The R&D Tax Credit Aspects of Geofencing
Geofencing is a relatively new phenomenon geared to use Global
Positioning System (GPS) to strategically build virtual boundaries
around designated locations. The predecessor of Geofencing is beacons,
which can now be used jointly to further enhance a business’s marketing
capabilities. Beacons were instrumental in changing the way retailers,
event organizers, transit systems, enterprises, and educational
institutions interact inside indoor venues. Retailers especially
benefited from beacons, despite their inherent limitations. For
example, hardware, applications, and minimal distance between beacons
and mobile devices are required to convey advertisements and
promotional offers to users.
Now, Geofencing eliminates the need for additional
hardware, instead reaching anyone within a larger, designated radius
that can take any shape. In the realm of marketing, Geofencing creates
more advertising opportunities in larger regions than ever before. For
more precision, Geotargeting is useful, because it targets locations
based on different parameters, such as city, zip code, and individual
Endeavors in research and development for Geofencing
are now eligible for federal and state research and development tax
The Research & Development Tax Credit
Enacted in 1981, the federal Research and Development (R&D) Tax
Credit allows a credit of up to 13% of eligible spending for new and
improved products and processes. Qualified research must meet the
following four criteria:
- New or improved
products, processes, or software
- Technological in nature
- Elimination of
- Process of
Eligible costs include employee wages, cost of
supplies, cost of testing, contract research expenses, and costs
associated with developing a patent. On December 18, 2015,
President Obama signed the bill making the R&D Tax Credit
permanent. Beginning in 2016, the R&D credit can be used to offset
Alternative Minimum tax and start-up businesses can utilize the credit
against $250,000 per year in payroll taxes.
Replacing Beacons with Geofences
Mobile devices trigger events through applications, such as text
messages or push notifications, when that device crosses a Geofence.
Trigger events can be sent to a Geofence when a mobile device enters or
leaves the radius via a cellular network, Wi-Fi, or GPS. Beacons, on
the other hand, are less
precise. A beacon is a Bluetooth Low Energy (BTLE) hardware device that
transmits a non-pairing signal to the application that a mobile device
user has running.
Communication about location is received by the
application when the mobile device picks up a beacon’s broadcast. Once
the mobile device identifies the signal, it can be translated to an
estimated distance to the beacon. The only way a signal for a
mobile device is noted is if the mobile device has Bluetooth enabled.
Otherwise, the beacon will not work as intended.
Beacons and geofences are useful in different
applications. For micro-locations, beacons are more advantageous.
However, if a company is seeking to spread its reach on a macro level,
then geofences are more beneficial. A beacon requires additional
hardware and is effective for close proximity—less than a 50 meter
radius. Geofencing, on the other hand, works best in large geographic
areas, over 50m, and is static, which means it cannot be moved around.
This may be a pitfall for Geofences as beacons can be moved around. For
example, a beacon can be put on a train, thus working regardless of it
being moved from one destination to the next.3
Research and application indicates that beacons will
not be completely replaced by geofences. A 2014 Business Insider
Intelligence report predicted that the number of installed beacons
would grow 287% over the next several years. Similarly, a 2017
Search Engine Watch report indicated that only 22% of businesses use
“hyperlocal targeting tactics, like Geofencing, to their full
potential.” These statistics demonstrate that while beacon
adoption is on the rise, Geofencing is also increasingly popular for
its extended services.
So how do most businesses decide which to pursue? It
was found that most enterprises employ Geofences first, and then move
towards beacons. This helps the company determine how to leverage
the use of this new technology. We are seeing more and more the
adoption of a combination of beacons and Geofences.
Incorporating Geofences with Beacons to
Maximize on Benefits
Geofences and beacons are used in conjunction in several marketing and
retail applications. This combination can facilitate customers to
purchase something before driving to the store. For example, a Geofence
around the perimeter of a restaurant can notify the on-location staff
about the distance of the customer who ordered something online. The
beacon would work on location, as a means to notify the staff when the
customer is at the restaurant. This way, the staff can ensure the order
is ready for pickup.6
Beacons and Geofences also work together in
attracting crowds of shoppers. The Geofence can be set up outside a
store that delivers personalized offers and advertisements to passing
customers. Once the customers go into the store, beacons take over and
provide useful product information and reviews about the items the
customer is approaching. Retail stores can take beacons a step further
by placing them at cash registers.6 This way, the phone can
automatically pull up coupons so the customer does not have to spend
time searching for them on his/her email.
Brands Incorporating Beacons with
Various retailers are now implementing beacons and geofences within
their borders to attract more customers.
Since 2015, GameStop has been testing Geofences and
beacons in over 36 stores. GameStop implements in-store technology to
enhance lines of communication with customers in the area to save the
business of physical software, consoles, and other gaming devices. The
Geofence works with the PowerUp application that loyalty members have
on their phones. It notifies customers about products and deals in
store when they are in relative proximity. Once inside the store,
beacons take over and work with the application to greet the customer
and give him/her messages about the products.
Sales increased during this testing period, which
suggests that beacons combined with Geofences is in fact beneficial to
the implementing retailer. Software sales increased by 5.8% during the
For its 30th anniversary September Issue, Elle
Magazine decided to take a different approach to enhance retail
businesses. The magazine incorporated Geofencing and beacon technology
into its application called ShopNow! The editor’s product picks are now
available on the mobile applications ShopAdvisor and RetailMeNot. The
Geofence works in such a way that when a person with the application is
near a retail store selling one of the products suggested by Elle,
he/she receives a notification, prompting him/her to purchase the
When that consumer enters the designated retail
store, he/she receives a notification with a promotional offer. It was
proven that, because of the ShopNow! program, there was an influx of
500,000 in-store visits and over 12% content engagement with
Woolworths is an Australian-based supermarket that
incorporates Geofencing and beacons to enhance consumer experiences
when shopping for groceries. It implements a click-and-collect service
that works through its mobile application.
With click-and-collect, consumers can select the
groceries they want to purchase. Then, the in-store staff are notified
when an order is made and how far the consumer is from the store. This
way, the purchase order can be prepared and ready for the customer by
the time he/she arrives at the location. This is where Geofencing comes
into play. Beacons are then used to notify the
consumer when an order is ready for pickup while they are on location.6
Another way beacons are employed is to target
consumers within a certain radius from the store. The beacon sends a
message to the consumer, asking if he/she would like to pick up the
online order. It will also help determine a pickup time.
Geotargeting is a more precise way to target customers than was
previously possible with beacons and Geofences. Geotargeting does not
merely reach people within a certain range. It goes beyond the
boundaries to reach highly targeted mobile users based on location,
interests, and general online behavior. It was indicated that 95%
of retail, restaurant, and automotive campaigns are considered
geo-precise because of their advanced usage and reliance on precision
Another way Geotargeting is employed is in a concept
called geoconquesting. In this model, competitors build Geofences
around competitor locations to steer potential customers away from the
competitor and towards the fence owner. In this respect, when users are
near a competitor’s location, advertisements for the Geofence
implementer are broadcasted instead of those for the competitor.
Geo-precise targeting is an up and coming
advancement for digital marketing campaigns, guaranteed to increase a
company’s competitive advantage in a market so saturated with an
abundance of competitors.
Because Geotargeting has the ability to target
larger locations based on various parameters, it can be useful to
target people within a city’s boundaries, but also within a radius
surrounding the city. The difference between Geotargeting and
Geofencing is that Geofencing creates digital advertising opportunities
within a defined area. Geotargeting can be used to target and deter
mobile users from going to competitors that do not fall within a
predefined Geofence.2 Companies like Starbucks utilize Geotargeting and
Geofences to urge customers to go to their locations instead of
competing coffee and tea shops.
Geofencing in Management Applications
Geofencing is beneficial in several management settings. Below is a
list of some common applications:
Particularly popular in sporting events, a Geofence can act as a
temporary no-fly zone to prevent drones from crossing into the defined
This usage is popular for truck or boat transportation. A Geofence will
alert a dispatcher when the vehicle driver breaks away from the
II. Human Resource
Management: When employees are given a smart card, a security
card with an embedded identification chip, and enter unauthorized
locations that are Geofenced, an alert is sent to security.
that cross Geofences will be documented to determine if they
comply with established policies.
Management: In the event that an employee or individual attempts
to take a device that is not theirs out of the designated Geofence,
then an administrator can monitor the device and lock it down to
prevent it from being used. This application is most common in
hospitals, to protect patient confidentiality on hospital-owned devices
such as iPads.
V. Law Enforcement: Ankle
bracelets and other wearable technologies that go outside of a
Geofenced location will alert authorities of the wearing individual’s
actions. This is most common when placing someone under house arrest
and he/she attempts to leave the designated premises.
VI. Home and Hotel
Automation: When a homeowner leaves the house with their
smartphone, the Geofence knows to lower the thermostat to its
pre-defined temperature. This feature is also common in modern hotels,
to ensure that air conditioning units do not run continuously in rooms
that the user, with their smart room keys, are not currently in.
Current Uses of Geofencing
Various companies are now integrating geofences into their operations
in order to improve a product or service.
Since 2014, Uber has been pioneering Geofencing
techniques, namely around airports. Privately hired car services, such
as Uber, are not licensed to pick up passengers at airports. Therefore,
they decided to pursue Geofencing outside of designated pickup areas.
Now, Uber drivers can wait for their fares. Although this is
beneficial for Uber to remain a competitor in the airport passenger
market, it hinders some drivers to receive fares because there is no
queuing system. As a result, some receive fares while others must wait
Uber suggests that it will create more efficient
traffic flow with Geofencing, primarily because it can ferry passengers
to and from airports while monitoring the number of cars entering and
departing a designated area.
This mobile application is often used to let people
anonymously post messages. Anyone on the application within 1.5 miles
of the post can see it, reply and vote on it, and chose whether to push
it up or down on the list. This application grew in popularity around
school districts, ranging from middle schools to high schools and
universities. Unfortunately, because this application allows anonymity
and freedom of speech, users can say whatever they want without facing
repercussions. This became a source of harassment in educational
Yik Yak was determined to remain in business and
maintain its reputation but also prevent harassment from occurring on
its platform. Therefore, it turned to Geofencing. With Geofences,
it has the ability to block people using the application near schools.
Therefore, “barring the use of campus Wi-Fi to view or post” on the
application is a way to keep it afloat. Amongst its safeguards,
Yik Yak specifically developed Geofences around middle and high schools
to prevent its use. The Geofences are not inherent around universities,
however if the universities would like to, they can build their own
Geofences to prevent Yik Yak usage.
Now that a majority of the new generation walks
around with smartphones, namely iPhones, it is easier for parents to
track their children’s every move.
Parents can employ the Find My Friends application
on every iPhone to track their child. Geofence-based notifications can
be configured to alert a parent when a child enters or leaves the
Although to view someone’s location both users must
have consent to share their locations, there are parental controls that
help parents prevent children from disabling the application and
location sharing. The use of Find My Friends does have some
limitations. For example, parents can only set one Geofence at a time.
Apple did this purposely because it did not want the app to be abused
by people tracking others—they wanted it to merely benefit those being
The limitations inherent with Find My Friends are
expected, because after all, this is a free application. However,
parents wishing to pursue more concrete tracking of their children can
purchase Footprints for iPhones, which is $3.99 per year.14 With this
application, parents can see location history, configure Geofences, and
even track children as they drive or are driven to determine if they
break the speed limit in designated zones.
Safely Drive and Locate are two other applications
that alert people about each other’s activities. With Safely Drive, the
system senses if a car is being driven. If it is, the sensor shuts down
the phones texting and communication abilities so that young drivers
are not distracted when driving. Within the same family of applications
is Safely Social Monitor, another application that parents can use to
check on a child’s use of social networking applications and ensure
they are not engaging in poor or negative activities.
McDonald’s, and Victoria’s Secret
These three companies implement Geofences to target
potential customers near store locations. However, instead of creating
Geofence-based advertisements through their mobile applications, these
companies have their advertisements relayed from the Pandora radio
application.15 Thus, if a customer has the Pandora radio app running on
his/her phone, advertisements from the nearby Best Buy, McDonald’s, or
Victoria’s Secret venues will be broadcasted.
Implications in Choosing a Geofence
There are several aspects to be considered when choosing the
appropriate software or company to develop personalized
Geofences. First, it is important to understand the shape and
radius compatibility of the software. Only being able to create
circular Geofences can be rather limiting. An area you wish to monitor
may be in the shape of a triangle or rectangle, but circular Geofences
will be more challenging to accurately encompass and monitor this zone.
Furthermore, if the vendor does not permit the user
to create custom sizes, then the user may develop a Geofence that
encompasses an entire city instead of just his business. Geofencing
software that only permits a user to create large fences limits the
ability to go from macro to a micro-location analysis. Micro-locations
may be more beneficial to some users than others that employ Geofences.
Another question that must be addressed is how many
locations can be monitored at a time. Many providers only permit the
user to address up to 20 Geofenced areas at a time. This is not
beneficial for users targeting a larger base employing countless
Geofences. Pulsate Engage is one tool that actually permits a user to
review an unlimited number of locations simultaneously.
A Geofence user should be able to conduct reverse
Geocoding with the Geofence provider. In other words, a business must
be able to give the provider a list of location addresses that the
vendor can quickly and easily convert into latitude and longitude
coordinates. This speeds up the process for Geofence setup. As a
result, this automates the creation of all fences in designated
Being able to bulk Geofences, specifically around
competitors, is a significant advantage of any Geofencing provider.
This feature would save the user time and resources because it ensures
that all competitors within various Geofences are monitored and
addressed in the same way.
A Geofence provider that offers its services through
hardware purchases raises a red flag. This is one of the significant
differences between Geofences and beacons, because beacons require some
sort of hardware to function. The Geofence provider, on the other hand,
should only integrate a plug-in into the user’s mobile application. In
this regard, a smartphone is all the hardware one needs to create,
monitor, and monitor Geofences.
As discussed with many existing Geofences, it is
common that a Geofence works only when an application is opened.
However, finding a provider that does not require the user’s
application to be opened will greatly benefit the user and his/her
business. With Geofences that work passively, a user does not need to
have the application open to receive targeted ads and promotional
offers when in range. Applications are running passively in the
background of a phone, even when the application is terminated or the
screen is off. Even when the application is killed, the mobile
application’s SDK is restarted in the background whenever the user
crosses a Geofence. A provider that expedites this process is more
advanced and will help its users reach more potential customers, even
when customers do not have the user’s application running.
As we experience when using our mobile devices, GPS
tends to drain devices of their battery life. Finding a Geofencing
provider that minimizes battery drainage is going to be beneficial in
the long-run. If customers realize their battery is drained from having
the application open in the background, they will uninstall it. This
will negatively affect the business, because it would no longer
broadcast promotional offers and send notifications to users when in
Geofenced locations. As one can see, too much dependency on GPS will
cause negative repercussions for customers as well as the business
employing the Geofences.
Geofencing can Eradicate Security
is probable that now Geofencing can be employed to alleviate some of
our concerns regarding security and compliance. As previously
mentioned, real-time analysis of Geofences can enhance the ability of
emergency services to pursue efficient and effective fleet management
and even dispatch the nearest team to trauma sites. This creates better
response time because valuable dispatch time is not compromised by
having to search for information such as contact numbers of those on
In work sites, IT administrators can employ
Geofences to ensure worker productivity and security, especially with
the upcoming growth of BYOD policies in modern businesses. Geofencing
can decrease user distraction without limiting the control and usage of
devices by the user. For example, security and privacy restrictions can
prevent cameras from being used in the office, phones from going off in
discussion or meeting rooms, and social media applications from
influencing worker productivity.
Whereas Geofencing can be utilized to promote
security and privacy features, it is also important that Geofences have
elaborate security features that protect data and prevent
unconstitutional access to data.
Privacy Concerns of Geofences
Before jumping to conclusions that Geofences are an
invasion of privacy, it is important to note that one of the primary
reasons Geofencing was made is to prevent constant tracking of
individuals. Constant tracking is a true overstep of privacy
boundaries. With Geofences, when parents track children or elders, they
are only notified in the event the child or elder leaves the Geofenced
region. Otherwise, the parent has no ability to view and track the
individual’s every move.
Geofences were successfully used in Japan in 2015,
thus demonstrating its power and importance in minimal human tracking.
In Japan, 12,000 dementia patients were deemed missing. With Geofences,
all patients, except for 479, were found and brought back to their
families and facilities. This is indicative of 97% of patients
being rescued, while the remaining 3% were marked as deceased. This is
an incredible success rate, all while not being considered a breach of
Various other applications of Geofencing are used to
relocate lost items, pets, family members, and livestock. For example,
in Australia, Geofences prevent cow rustling from occurring. Cow
rustling is a form of stealing cattle. Moreover, in the Netherlands,
Geofencing is used to identify and locate stolen vehicles. Although
these applications are considered a version of tracking, Geofencing is
not as intrusive as more traditional, technological tracking
techniques, thus promoting safety and protecting our privacy.
Regardless, consumers and smartphone users are still
concerned with their privacy rights. Having GPS systems embedded in
smartphones ensures that every user is carrying a tracking device in
his/her pocket, without a choice. There is no “good way for consumers
to understand who is collecting their information, how it’s being done,
and why it’s being done.”15 The thing with Geofencing is that it gives
the government and Geofence owners the ability to track our every move,
whether it is sitting at home watching TV or going to Church on Sunday.
Because Geofences shed light on so many
characteristics about individuals, it is necessary that the fences are
crafted to be non-intrusive. In other words, the user must be given the
option to opt in or out of offers and location-based notifications from
the application employing Geofences. The companies employing Geofences
must maintain their level of trustworthiness, which means their
Geofence-based applications must be targeted to the individual without
being intrusive or overdoing the alerts and notifications stimulated by
crossing in and out of Geofenced areas.
Geofencing is a growing and popular tool in digital marketing
campaigns. Coupled with beacons and Geotargeting, a business employing
Geofencing can gain a significant competitive advantage in the
marketplace, as well as Research and Development tax credits and
Geotargeting is beneficial in providing data-driven,
user specific push notifications to a user within a broader Geofenced
location. Geotargeting is currently employed by Facebook, for
example, which provides users with advertisements that are relative to
his/her proximity to the advertised business.
Whereas Geotargeting is used to reach users in a
broader area with other data concerning preferences or demographics,
Geofencing is useful for users nearby a store or venue employing
general advertisements and promotional offers. Beacons are most often
used to reach users in more confined spaces, such as aisles in a store
or museum exhibits. Geo-targeting relies on IP addresses for
specificity, while Geofences are determined via GPS coordinates, and
Beacons are applicable only through Bluetooth technology.
Finally, a common difference between the three is
location accuracy. Geotargeting does not require intense location
accuracy because other preferences are accessed to better refine
targeting. For example, a Geotarget may only address vegetarian women
in New York City between twenty and thirty years old. Geofences, on the
other hand, offer some accuracy in locations, and usually will target
users passing through an area and purposely going to a location.
Lastly, beacons are highly specific. When used in stores, they can tell
a customer exactly where to go and what aisle to find a specific
Geofences have replaced the ability of various
technologies and applications in security, tracking, and privacy
measures. This is an emerging technology that has the capability to
enhance business sales in digital campaigns, promote productivity in
work places, keep track of children and elderly family members, and
ensure overall consumer satisfaction. It has the potential to replace
the existing usage of RFID tagging and traditional beacon usage,
as well as create new avenues for development in innovative Geofencing
software, tools, and application. These research and development
efforts are now eligible for R&D tax credits.