Location Data: Benefits, Challenges, and Strategies for Business & Analytics
In today's data-driven world, location data has emerged as a critical asset for businesses and analysts alike. Beyond its traditional use in navigation, this geographical information provides invaluable insights into customer behavior, operational efficiency, and competitive intelligence. By leveraging technologies like GPS, Wi-Fi, and beacons, companies can gather and analyze location data to inform strategic decisions, enhance customer targeting, and drive innovation. This article explores the generation, benefits, and challenges of using location data, offering a comprehensive guide for business strategists, data analysts, and IT professionals.
What is Location Data?
Location data refers to the geographical information about a device or asset, typically collected and tracked via GPS. Smartphones are a common source of location data, transmitting their coordinates when location services are enabled. This data is gathered by network carriers and various apps on the device. Besides smartphones, location data is also generated by wearable devices, vehicle fleets, and shipping cargo.
Location data, often synonymous with GPS data, is analyzed using spatial analytics tools. This data is integral to geospatial technology and location intelligence, forming the foundation for numerous business applications. The availability of vast and sometimes open-sourced location data, combined with other big data forms, provides valuable insights that guide investment decisions, detect changes early, and measure impacts.
How Is Location Data Generated?
Location data is collected through various techniques, each differing in reliability and accuracy. The primary process for generating location data involves several key components.
Location Signals
The first essential component is a location signal. Devices receive these signals from external sources, not from the device itself. Here are the main types of location signals:
GPS (Global Positioning System)
Developed in the 1970s, GPS relies on over 30 satellites orbiting the Earth. Devices calculate their position by measuring the time it takes for signals to travel from these satellites. GPS is highly accurate, particularly in outdoor settings, with precision up to 4.9 meters in open sky conditions.
Wi-Fi
Wi-Fi networks provide excellent location accuracy indoors where GPS signals may be weak or obstructed. Devices use Wi-Fi infrastructure to pinpoint their location more precisely.
Beacons
Small, stationary devices that emit low-energy signals detectable by smartphones. By measuring signal strength, devices can determine their distance from the beacon, achieving location accuracy within half a meter under optimal conditions.
Cell Towers
Mobile devices connect to cell towers for communication. By triangulating signals from multiple towers, devices can approximate their location.
Device Identifier
To track movement over time, each smartphone is associated with a unique identifier. For iOS devices, this is the Identifier for Advertising (IDFA), and for Android devices, it's the Android Advertising ID (AAID).
Metadata or Additional Datasets
While location signals and identifiers provide basic movement tracking, adding metadata or supplementary datasets enriches the insights gained from location data. One common dataset is the Points of Interest (POI) dataset, which includes key locations like tube stations and travel routes. For example, tracking the movement of Londoners between 7-10 AM and linking this data to POIs allows for deeper analysis of travel patterns and behavior.
Benefits of Location Data
Location data offers numerous benefits, significantly enhancing strategic decision-making, customer targeting, and business operations. Unlike static datasets that are reviewed infrequently, location data is dynamic, often derived from mobile devices and geolocation technologies like GPS, providing real-time insights into customer behavior, departmental performance, and competitive opportunities. Here's how location data can be leveraged:
Detecting and Measuring Change
Location data can reveal changes in population movement and activity patterns. For example, during the early months of the COVID-19 pandemic, data showed significant urban exodus, with people leaving cities like San Francisco and moving to suburbs. This shift had substantial economic impacts, altering foot traffic patterns and creating new demands for public services and retail locations.
Informing Investment Decisions
Geospatial analytics are invaluable for making informed investment decisions. Banks and insurers use migration and foot traffic data to optimize returns and profitability. For instance, GPS data can validate real estate investments or predict future revenue based on current foot traffic trends. Combining location data with other data streams can provide a comprehensive view for strategic business planning.
Augmenting Competitive Intelligence
Understanding your competition is crucial, and geospatial data can offer detailed insights into competitors' strengths and weaknesses. For example, retail giants like KFC and Popeyes or Target and Costco can analyze foot traffic patterns to identify competitive advantages in specific regions. This intelligence helps businesses make strategic decisions to improve their market position.
Building New Products and Markets
Location data can also drive innovation, particularly in creating new products and entering new markets. A notable example is the parametric insurance industry, where payouts are triggered automatically based on specific thresholds like hail size or hurricane wind speed. This approach provides quick compensation after natural disasters, showcasing how location data can lead to innovative solutions.
Enhanced Applications of Location Data
In addition to the primary benefits, location data's integration with other technologies and datasets expands its applications:
Predictive Analytics
Combining location data with predictive models can forecast future trends and behaviors, aiding in proactive decision-making.
Customer Journey Mapping
Businesses can analyze location data to understand customer journeys, improving customer experiences and targeting.
Proximity Marketing
Using location data, companies can deliver targeted promotions to customers based on their proximity to a store or event.
Fraud Detection
Financial institutions use location data to detect and prevent fraudulent activities by identifying unusual patterns.
Challenges to Consider When Using Location Data
While the benefits of utilizing location data are significant, there are several challenges to consider:
Technology Restrictions
The proliferation of Big Data and the Internet of Things (IoT) has made it easier to collect vast amounts of location data. However, this abundance can strain resources needed for storing and analyzing the data effectively.
Data Variety and Verification
With numerous sources of location data, the diversity in data formats can complicate the ingestion process. Ensuring accuracy and avoiding overgeneralizations requires robust data governance technologies that can sift through extensive datasets and highlight crucial details.
Privacy Concerns
Handling location data involves navigating privacy issues, especially when individual identifiers are included. Establishing strong data governance and ethical policies is essential to manage and protect privacy effectively.
Intellectual Property and Licensing
Using location data often involves dealing with intellectual property rights and potential licensing requirements. Employing experts who understand these legal intricacies and can manage data conflicts and licensing issues is crucial for extracting valuable insights.
Conclusion
As businesses increasingly rely on data to drive decisions, the strategic use of location data offers a competitive edge. From detecting market shifts to optimizing investments and enhancing competitive intelligence, the applications of location data are vast and impactful. However, to fully harness its potential, organizations must navigate challenges related to technology, data diversity, privacy, and intellectual property. By adopting robust data governance practices and leveraging advanced analytics tools, businesses can transform raw location data into powerful insights, paving the way for innovation and sustained growth in a dynamic marketplace.