The term “geofencing” refers to a technology that uses GPS coordinates or RFID signals to draw a virtual boundary in space and to trigger certain actions on the basis of this boundary. This virtual border is called a geofence, which is a portmanteau word made up of geographic and fence. The actions that are triggered by the user when a geofence is crossed can result in the sending of push messages, emails, SMS or in more complex applications, which sometimes include programming instructions.
Both objects and persons can be located within a geofence. If a receiver device such as a smartphone or a microchip in a car is within the range of a predefined geofence, subsequent actions are triggered by the exchange of signals between the receiver and the transmitter. The receiver receives a message, for example, that special offers are submitted to him or that the car with the microchip is not allowed to cross the national boundaries.
Geofencing is technically based on a GPS system, but can also be implemented using RFID chips and M2M communication. It is commonly assumed that geofencing will be an important technology for the Internet of Things. The technology is already being used in mobile marketing.
Geofencing is used in a wide variety of areas to manage administrative tasks, supplement marketing, or to check security-relevant aspects. In principle, such systems work like positioning and navigation systems. The difference is in the boundary coordinates, which enclose a specific area in the shape of a rectangle or circle and function as a geofilter. This virtual positioning is known from vehicle location by GPS. By distinguishing between the inside and the outside of a precisely defined area, it is possible to trigger actions on entering or exiting from this defined area.
For example, a location-based user can be encouraged to purchase at a specific store location as soon as they come close to it. In contrast, measures against theft or the protection of moving objects are implemented using the outside area of the defined space. If an object moves out of the marked area, the system administrator receives a message or is alerted. Such functions are known from the location-based service (LBS).
But with geofencing, this marketing tool is automated and thus less passive than location-based marketing. Entry into a geofence is automatically detected by the device or the system and an action is automatically initiated.
Geofencing applications are relatively versatile thanks to their functionality. Geofencing can be implemented in operating systems, programs or hardware components. For example, Apple’s iOS has a function called a location-dependent memory. As soon as a user crosses certain coordinates with geofencing turned on, they will receive a reminder that the user himself has entered beforehand.
When geofencing is combined with site-based advertising, it is in most cases an app that performs the action. Users must install this app on their device and agree to the terms before the app can send push messages when crossing a virtual boundary. When users go past the virtual border, they can be offered location-based campaigns, discount deals, or incentives. Such apps are in part available through partner programs, platform-dependent services or third-party providers of location-based advertising and InApp Advertising.
There are basically two ways geofencing is technically implemented:
The geofilter boundary is defined accordingly with GPS coordinates, mobile radio network areas or WLAN networks. Some applications use Google Earth, while others use latitude and longitude, or custom web-based maps. Beacons can also be used within smaller coordinate systems.
Geofencing can cause actions and responses from devices with signals when they are connected to the system. Reactions of devices are sometimes dependent on additional data collected by additional sensors. By means of IFTTT (if this then that) instructions, complex applications can be implemented which sometimes require extensive user knowledge and additional sensors or devices. This is considered an important building block for the Internet of Things.
The legal aspects of geofencing are quite controversial. In order to use location-based data, companies first have to obtain user consent in some countries and push messages have to be approved by the user before companies can send these advertising messages. In order to carry out geofencing legally correct in some countries certain actions are required. For example, companies can inform users about the use of location data and obtain consent to get push messages.
Other laws such as UWG (German Law Against Unfair Competition) must also be observed when geofencing is used to get customers from competitors. A legal check is advised before any geofencing measures. If the still unclear legal situation is observed, geofencing can significantly improve the user experience at the point of sale, use ROPO effects, and deliver personalized advertising through innovative technology. However, the most positive information and case studies on geofencing from the US should to be taken with caution since data protection regulations differ for different countries.