Experts Blog

Beacon technology in e-commerce – key to differentiation or high-tech toy?

  • Unic Author

Companies want to use technology to make their customer shopping experience across all channels more personalised and thus more intuitive and memorable. The aim is to win customers wherever they are with a personal approach, promotional discounts and relevant advertising that enables them to find the right products and purchase using mobile payment methods.

Flexible e-commerce in real time

Employees should also be informed in real-time about missing stock and be able to control flexible pricing with digital price tags. These ideas are not new: Microsoft’s Officelabs think-tank first proposed this concept 10 years ago, as part of its ‘Retail Future Vision’. But it’s only now – or rather, in the next few months and years – that beacon technology and similar approaches will make this vision a reality.

Beacons: drivers of location-based services

Beacon technology enables companies to provide location-based services. Beacons work on the lighthouse principle: they emit a signal that is picked up by end devices in the immediate area, making it possible to interact with potential customers.

The underlying Bluetooth low-energy technology was introduced by Nokia in 2006. In 2013, Apple became the first provider of beacon technology when it launched its iBeacon solution for interior localisation as part of its new iOS7 mobile operating system. This was the starting point for the practical application of beacon technology: in early 2014, the first large companies started venturing into this new area by experimenting with possible applications.

The stage is set for beacon technology to enjoy successful and widespread use across the market: the underlying transmission technology, Bluetooth, is already well established and supported by almost all smartphones and phones. The necessary hardware is affordable, with providers charging between $5 and $30 per beacon. The beacons are battery-powered, so they are entirely self-sufficient and maintenance-free for about two years and incur virtually no running costs. So the question is: what’s standing in the way of a mass roll-out of this technology?

Reasons for slow market penetration of Beacons

On paper, beacon technology is very simple and affordable. But companies are able to create a personalised customer experience only if all the various platforms behind the scenes are perfectly integrated: these include CRM systems, databases and, of course, good analytics tools for quick evaluation of the considerable data flow. Not to mention the apps for customers’ smartphones: without apps, the beacon’s one-way signal is destined to fall on deaf ears.

The second reason for the sluggish market development is a lack of useful applications for customers. There have been many approaches and trials organised by large well-known companies, such as Apple, American Eagle, Best Buy, J.C. Penny, Macys and Tesco, but to date none of them has found a truly satisfying concept. In the retail sector, in particular, beacons provide companies with massive amounts of top-quality data, such as customer movement within stores, viewed products and much more, but often there’s no real benefit to the customer.

Furthermore, several unanswered questions get in the way of progress:

  1. How many push messages can be sent without overwhelming the customer?
  2. How can customers be persuaded to use the necessary app from the provider? Are interactions between apps (for example, the current iOS health app) also possible for retail purposes? The health app makes it possible to connect and exchange data with a variety of special apps from other providers, so the customer doesn’t have to download a separate app from each provider.
  3. Is today’s ‘opt-in’ principle enough to resolve questions of transparency and data protection? Or will it in future be replaced by a disclaimer in the GTCs, whereby the customer can no longer identify which apps are sending what data and when?

Assessment of the potential consequences

The technology is already highly developed and ready to be rolled out, and the costs of purchasing the beacon hardware and apps are reasonable. It is still unclear exactly what applications will benefit from this technology, but this will presumably be resolved soon during the current trial and error phase. The possible uses for companies from all kinds of industries and private users are diverse, and the first successful applications are sure to trigger a viral effect among companies and users.

Beacons are expected to have a major effect on future markets:

  1. They provide a potential solution to the ongoing discussion about the missing link between offline and online approaches, and could lead to a truly omni-channel experience.
  2. They open up new opportunities for customer loyalty and improved communication between companies and their customers.
  3. They support additional services and improved cross-selling and up-selling.
  4. They form a basis for customised and personalised products and services.

These opportunities, together with the low entry costs, make it a good idea to use this technology sooner rather than later. It offers huge potential for companies to differentiate themselves if they can develop clever, useful applications that offer customers genuine added value. However, it’s worth keeping in mind that it is precisely these strengths – i.e. the low costs and open technology standards – that can also be exploited by competitors. As a result, companies must constantly develop and improve their services to maintain their hard-earned advantage and ensure ongoing differentiation.

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More information:
What is iBeacon – an Animated Guide