Geofencing is the concept of restricting the location of your customers and potential customers by their location, so you can better target promotions and fine-tune your marketing. Over the past several years a number of new companies have been created to take advantage of it and produce smartphone applications, digital coupons, and manage your social media marketing campaigns with an eye to the neighborhood around a particular retail establishment.

“With low-cost developer’s tools becoming available, geofencing is finally coming out of the shadows, moving beyond traditional location-based applications, to form the backbone of a host of new applications and services,” say analysts at ABI Research in a report published in February. They claim it will become a $300 million business by 2017.

Solution providers can build geofences for their retail clients, but it isn’t going to be easy: there are a confusing array of app providers, methods, and tools to use. Here are a few questions to address before you start your first project.

1. What are you trying to build? Seems obvious, but first settle on the actual end goal of your geofencing project. Does your retailer want loyalty rewards, a half-price mobile coupon, the ability to track social media mentions by store, individualized SMS messages, or what? Do you want something that is installed on an enduser’s phone, or that works with an existing payment or social media apps?

“To really be effective, the business needs to leverage more understanding than just the patch of Earth the customer currently occupies, says Corey Gault, Director of Communications of Portland, Oregon-based Urban Airship. “If I know you are a fan of wines or certain seafoods, I could make that message much more compelling by informing you of new fresh inventory. That turns an annoying interruption into a welcome invitation to engage with my business because it considers your preferences.”

Each project is different, other than using geofencing to focus on a particular local area.

Once you have a notion of what you are trying to build, look for particular technology providers in that area. You can start by looking through the long list of vendors that came to last year’s Local Advertising Conference here. Don’t be surprised if most of these are vendors that are unknown to you: that is the nature of this business.

Another way to come at the core technology providers is to first look at the broad category – social media management, coupon creation, local messaging, social check-in – and then see how many of them actually support any kind of geo-location features. This can quickly narrow the field of potential providers.

2. What are Google, Apple, and Facebook doing in geofencing? While none of these three are VAR-friendly, it pays to at least understand how these major consumer tech companies are approaching the concept. All have announced various geolocation initiatives over the past two years, such as Apple’s Passbook, Facebook Places or Google Maps.

3. Does your technology provider have any experience in your particular retail sector? Chances are the answer is going to be no, as geofencing is still pretty new. But don’t let that stop you. Most providers are just getting pilot programs off the ground, and many haven’t really gotten very far in working in retailing yet. For example, we asked several of the leading geofencing providers if they had any restaurant chain clients: none as yet did. Prepare to break some ground and be patient as you educate them on your needs.

4. Who are the current partners for your technology provider? Again, many of them don’t have well-developed VAR programs, if at all, so again you are going to be doing some evangelizing here as well. Except for the larger vendors, many don’t have well documented APIs for their tools, or have software that only works on iPhones, or don’t have VAR contracts yet. Most of the vendor’s websites that we examined don’t even have complete contact information, other than an information request form.

As you can see, this is still very much an emerging market, despite all the hoopla over Foursquare and Loopt several years ago. But it clearly is the wave of the future.