“Every retailer wants to better understand their customer,” said Vengroff, previously the principal engineer at Amazon who helps clients like Wal-Mart, Sears and Marks and Spencer provide more targeted offers to shoppers.
“The challenge is to make it really personal and not just a bunch of technology like ‘Big Brother’ watching you and ‘Minority Report’ as you’re walking down the street,” Vengroff said.
If a retailer identifies that a high-value shopper has just entered the store by their phone signal, it would be better advised to get a member of staff to give them extra attention rather than bombard them with text messages, Vengroff said.
Last month, a group of US companies specializing in location data for retailers agreed to a privacy code of conduct which includes signs posted in store to alert shoppers to the use of tracking technology and instructions for how to opt out.
“Even in an anonymous state, you can begin to pull together a profile of a customer, when they are coming to store, when they are mobile,” said John Sheldon, global head of strategy at consultants EBay Enterprise.
“These are early days for these capabilities,” Sheldon said, adding he expects the advent of wearable computing devices such as Google Glass to accelerate the trend towards more location-based tools to navigate shoppers toward deals.
Telecoms group Telefonica, owner of the O2 brand in Britain and other European markets, dropped plans last year to sell location data it collects from its mobile phone customers to German retailers due to a backlash over privacy concerns.
However, it proceeded elsewhere, saying it gains insights only from aggregated data and does not sell personal information.
Telefonica helped Britain’s No. 4 grocer Wm Morrison hone its marketing by using phone data to analyze how far potential shoppers would be prepared to travel to a store. That allowed it to target coupons to more households, driving a 150 percent increase in new or reactivated customers.
Many consumers are already shrugging off privacy concerns and embracing tracking technology: European retail consultancy Jupiter has seen a 90 percent opt-in rate for a platform which offers marketing and mobile payments on smartphones.
“Messages are less and less likely to be annoying because they will become more and more targeted as you interact,” said Robin Bevan, Javelin director of location and analytics. “The system is self-learning: It tests the response rate to ensure that people don’t get messages that aren’t relevant.”
The software is proving popular even in Germany, where data privacy is tightly controlled. Airline Lufthansa has integrated it into its “Miles & More” loyalty app, signing up more than 400,000 users since its launch in 2010.
On Valentine’s Day, Lufthansa offered male app users aged 20-50 in Frankfurt airport a 20 percent discount at jeweler Swarovski. It was redeemed by 30 percent of those targeted, a much higher redemption rate than for normal promotions.
Sian Rowlands, an analyst at consultancy Juniper, sees the trend towards such promotions helping triple global spending on mobile advertising to US$39 billion in 2018 from US$13 billion now.