Foursquare Business Models

  |  May 28, 2010   |  Comments

Convergence of vicinity-based loyalty platforms, traditional loyalty programs, mobile payment gateways, and multi-channel analytics will give companies a whole new level of customer awareness.

In my column, "Foursquare - Mixing Social Networks With Loyalty Programs," I discussed how the company mixes social networking with a real business model. I then described how Foursquare could expand to really become a loyalty platform. However, I didn’t clearly show how this was in fact a business model - I laid out the pieces but didn’t tie them together. I got a few comments asking where the business model was. I’ll address that today.

Companies pay a lot of money to create and maintain loyalty program infrastructure. Moreover, most loyalty programs exist mainly to track user’s multi-channel behavior. This tracking is enabled by the use of a loyalty card.

But, if we can imagine your phone as the loyalty card, then we open up a world of possibilities. What the physical loyalty card lacks is marketing and intelligence. But, when we replace the card with a computer, we open up the possibilities of what a loyalty program can be. With an infrastructure like Foursquare’s, the early groundwork is taking place. Foursquare still needs to build a lot of functionality to become a viable loyalty platform, but with good direction, it can get there.

With the smartphone as a loyalty card, and a platform like Foursquare running the loyalty program, companies have the ability to not only do special point-of-sale promotions based on a consumer’s multi-channel history, but also to do "near point-of-sale" loyalty-based incentives. Foursquare excels at this, telling people that there is a deal going on next door. At the moment, these are global deals, but they could eventually be personalized and dynamically priced.

The next step is the most exciting one. Add the purchase ability from Mobio to Foursquare, you have a loyalty card with a smart loyalty platform and you have a purchase mechanism. The important idea here is that technology like Mobio also enables dynamic pricing (based on loyalty). More crucial, it opens up non-traditional channels to e-commerce. As I mentioned in my Mobio column, its technology isn’t just about replacing a credit card with your phone. That’s a way too simplistic view of the possibilities. Instead, it enables magazines, billboards, store windows, and other mass marketing tools to become bona fide points of sale. That means I could buy a pair of shoes that are on a billboard (with one tap) as I am driving by it. The system is more than just a credit card replacement, because it knows my shoe size, my billing/shipping information, and the entire merchant’s information. In one tap (or click), all information is exchanged securely and a package is sent to me.

So, the smartphone becomes not just a multi-channel loyalty program on steroids, it also expands the channels to include those that have never been used or tracked before (in terms of sales, not brand awareness).

One step is missing: analytics. Enter Coremetrics and Omniture. These companies have robust multi-channel reporting capabilities. However, they are missing a single point of collection for this data. In this case, the smartphone becomes the creator of data across several offline channels.

Once they are onboard with technologies like Mobio and Foursquare, several things will happen. First, the loyalty program gets bolstered by true multi-channel data, even the channels that don’t use smartphones. Second, users’ online behaviors are affected by their offline purchases. This in turn unifies companies’ brands and user experiences across all channels, even those deemed "static," such as mass marketing channels.

And therein lies the business model. A company like Foursquare has a lot of bridges it could build to other enabling technologies. But, these bridges cost money to implement and maintain. Retailers invest a lot of money in loyalty programs and analytics, and most wish their multi-channel views of their customers could be more robust. All of them wish they could expand their channels beyond traditional points of sale, online and off.

Once vicinity-based loyalty platforms, traditional loyalty programs, mobile payment gateways, and multi-channel analytics converge, there is a whole new level of customer awareness and services companies will be eager to use.

And that’s a great business model, as far as I’m concerned.

Until next time...



Jack Aaronson

Jack Aaronson, CEO of The Aaronson Group and corporate lecturer, is a sought-after expert on enhanced user experiences, customer conversion, retention, and loyalty. If only a small percentage of people who arrive at your home page transact with your company (and even fewer return to transact again), Jack and his company can help. He also publishes a newsletter about multichannel marketing, personalization, user experience, and other related issues. He has keynoted most major marketing conferences around the world and regularly speaks at and other major industry shows. You can learn more about Jack through his LinkedIn profile.

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