The Utility and Risk of Mobile Device Tracking

in-store mobile marketingAmericans are becoming increasingly dependent on mobile devices. These devices allow us to remain in constant contact with our family, “friends” (the real kind and the Facebook kind), Followers, and colleagues. Use of the devices is now cross-generational; teenagers to grandparents are carrying around the latest iPhone or Android product. Retailers are taking notice and capitalizing on this social and technological phenomenon by tracking mobile devices and their owners as they move about malls, shopping centers, and stores. This allows for the study of customer behavior, which ultimately enables a better understanding and improvement of the customer experience, which hopefully leads to more sales. This analysis is known as mobile location analytics. Not surprisingly, so-called “privacy advocates” aren’t as wild about the idea as retailers are.

To understand the utility and risk of mobile location analytics, one must get a basic handle on the technology. Today, almost all mobile devices are equipped with a Wi-Fi network interface, which allows the device to connect to surrounding networks. Devices so equipped are continually transmitting “probe requests” in search of available networks. Embedded in every probe request is the mobile device’s unique identifier, known as a media access control address. Retailers set up devices known as beacons throughout or surrounding their locations, and the beacons catch, record and track these media access control addresses as mobile devices pass through.

The customer tracking data captured by these beacons has real value to retailers. They use the data to develop and implement individualized and general marketing strategies. For example, a retailer captures data about how a particular customer crisscrosses their store, how long the customer lingers in each department, and what products the customer purchases. Based on this information, the retailer develops a buyer profile associated with the captured media access control address. Using this customer profile and the associated mobile device’s media access control address, the retailer tailors an individualized marketing plan to that particular customer, which may include real-time advertising texts or emails to the mobile device when the customer next passes through, or even sending follow-up advertisements to the customer’s mobile device when she or he leaves the store. For the most part, this kind of on-the-go, individualized behavioral advertising is not in wide use, but it’s definitely on the near horizon, “coming to a mall near you.”

Mobile MarketingIn more common use today is the use by retailers of aggregated, “anonymized” customer data to improve more conventional marketing strategies. Customer tracking data better informs a retailer where to locate in-store displays, or how to organize products by location, grouping, and shelving to maximize sales potential. Or a retailer may use the data to determine where to locate cashiers (especially mobile cashier’s with tablets), in order to decrease customer wait time and increase product sales.

While retailers benefit from mobile location analytics, others have raised privacy concerns. Even though a mobile device’s media access control address does not contain personally identifying information specific to the owner, the tracking information alone reveals a wealth of behavioral data. By associating a mobile device to a behavioral profile, a retailer can potentially extrapolate the gender, age range, and socio-economic strata of the owner. It is technologically possible to link a media access control address to a specific credit/debit card purchase, which could ultimately lead to the identity of the card holder. Of course, the interesting thing about these concerns, as with many concerns raised in the name of an ever-expanding definition of “privacy,” is that none of this information is truly “private.” The location of a particular customer in a public retail establishment, what merchandise they consider, what they purchase, and the order in which they visit various departments or stores is, of course, not private at all. It’s perfectly observable by anyone who bothers to take note. Tying that behavior to a particularly person by name certainly reduces a shopper’s chances at anonymity, but privacy and anonymity are not the same thing.

Nonetheless, the Federal Trade Commission has taken note of the trends in mobile analytics. While currently no federal or state laws prohibit these practices, there are those who are advocating industry self-regulation, and progress has been made in this regard. The mobile analytic industry adopted a code of conduct in 2013, and in February 2014, U.S. Senators Chuck Schumer and Al Franken, organized a voluntary program by several mobile analytics firms to allow consumers to opt-out of being tracked.

There is little doubt that mobile location analytics offers many advantages to both retailers and their customers. However, as with most new technologies, with the rewards come risks. Retailers should carefully weigh the risks versus the benefits, and we’ll all wait to see how the field of mobile location analytics shakes out over the long term.

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