Small businesses are often tasked with competing with larger, well-known national brands with significant digital advertising budgets and name recognition. At first glance, it might seem like a David vs. Goliath type of battle. So how do you encourage potential customers to patronize your business, rather than order an item from Amazon or go to an established retailer or chain restaurant?

One benefit of being a small business is that you can use hyperlocal marketing strategies to attract customers directly in the area. More specifically, small businesses can use geofencing to drive foot traffic to their brick-and-mortar locations or drive website traffic with the ability to reach a hyper-targeted audience. Here’s a run-down for how geofencing works and how to make it work for you.

What is geofencing?

Geofencing is the ability to trigger a response on a user’s smartphone when a person enters or leaves a particular geographic area. Think of geofencing as a digital boundary that you can draw as large or small as you want, wherever you want on a map. When someone enters the area outlined in your geofencing, they will see an ad that appears on a website or app while they are in the fenced area.

Why should you use geofencing?

Geofencing empowers small businesses to get hyperlocal. Not just “Tucson” local. Or “Downtown” local. More like, “the corner of Main St. and 4th Avenue” local.

Geofencing can be a cost-effective marketing strategy due to this hyper-targeted nature. Rather than spend thousands of dollars on a traditional ad that will yield a low response, you are getting your product or service in front of the people most likely to use it based on where they are or what they are doing. An analysis published in Search Engine Land showed that geofenced and geo-targeted digital advertising tend to result in a doubled click-through rate, compared to digital advertising that does not use location-based services. Other research has shown that location-based advertising is 20 times more effective in generating returns than traditional advertising.

Since 77% of American consumers own a smartphone and users spend an average of two hours per day on mobile apps, not taking full advantage of geofencing means missing out on a lot of audience engagement. Although digital advertising through mobile ads and paid social media offer opportunities for geo-targeting, no other digital channel provides the immediacy of geofencing.

Geofencing draws upon the same mindset as “impulse buying” at grocery stores; when something is right in front of a customer, they are more likely to purchase it. Geofencing also offers enhanced opportunities for customization.

Finally, geofencing can be connected to analytics. You might choose only to send out certain promotional offers through geofencing, and you know that if the customer uses it that your strategy was effective.

How can geofencing be used as part of a broader marketing strategy?

While geofencing is one of the best marketing options to grow a small business, it should not be your only channel. In fact, geofencing is best used in conjunction with other channels and strategies.

The future of geofencing

While location-based marketing services are still relatively new, it is expected to grow significantly over the next few years. As consumers become more accustomed to digital advertising, location-based advertising will become an increasingly popular method of rising to the top.

While being a small business comes with its own unique set of challenges, having such a geographically defined audience is one of the greatest benefits. Your digital advertising strategy should reflect this hyperlocal. With geofencing, you can cut through the noise and reach potential customers at the right place, at the right time–in the most literal sense of the phrase.