Distance and Local Competition in Mobile Geofencing

Information Systems Research, Forthcoming

47 Pages Posted: 3 Apr 2018 Last revised: 10 Jun 2020

See all articles by Yi-Jen (Ian) Ho

Yi-Jen (Ian) Ho

Pennsylvania State University - Smeal College of Business

Sanjeev Dewan

University of California, Irvine - Paul Merage School of Business

Yi-Chun (Chad) Ho

George Washington University - School of Business

Date Written: April 20, 2020

Abstract

This research studies the performance of geofencing, a practice where mobile users are targeted within a pre-defined virtual geographic boundary around an advertiser’s establishment. We argue the significance of distance (i.e., the mileage from a consumer to a focal establishment) and local competition (i.e., the number of alternatives in consumer vicinity) in ad responses. Drawing on the notion of the purchase funnel, we develop a two-stage hierarchical Bayesian model to examine consumer click and conversion choices. A unique data set of geofencing ad impressions is collected from one of the largest location-based marketing agencies in the United States. The results suggest that local competition matters in the click stage, while distance influences the propensity of conversion. Quantitatively, one additional competitor in the consumer vicinity zone lowers the click-through rate by 1.03%, whereas a one-mile increase in distance results in a 17.64% decrease in the conversion rate. We also find a significant interactive effect, whereby a higher degree of local competition amplifies the negative impact of distance on the likelihood of conversions. Additionally, product differentiation ameliorates the effects of distance and local competition, while these effects are found to be more prominent during office working hours. This study discovers the stage-varying roles of distance and local competition along the customer journey and offers new directions for more effective location-based targeting.

Keywords: location-based advertising, geofencing, mobile, purchase funnel, competition, hierarchical Bayes

Suggested Citation

Ho, Yi-Jen (Ian) and Dewan, Sanjeev and Ho, Yi-Chun (Chad), Distance and Local Competition in Mobile Geofencing (April 20, 2020). Information Systems Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3154767 or http://dx.doi.org/10.2139/ssrn.3154767

Yi-Jen (Ian) Ho

Pennsylvania State University - Smeal College of Business ( email )

University Park, PA 16802
United States

Sanjeev Dewan

University of California, Irvine - Paul Merage School of Business ( email )

Paul Merage School of Business
Irvine, CA 92697-3125
United States

Yi-Chun (Chad) Ho (Contact Author)

George Washington University - School of Business ( email )

Washington, DC 20052
United States

HOME PAGE: http://business.gwu.edu/chad-ho

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