Marketers Map Out Their GPS Ad Plans


location based services

April 24, 2006

NEW YORK -- Many people find global positioning systems a handy navigational tool, but can GPS also be a marketing tool?

During the past two months, Dunkin' Donuts, Cold Stone Creamery and others began appearing on in-car GPS devices to alert drivers to nearby locations and, in some cases, offer special deals.

Proponents say this form of media has a special edge: "Not only can GPS devices tell you how to get there, they can tell you where to go," said Samir Bhavnani, director of research with Current Analysis, San Diego. Media buyers have also taken notice. "There are a lot of great applications, especially in the quick service restaurant category," said Sharon Hatch, vp/director of out-of-home at Horizon Media, New York.

While the number of GPS owners is still relatively small, it is growing quickly thanks in part to the fact that prices fell last year from an average of $1,000 per unit to $800, per the NPD Group, Port Washington, N.Y. While the user base is well under a million, unit volume sales of GPS devices jumped 152% in 2005, per NPD, which doesn't track Wal-Mart, direct and warehouse clubs sales. Thales Navigation, the San Dimas, Calif., owner of the No. 3 Magellan GPS brand, projects the global market for car navigation and recreational handheld units to reach $5.4 billion globally by 2008.

Seizing the opportunity to talk to consumers on the go via their GPS devices, Dunkin' Brands inked a first-of-its-kind licensing agreement in February with the trendy No. 2 manufacturer TomTom. Under the agreement, users can download the Dunkin' Donuts and Baskin Robbins logos onto their devices so they can easily spot the popular chains when they are on the road. Typically restaurants are shown using a standard knife and fork icon.

The TomTom systems, which begin at $699, can also be programmed so that drivers are alerted, via a flashing icon or a beep, as they approach a local Dunkin' or Baskin outlet. "If people are within a one-mile radius and something pops up and the driver says 'Hey, how about a nice cup of coffee,' then why not [try advertising on a GPS system]?" said Hatch. TomTom is exploring similar arrangements with other brands.

No. 1 manufacturer Garmin, meanwhile, partnered with Entertainment Publications, best-known for its Entertainment Book of discounts commonly used for local school and community fundraisers. Garmin Nüvi GPS owners can sign up to receive 45,000 special offers on everything from ice cream treats at Cold Stone Creamery to shoes at Athlete's Foot.

Nüvi users can add a digital SaversGuide to their devices for an annual fee of $49.95. The searchable database of discounts also can direct customers to offers available at select Eddie Bauer, GNC and Supercuts locations. Users present a membership card at purchase to receive their discount. The service will be expanded to other Garmin products as well.

"No matter where you are in the country you can find not only the location of a restaurant or dry cleaner, you can get a discount," said Ted Gartner, rep for Garmin, Olathe, Kan. Garmin has sold more than 14 million units worldwide.

Ross Rubin, director of industry analysis at NPD, sees "huge potential . . . to almost literally drive traffic to the point of transaction."

These devices and others could serve as a distraction, prompting the Consumer Electronics Assn. to launch its "Watch the Road" campaign next month.

The demographics of GPS buyers is desirable. A third (34%) of buyers earned between $100,000 and $150,000 annually per a three-month NPD survey. Roughly 45% made $75,000 or more annually.

Maybe this will help explain why men don't ask for directions: 81% of GPS purchasers were male, of which 29% were ages 45-54 while 23% were ages 18-24. The younger buyers "make a lot of investment in vehicle technology. They want to soup up their cars," said Rubin.

Current Analysis' Bhavnani agreed that while the partnership was a good idea, "in the beginning sales will be challenging because they have to not only be familiar with the Entertainment Book, they have to be in the market for a GPS system."

Still, advertisers will know how effective the buy was since consumers will have to use membership cards to redeem the discounts. Hatch said from an ROI standpoint, this is invaluable: "If it's trackable, that's an important selling point."

Overall, the category is attracting some powerful players. Google recently joined with Volkswagen to offer Google maps on its pre-installed GPS systems, and AOL will offer Mapquest as a service for GPS-enabled cell phones.

Thales Navigation has yet to strike any marketing deals for its Magellan devices, however rep Angela Linsey-Jackson noted, "We're going down that road."

--Kenneth Hein