Marketing and the Location Based Services (LBS) Concept

Back in business school, we learned about “The Marketing Concept” as the total company effort to satisfy customer needs at a profit.

Location based services are booming and as marketing professionals, we have real challenges on how to integrate these new technologies to our tool set together with Wikis, Blogs, Social Networks, Podcasts, etc. Are you ready for new ideas like Location Based Advertising?

From a business perspective, I would define the “Location Based Service concept” as the company’s effort to transform geographical positioning information into valuable and relevant data for a customer, to make a profit.

The Location Based Service concept, like the marketing concept has 3 components

1- Get Geographical positioning information. This can be accomplished in many ways. The obvious way is a GPS device through cellular network, IP address mapping, user input, etc. (will address this in future posts)

2- Transform this data into valuable information. Your kids are calling for a pickup at midnight; would you consider the same situation knowing they are at a friend house or wandering around downtown? Suddenly the geographic layer of information changed the urgency of the pickup completely. What if you try to locate your grandmother suffering from Alzheimer or if you want to know where is your task force at any given moment. What if instead having the pizza place telling you “…another 5 minutes…” you can go to the web and receive a service “Where is my pizza”!! (No doubt this is a nice application, particularly if your teen son came with friends from a soccer game and they are starving…) The number of possible applications is limited to the extent of your imagination (and of course some technical limitations…), but the idea is to generate value for somebody and get paid for that service.

3- Make a profit. It’s amazing how many companies/developers forget that the ultimate reason of putting a business together is TO MAKE A PROFIT. Location Based Services is an expensive business. Usually your current location needs to be relayed to certain application server and most of the time this is accomplished through cellular networks; hence somebody must pay the bill. When you buy a personal locator device – PLD (like zoombak, Leipac, and others) they have a cellular device included, usually with a SIM Card, to communicate your location – and that service is expensive.

The number of LBS applications is growing exponentially. Just in the last few months I’ve seen dozens of free Location Based Social Networking sites come alive. The question is how many of those will be alive next year. For me the answer is simple, only those with a solid revenue model and clear value proposition will last. Some are betting on valid strategies based on collective user value, wikonomic “prosumers”, “fremium” services, etc. In that case, the keys to success are a) make sure somebody else pays the communication costs and b) be sure your customers generate real aggregated value you can capitalize.

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