sensors can be installed in stores, malls, airports, hotels, and virtually anywhere else to pick up and record the broadcasted MAC address, which then can be used to track the location of that device – and the customer carrying it – with great accuracy. The gathered location data is then aggregated (along with data gathered in other stores using the same MLA provider or partner providers) and can be used to reveal customer patterns such as the percentage of customers walking by a store who enter it, heat maps to show the most common paths customers take through a store or mall, the amount of time an average customer will spend in a store, and the amount of time average customers spend at particular product displays. And because each MAC address is unique and is linked to a particular device, it also allows the retailer to track a customer over time, to identify repeat customers, and to know whether that customer has been to the retailer’s other branches or stores. With enough data points, it is even possible to infer age and gender of customers.

Though names, addresses, and other personal information are not linked to MAC addresses, the nature of the data gathered for use in MLA presents some obvious privacy concerns, particularly when customers are not aware that the data are being gathered or how they are being used. Some studies have shown that customers overwhelmingly disapprove of the practice. To help allay these fears, many of the major companies providing MLA services have taken significant steps to ensure customers’ privacy is maintained, including by de-personalizing the data immediately upon gathering it, by complying with a mutually-agreed upon Code of Conduct that requires certain privacy controls, and by providing an opt-out website that allows individuals to add their MAC address to a database that serves as a de facto ‘do not track’ list obeyed by many of the largest MLA companies. It also helps that the FTC publically has taken an interest and is keeping a watchful eye as the use of MLA technology increases.

Privacy concerns aside, MLA technology can provide significant benefits to all parties involved in the retail experience. Shopping center managers can use the technology to optimize the mix of tenants, to increase efficiency and improve traffic flow throughout the premises, and to maximize advertising effectiveness. Store owners can use the technology to improve their marketing efforts, to place products and staff more efficiently throughout their stores, to funnel customers to their most profitable products, and to provide a better overall shopping experience that increases the likelihood that a customer will provide repeat business. And even customers benefit from better access to the products they most often want, more helpful and relevant advertising, more effective customer service, and generally an easier shopping experience. Online retailers have had access to data that allowed them to provide analogous benefits for years. Now, with the increasing availability of MLA, brick-and-mortar retailers have a powerful tool to help keep up.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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