Location-based marketing is a method of advertising where geolocation APIs collect current or past location data from consumers and use the user's device to display relevant content to them. Other names for location-based marketing are location marketing, geo-targeting marketing, geo-location marketing, proximity-based marketing, and hyperlocal marketing.

Location-based marketing is the overarching method, which is broken down into geo-fencing or geo-targeting. Geo-targeting is when a customer is served an ad based on their location. Geo-fencing is when a customer is served an ad with the help of GPS or RFID technology based on a pre-determined virtual fence of a geographic area.

For example, when someone visits a department store, the store captures their data. The store can use that data for a promotional campaign to target the customer as they are shopping in the store (geo-targeting) and in the future when they are in the area (geo-fencing). Serving advertisements in the store or when the individual is nearby can help convert potential customers, especially sales and coupon incentives.

When it comes to choosing between geo-targeting and geo-fencing, which one should a business use?

The technology and the specificity of the targeted demographics decide whether a business should choose geo-targeting or geo-fencing. Both options usually use push notifications to alert the users of ads from businesses, but geo-targeting works with a device's IP address to locate the individual. In comparison, geo-fencing uses GPS and WiFi.

Geo-targeting works if the business has a specialized group of potential customers in mind. If a store wants to target everyone in the immediate vicinity about their sales, geo-fencing might be a better option.

Key Benefits of using location-based marketing:

Increase in-store visits: Showing the ads at the right time when the customer is nearby has a higher chance of increasing a walk-in impulse purchase.
Get deep insights into customers’ shopping behavior: With potential customer visits, audience, and trade area data, marketers can use ad campaign results to build more effective and relevant buyer personas.
Enhanced targeting: Use geo-targeting and geo-fencing appropriately for ad personalization to target potential customers based not just on the location but also on various other factors.
Only pay when customers make an in-store visit again: Using location-based advertising gives marketers new performance models, such as cost-per-visit (CPV) advertising.