First post – Marketing and the Location Based Services 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.

First post! I will talk about those services and business models, including GeoTagging, WEB 2.0 applications, Location Based Social Networking, Location Based Advertising, Privacy Issues, and many other.

YOUR OPINIONS are welcomed and desired.

THANK YOU!

Posted in: Blog, Marketing on November 18th by Claudio Schapsis

11 Comments

Comment by David Sanderson — November 20, 2008 @ 3:50 pm

Yes indeed the growth of LBS is real and evident in the market. Services will allow the hardware to be monetized by providing applications that the user will benefit from. Being sure to ‘add value’ to the consumer(customer) is important. Don’t just sell the technology – sell the solution. By the way, I think that this now elevates the platform to WEB 2.5 or 3.0.
Comment by Tabi Tabe Tabi — November 26, 2008 @ 2:44 pm

The challange with new business ideas is that you will get the “”met too” entrants who will just copy one model and replicate it in a different market or even in the same market. The LBS industry is currently where VoIP industry was about five years ago. Everyone wanted to be the next Vonage. Now they are gone and forgoten. Don’t be surprise to see white label offerings for anyone to make a small investment and get into the market.

What will determine whether these new entrants survive is their business model. Where will the cash come from? How will they make money? Basically, like you put it, what is the revenue model?

We have seen with social networking (SN); people use hosted platform or build their own to get into the SN business with no clear business model. They all want and hope to be the next facebook. Thing is you cannot put a site out there and hope to attact millions of users and that someday it will make money through advertizing or that someone will buy it the company. Skype had a good business model do you? It is time to start thinking of something valuable that customers will be willing to pay for. Business is about willing seller have goods or services in a market of willing buyers. Can you use your own LBS service and what problem does it solve or what value do you derive from it? Think!
Comment by Javier F — December 3, 2008 @ 9:29 am

I think we all agree on one thing, the most important problem mobile social networking applications are facing is generating revenues.

I am aware of the value that these applications bring to customers, specially the younger crowd. However, I don’t think anyone will be willing to pay for this type of service.

I’ve heard many times that this may be paid for by mobile advertisement. I still believe this kind of advertisement is intrusive and people do not want advertisement in their personal device.

I have given this topic a lot of thought and I can’t figure out where else to generate significant revenue. The “fremium model” might work for some, although for social networking services I hardly see someone paying a monthly fee, although hopefully I’m wrong. Claudio, I would love to hear you comment in more depth about this topic.
Comment by Claudio Schapsis — December 4, 2008 @ 7:37 pm

Tabi Tabe, Javier,

Thank you for your comments. I agree, the “me too” model will not work here. Providing LBS services is more than opening a SN site and paying for hosting – it’s an expensive business (see value chain part-2). Therefore migrating regular web 2.0 strategies to the mobile world is problematic. The key here is in the collective value of the network. I’ll address this issue and a few ideas on my next post (coming Saturday).
Comment by Greg Peckham — December 5, 2008 @ 1:48 pm

Tell me about the profits first, then bring me to them. Feel as though I am following bread crumbs through the forest to the Cookie House. Show me the $$$ then back me down the trail. PERT- Partially kidding, but like to see a picture of myself on the moon before I start the journey.
Travel Safe- Kind Regards Greg
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