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Mobile location-based services require customer trust

Mobile location-based services enable companies to enlist data for greater insight about their customers. But success in LBS isn't guaranteed.

Today, customers have far more control in their interactions with companies -- whether that's in the course of...

purchasing products, getting deals or for some other reason. Many factors have contributed to the shift, but one thing is clear: The voice of the customer has become paramount, and customers are driving the bus on purchasing.

And, as customers increasingly operate with the proliferation of communication channels --from social media to mobile devices to the company's website to traditional phone calls -- companies have had to adjust. They need to stitch together all of these sources of data to get a 360-degree view of the customer, and use that data to market and sell more effectively to these consumers.

In the war for customer acquisition and retention, a customer's location has become a key piece of information. When combined with other data, such as customer demographics and location, companies can target a customer with offers and other content that make customers feel valued or engaged with the brand. At the same time, companies have to be sensitized to the fact that customers are concerned about their data privacy -- and the intrusiveness of location-based techniques, which may barrage them with too many messages that hold little value for them. Not all customers with a mobile device want their location tracked. Companies must strike a balance between forging customer trust and privacy concerns. And they must be able to articulate the value of these so-called mobile location-based services (LBS) to consumers.

Enter LBS, which have opened up new opportunities for companies to gather data about their customers, increase efficiency and bring them closer to developing meaningful relationships with their constituents. Mobile location-based services enable companies to gather data about their customers based on a customer's location. The company can, in turn, provide offers, discounts or other information based on that knowledge. On the surface, LBS represent a win for companies and customers alike: Companies collect data on their customers and how they behave on their mobile devices, and customers get specialized discounts or other promotions that they value.

But, companies exploring the benefits of mobile location-based services need to ask some hard questions first: How much do customers trust your company? How comfortable are your customers with sharing their personal data? What kinds of experiences are you offering your customers and are they important to them?

LBS in our everyday lives

Mobile location-based services take advantage of the fact that customers exchange information on a day-t0-day basis on mobile devices, whether it's to find a new restaurant or to check out a new store. LBS use location data about consumers and products to deliver services, which are accessible with mobile devices through a mobile network by using information on the geographical position of the mobile device itself.

LBS have become important in the development of marketing and sales strategies to communicate with customers based on their demographics and preferences, including location. Companies can tailor messaging, promotions and other offers to consumers based on this location-based data. Mobile location-based services have spawned a new era of mobile commerce, taking the form of coupons or advertising directed at customers based on their current location.

Companies are capitalizing on these new trends to streamline marketing strategies and develop innovative services. Google not only uses location reporting for things like its "explore around you" feature on Google Maps, but also keeps track of your location history. Google archives your location history to offer directions to places you've visited frequently -- a feature that some people find useful, while others feel it unduly monitors them. Users can disable this feature, if they choose. Additionally, Google claims it will never share users' personal information unless given direct consent from the user or requested to do so due to legal purposes.

Some companies, such as Twitter, enable other companies, such as Hootsuite, to use its geolocation information. Twitter allows you to attach your location to a tweet, which allows Hootsuite to do "conversational listening" in a specific geographical area to pinpoint "trending topics" that are causing a lot of buzz. The geotagged information is stored on Twitter's servers, but Hootsuite can use the data for its own application. Some customers might see this as a betrayal of trust, while others might not care if this information is shared with a third party. So, when do companies cross the line? Can we foretell who will be compliant and who will refuse to share their information?

Sharing data: A delicate proposition

A person's willingness to divulge information, especially his or her exact location, to a company is a complex balance of opportunity cost. Researcher Tao Zhou distinguished between enablers and inhibitors. An enabler, Zhou wrote, is anything that "includes perceived usefulness and trust," and causes the user to opt-in to LBS practices. An inhibitor is a privacy risk and would deter a user from participating.

"The results indicate that contextual offering is the main factor affecting trust, whereas ubiquitous connection is the main factor affecting perceived usefulness," Zhou wrote. "Privacy concern affects privacy risk. Trust has significant effects on perceived usefulness and privacy risk. And these three factors predict user adoption and usage behavior."

This means companies can predict the success of a mobile location-based services initiative by understanding three key areas:

  • Trust in the company -- offering LBS in context.
  • Perceived benefit of LBS -- use full-time tracking only when needed.
  • Personal value of privacy.

People who highly value their privacy need to trust the company and see the benefit of the service offered. Conversely, people who do not value their personal privacy as much won't need much trust in the company, if they think the service would be useful. The companies that excel in LBS are trusted by their clientele and offer valued experiences to their customers. The ones who are less than successful fall short in one of the three areas above.

Yelp has experienced mitigated success due to wavering trust and tough competition. While Yelp customers see value in researching local businesses, or finding a new business they wouldn't have otherwise tried, customers have lost trust in Yelp. There has been debate regarding possible extortion of companies and allegedly manipulating the reviews that users post. The tradeoff between valuable location-based data and concerns about credibility are just one example of the kind of problems that arise from misuse of customer data. Companies need to be careful stewards of LBS to educate and enhance consumers' experience, rather than have consumers feel betrayed or misled.

Next Steps

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This was last published in September 2015

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