Geofencing: Definition, Tips and Examples

Updated July 22, 2022

If you own a local business, geofencing can allow you to re-engage past customers for repeat service and attract new customers who are in your area, growing your business. It can also allow you to keep track of any employees who are in the field, automating time cards and monitoring the location of your fleet of vehicles.

When done correctly, geofencing can be highly effective at linking the online and offline elements of a brand and engaging current and potential customers when they're on the move.

In this article, we discuss what geofencing is, how it works, who can benefit and some tips you can use to get started right away. We also share some examples of geofencing to help you come up with your own ideas.

What is geofencing?

Geofencing is the practice of defining a geographic boundary and then setting up triggers to engage an audience by sending relevant messages when they enter or exit that pre-defined area. Depending on how the geofence is configured, it can use GPS or radio frequency identification (RFID) technology to prompt mobile push notifications, send text messages or alerts, trigger targeted advertisements on social media, deliver location-based marketing data, allow tracking on vehicle fleets or disable certain technology.

Companies commonly use geofencing for marketing activities. They also can use geofencing to monitor activity in secure areas, alerting management when anyone enters or leaves a pre-defined area. Businesses also commonly use geofencing to monitor employees in the field, keep track of company vehicles and automate time cards.

How does geofencing work?

A geofence is defined within the code on a mobile application, and mobile device users must opt-in for location services for the geofence to track their location.

To make geofencing work, a developer or administrator must establish a virtual fence around a pre-defined location in software that is GPS- or RFID-enabled. The geofence will then trigger a pre-set response when a mobile device enters or exits the area.

A restaurant or retailer can draw a geofence around their locations to trigger mobile alerts and send alerts to customers in the area and let them know about the latest offers to encourage them to come into the store or restaurant.

Geofences can also be dynamic. This means that companies can shrink or grow the geofence based on criteria that the administrator sets up. For example, you could use a geofence with a smaller radius to attract those within closer proximity of your business during busier times of the day. Then, during off-peak hours, you could increase the reach of your geofence.

Who can benefit from geofencing?

It can also work well for businesses that send sales representatives into the field or who have service teams on the road meeting customers, as geofencing allows you to keep track of employees and automate time cards.

Geofencing is also extremely useful for local businesses, particularly those that rely on foot traffic to generate sales, as it allows them to:

Engage local customers and encourage repeat business
Attract new customers by offering special discounts
Win the sale of customers who may have visited a competitor

Tips for getting started with geofencing

Here are some tips you can use to get started using geofencing effectively in your own business.

Understand your customer.
Target your competitor's locations.
Be relevant.
Prompt immediate action.
Be transparent.

Understand your customer

Understanding who your customers are and where they spend their time can have a powerful impact on the effectiveness of your campaign. For example, you could set up geofences around locations you know that your ideal customers spend time.

Related: What Is Geotargeting?

Target your competitor's locations

While it's useful to build geofences around your own business, you may want to also consider creating geofences around your competitor's businesses, such as other similar restaurants or stores. This will allow you to send them push notifications and text messages with special discounts when they may have already been going to your competitor's location. This strategy may allow you to win the sale over the competitor.

Be relevant

In general, the best strategy is to set up a geofence within a four- or five-minute radius from the location you want customers to visit. During the slow time of day, however, you may want to increase this to attract a larger audience. You could offer special, limited-time discounts throughout the day to draw in customers during off-peak hours.

Prompt immediate action

The messages that you are sending potential customers should be clear and concise and prompt them to take immediate action that will best drive conversions.

Be transparent

It is important to let users know how you are using their location information. Many mobile users are open to receive special offers and discounts from local businesses, but they do want to maintain their privacy and have the option of opting-out of notifications.

Examples of geofencing

Geofencing has become a standard practice for many businesses. Here are some examples of how it can be used to help you generate your own ideas.

Retail store example

A retail store could create a simple geofence around its physical location so that when mobile device users pass through the geofence, a notification or text message is set that sends them a special offer to entice them to go in and shop.

Car dealership example

A car dealership could set up a geofence targeting people who are leaving a competitor dealership. The dealership could make them a special offer such as zero-percent financing to encourage them to visit their location as an alternative option.

Concert venue

A concert venue could use geofencing to deliver information to attendees at an event or to encourage users to use a branded filter on their social media posts while attending a concert.

Restaurant example

Restaurant owners can use geofencing with Google pay-per-click ads. For example, if you own an Italian restaurant, you could use geofencing technology to serve PPC ads to people who search for keywords that you define while within a specific pre-set radius of your business.