In my previous post, I mentioned the importance of determining the location of a consumer using their mobile phone.  Retailers can track anonymous mobile phones to determine traffic patterns both inside and outside their stores.  And with consumers' permission, retailers can send location-aware offers to mobile phones; for example, a coupon for cereal as you walk down that aisle.  When paying with Square, your location is matched with the transaction.  So there are lots of reasons for retailers to want to know the location of their customers.  But how is it done?

I thought I'd dive a little deeper on that topic and consider the approaches to determining location.

1. Tower Triangulation

By comparing the relative signal strength from multiple antenna towers, a general location of a phone can be roughly determined to an accuracy of 200-1000 meters.  The more towers involved, the more accurate the location.

2. GPS

Using Global Positioning Satellites is more accurate than using cell towers, but it takes longer to find the satellites, it uses more battery, and it won't well indoors.  For geo-fencing applications, like those provided by Placecast and Digby, cell towers are often used to determine if the consumer is nearing a "fence" then switches to GPS to determine the actual crossing of the fence.

3. WiFi Triangulation

WiFi triangulation is usually more accurate than using towers just because there are so many more WiFi access points (i.e. radios in routers) around. The position of each WiFi AP needs to be recorded in a database and used in the calculations, which is what Skyhook has been doing since 2008.  Another advantage to this method is that works well indoors, although it usually requires additional WiFi beacons to get the accuracy down to 5-10 meters.  Companies like ZuluTime, Aisle411, and PointInside have been perfecting this approach for retailers like Meijer, Walgreens, and HomeDepot.

Keep in mind that a mobile phone doesn't have to connect to the WiFi network in order for it to be located.  The WiFi radio in the phone only needs to be on.  Even when not connected, WiFi radios talk to each other to prepare for a possible connection.

4. Hybrid Approaches

Naturally the most accurate approach is to combine the approaches described above.  The more available data points, the greater the accuracy.  Companies like ShopKick like to add in acoustic triangulation using the phone's microphone, and NearBuy can use video analytics to increase accuracy.

5. Magnetic Fields

The latest approach, and this one is really new, takes a page from the animal kingdom.  As you've probably learned from guys like Marlin Perkins, some animals use the Earth's magnetic fields to navigate.  By recording magnetic variations within a store, then matching those readings with ones from a consumer's phone, location can be accurately determined.  At least that's the approach IndoorAtlas is taking, and the science seems to bear out.  It works well indoors, and doesn't require retailers to purchase any additional hardware.  Keep an eye on this one.