Location-Based Marketing. Gérard Cliquet

study and implementation of development projects.

      Although considered as an administrative category, a country is neither a local authority, nor a canton, nor an EPCI (Établissement public de coopération intercommunale) and therefore does not have its own tax system. A large part of France is thus composed of “countries” resulting from contracts concluded between municipalities; this is of particular interest to rural areas.

      The spatial surface is in fact a rather vague concept, but it expresses the difficulties resulting from the spatial heterogeneity encountered in certain spaces, due to discontinuities resulting from irregular borders, for example between regions, peninsulas or real inner holes. This heterogeneity can make the valuation of house prices very complex. This idea was applied to define house prices in the Aveiro region of the Ílhavo district (Portugal) (Bhattacharjee et al. 2017).

1.2. From geomarketing to spatial marketing

      After describing the evolution of spatial marketing and placing it in the midst of other disciplines, it will be necessary to define this field, then to specify its differences from geomarketing, before identifying its content.

      1.2.1. Spatial marketing: between economics and geography

It all starts with the development of the location theory of economic activities. Thomas More defended, as early as 1516 in his book Utopia, the need to divide the city into districts to accommodate each a market (Dupuis 1986). In his economic writings, Turgot (1768) posits three principles of the theory of store location:

       – the centrality of the points of sale;

       – the demographic threshold for the establishment of businesses, the existence of a sufficient market;

       – the grouping of purchases.

      On a more methodological level, von Thünen (von Thünen 1826), considered as the “father of location theories” (Ponsard 1988), then explains that “the optimal locations of agricultural activities are such that in every part of the space the land rent is maximized”. He thus founded the spatial economic analysis which he would later rely on to design his industrial location models at the beginning of the 20th Century (Weber 1909), which in turn would be used to model the expansion or spatial development of retail chains (Achabal et al. 1982). We can thus see how, in terms of the use of space in economic and managerial theories, progress has taken time.

Another economist (and also a leading statistician), Hotelling (Hotelling 1929), described in a celebrated article the consequences of location changes using a simple example and thus defined the principle of minimal differentiation, often referred to as the Hotelling rule (Martimort et al. 2018) or the Hotelling law (Russell 2013). Hotelling developed the idea that competition between producers tends to reduce the difference between their products. His theory is still being discussed today and is still the basis for much research. It has thus been possible to demonstrate in a theoretical way the contribution of advertising in order to allow companies to bypass this principle of minimal differentiation (Bloch and Manceau 1999). Geographers then developed the concept of central squares (Christaller 1933) from which the hierarchy of cities and the hexagonal shape of the geographical segments surrounding the squares (cities, towns, villages) were deduced (see Figure 1.1).

Each economic actor maximizes its utility (consumer) or its profit (firm) in a homogeneous space where prices are fixed and where the cost of transport depends on distance. The hexagonal shape of Figure 1.1 theoretically facilitates a perfect interlocking of these segments around the squares that form a network as shown in southern Germany (Christaller 1933), southwestern Iowa, northeastern South Dakota and the Rapid City area of the United States (Berry 1967). In these great plains of the United States, a diamond-shaped network of central squares was observed; this is called a rhomboidal grid. This network of markets, with regular hexagonal outlines, suggests, on the one hand, the existence of a single equilibrium configuration with a given number of firms on the market, and on the other hand, the domination of this network with free market entry (Lösch 1941). This author formalizes the central place theory using a micro-economic approach. It is also based on the actual price of a good defined from its factory price plus the cost of transport. As the latter increases with distance, the quantity requested will be reduced accordingly, thus allowing the construction of space demand cones by integrating the function linking quantities requested, on the one hand, and price and distance in transport costs, on the other hand. Lösch then defines a profitable location as one whose sales amount, as determined by the spatial demand cone, provides the appropriate rate of return. This concept would correspond well to the markets for industrial goods (Böventer 1962). This design will be challenged, because this hexagonal network is not the only equilibrium configuration (see above the rhomboidal grid) and free market entry does not necessarily lead to hexagonal shapes of market segments (Eaton and Lipsey 1976). In any case, it is possible to retain from this work the idea of centrality with the objective of reducing distance for the greatest number of people and thus facilitating access to goods and services.

Figure 1.1. Theoretical and schematic representation of central place theory

       (source: after (Christaller 1933))

Shortly before, another geographer (Reilly 1931), a consultant to his state, had proposed a law of retail gravitation, often called Reilly’s law, based on the notion of gravitation by analogy with Newton's theory applied here to retail activities. This law was for a long time the basis for many academic and professional projects, for example to set up supermarkets in rural areas or malls. Based on this pioneering work, researchers have proposed models to better understand consumer spatial behavior and, above all, to predict the future level of city activity or store sales (Converse 1949; Huff 1964; White 1971) until these attraction models become widespread, whether spatial or not (Nakanishi and Cooper 1974).

      Pioneering work in space marketing as early as the 1970s and based on time series data, long before geomarketing software appeared, showed that it was important to study market shares according to sales territories in order to understand how buyers react and to better predict these sales (Wittink 1977). It can be concluded that advertising, which is supposed to increase sales if adapted to the territories, can improve price sensitivity.

      However, a few years later, based on previous work (Ohlin 1931), it became apparent that marketing researchers were not interested in spatial or regional issues (Grether 1983). It could not be said today that much has changed. Even store location issues are no longer of much interest to researchers, probably because it is mistakenly believed that the Internet has definitively removed the tyranny of distance. However, most of the pure players, those businesses that are only present on the Internet, are starting to open brick and mortar stores that are either physical or “hard”: Amazon has acquired the Whole Foods Market network of organic stores in the United States.

      Moreover, the very rapid development of applications (apps) on smartphones may change the situation by creating on the one hand a real mobile commerce and on the other hand a new kind of spatial consumer behavior favoring mobility (or rather ubiquity), comparisons of products, services, prices, etc.

      1.2.2. Definition of spatial marketing and geomarketing

      Spatial marketing is a broader and more conceptual field than geomarketing, which remains more oriented towards mapping techniques.

      1.2.2.1. Definition of spatial marketing

Spatial marketing can be defined as anything related to the introduction of space into marketing from a conceptual, methodological