By Tasso Roumeliotis

Geofencing and background processing have arrived. Many mobile devices including the latest iPhone 4 can detect when a user has entered or left a certain area and alert an application or service. This technology is known as “geofencing.”

While we have all grimaced at the annoying geofence example of “walking by the Starbucks and getting a coupon” for years, we nevertheless intuitively feel that this type of location and real-time context should yield real value to marketers.

Background processing on Apple’s iOS4 plus the success of the check-in model begs the answer to the question: How can mobile marketers use this new technology in ways that make consumers smile instead of grimace?

We think there are five key geofence use cases that marketers will capitalize on:

Passion
I am not sure if my wife would care for a Starbucks ad but she would she love it if she got a text message that her favorite designer was on sale at the Bloomingdale’s five minutes away. The hit rate would probably be 100 percent. Make it a private sale and she would pay for this service. Shopping is entertainment.

Geofencing can create feelings of serendipity that will drive more users into retailers with laser-like precision targeted at shoppers’ hearts.

Marketers who should care include passion brands such as Apple, luxury brands and high-end retailers, and vertical brands comprising golf and other sporting goods as well as culinary wares.

Irresistible value
People will buy stuff they do not need if they get a superb deal. I call this the Black Friday syndrome. It is a tried-and-true way to bring people into your store.

Stores run loss leader campaigns all the time, but what if they could notify potential opted-in customers who are nearby a killer sale?

For many, the combination of an outrageous deal that is nearby feels like I have discovered the secret map to a hidden treasure – almost like a game.

My neighborhood Best Buy is selling DVD players for $5 for the next hour – think contextualized Groupon.

Marketers who should care include bigger retailers with clever upsell strategies.

Perishable inventory
What do movies theaters and pizza shops have in common?

There comes a point when their inventories – be it the pizza slice that is getting old or the movie tickets for the show that is about to start – will expire and lose all value.

Geofencing allows for these types of marketers to quickly and at an irresistible value proposition liquidate expiring assets.

Marketers who should care typically would be in restaurants, hotels and events-related businesses such as movies, concerts and sports.

Super-context
Location and time provide great context but it would be better if you knew that I was driving and that my gas tank was on empty – then you solve my pain with a geofence alert of cheap and close-by gasoline.

Obviously this example would be difficult without a connection to car systems. But there are other valuable use cases. For example, a user located at a hotel in a new city would love nearby restaurant recommendations.

Marketers who should care are gas stations and convenience marts.

Physical click-through
Connecting buyers and sellers is the point of marketing.

Google makes all its money on one thing: connecting buyers and sellers via click-throughs on the PC.

Mobile, unlike the Web, can bring the power of digital advertising to physical retailers because the buyer is mobile when she is viewing the advertisement.

But beyond just targeting the ad for a nearby merchant, mobile devices with location-based service have the incredible power to close the loop.

A retailer such as Best Buy can know that someone actually walked into the store after viewing the ad – something we call the “physical click-through.” This is done with geofences.

A geofence can be set when an ad is viewed and then used to confirm that a user has walked into the store that placed the ad. This will serve as confirmation of mobile performance for location-based ads.

Marketers who should care are mobile ad networks and retailers.

Geofences have a chance to make a big effect in mobile marketing. They drive context: the right marketing message to the right person in the right location at the right time.

But these messages must be undeniably compelling for users: great deals, products of passion, super-contextualized.

All of this brings us back to the fantastic opportunities offered by location-based-services, of which geofencing will be a critical component.

Tasso Roumeliotis is founder/CEO of Location Labs, Emeryville, CA. Reach him at [email protected].