5 Questions For Beacon Providers

Editor’s note: Mark DiPaola is chairman and co-founder of inMarket.

From concert venues to your neighborhood grocery store, beacons are ushering in an age of touchless, context-based mobile experiences for savvy consumers. There have been plenty of exciting announcements touting beacons in 2014, and enormous interest in the field. However, there is also confusion about how to actually use these devices at scale.

With that in mind, here are five critical questions to ask “before you beacon.”

1. Which apps do these beacons work work with, and how many people use those apps?

A beacon network without an app ecosystem is like a radio station with no listeners. In fact, beacons themselves are just little radios attached to a watch battery — they don’t “do” anything without apps (and users) tuned in to listen to them. Before you go out and buy 1,000 beacons, make sure you have an app network in place to make the program work.

Because some percent of users may have Bluetooth off, opt-out, or have an old phone, 10 million-plus installs is a good rule of thumb to begin seeing meaningful activations on a national campaign. Local campaigns should have more. If this is beyond the scale of your own app distribution, consider one of the emerging SDK networks that leverage other apps to listen for your beacons or locations.

And don’t forget about compatibility. There are a lot of Androids out there — does your provider offer an Android beacon solution? And does that solution actually use beacons, or does it simply use GPS? There’s nothing wrong with using GPS as a backup for devices that aren’t beacon-compatible, but make sure you understand what you’re actually paying for.

2. How much experience does your provider have in microlocation?

The basic concept behind beacon marketing is not new: Target a consumer at the perfect moment on the path-to-purchase. Since the advent of GPS, mobile marketing firms have successfully reached shoppers based on their locations. However, it just wasn’t as accurate, often fired at the wrong time, or ate through your battery. If your goal is to reach shoppers, a company with a track record in microlocation solutions may be better suited to help you than a company that simply sells beacon hardware.

Watch out for vaporware, and the dreaded asterisk that appears subtly on more than one analytics page: “Please note the following examples are for illustrative purposes only.” A beacon provider should come to you with a demo, point you toward a nearby location with the technology installed, and demonstrate how their content management system works. Demand more than mockups and evaluate the actual experience.

3. What is the value proposition for the end user?

Beacons piggyback on existing consumer behavior: Using apps in certain places to add value to real-world experiences. A smartphone becomes smarter when it acts like a concierge and helps you effortlessly. So how does your beacon campaign add value for the consumer? The idea of sending multiple messages to consumers as they walk down the street is a request we’ve encountered from more than a few brands. But will today’s consumers tolerate 1999-style popup ads on their phones? No way. Delighting the user is paramount, and apps that annoy get the app “death penalty” — deletion.

However, when deployed correctly, there is a great reward: We’re seeing that consumers who receive a location-based message are 16 times more likely to use an app in-store than those who do not. And since consumers who use apps while in-store buy 14 percent more than those who don’t, that’s money in the bank. Marketers who dream up responsible user experiences that surprise and delight consumers are in for a treat.

4. How much buck for what kind of bang?

Three broad pricing models have emerged:

  • Pay Per Beacon: Anyone can buy beacons online for as little at $5, or as much as $60 for “name brand” beacons in cute packaging. The dirty little secret is that almost all of these beacons are exactly the same inside. The brand of battery you use is more likely to influence your beacon experience than the brand of beacon itself. As beacons are further commoditized, we can expect to see them drop to as low as $1 or $2 apiece. In this model, you are responsible for building your own app, building your own audience, and installing the beacons.
  • Pay Per App User: Using the SaaS model, some companies charge a “service fee” based on the number of active users in a beacon-capable app — whether or not those users engage with a beacon. An existing model charges ~$600,000 per year for each million users… just for the chance that some of those users interact with a beacon. These fees are incurred whether or not the program successfully delivers.
  • Pay For Performance: The third model is a full-service, turnkey solution with beacon acquisition, deployment and maintenance handled by the beacon partner. This includes a varying amount of customization based on your data and marketing needs. There are also opportunities to gain reach and marketing dollars by allowing a controlled group of advertisers onboard, somewhat akin to a store’s weekly ad. This model is performance-based, so you’re billed based on success metrics and actual engagement.

We’re still in the early innings of beacon adoption, so the jury is still out on pricing models. Select the solution that makes the most sense for your application.

5. Are you protected from hijacking?

Beacon hijacking — listening for beacons that other people have placed — is an important issue depending on your application. WikiBeacon is among the first sites to begin collecting “naked beacon” IDs and addresses — 32,000 so far — and posting them for all to see. Physical competitors are already beginning to use this data to target retailers who have been unfortunate enough to deploy naked beacons, and it’s not hard to imagine a world in which online competitors could target users, too.

The good news is that security exists. Ask a potential partner’s provider if their beacons are locked down and protected so that only you can use them.

As beacon technology becomes more common, we’ll see an evolution in all five of these categories. The key for today’s adopters is to ask the right questions. Watch out for vaporware, know exactly what you’re paying for, and make sure you’re adding value to the consumer experience.