Location-based services like Foursquare saw their popularity increase dramatically in 2010, and along with that popularity came plenty of press attention. To some, location-based services may represent the holy grail of mobile marketing for brick-and-mortar businesses.

But are brick-and-mortar marketers overestimating how much these services can help them?

AdAge, in conjunction with Trendrr, tracks check-ins on Foursquare, which has been the subject of a lot of the press in the location-based services market. According to AdAge 54,000 Foursquare users checked in to McDonald's locations the last week of 2010, making McDonald's the second most popular check-in spot. Yet according to the McDonald's website, the fast food giant serves a whopping 47m customers around the world daily, or 329m customers per week. That means that Foursquare users who checked in to McDonald's during the week account for less than .02% of McDonald's weekly customer base.

McDonald's was criticized when its social media head Rick Wion celebrated the company's ability to increase check-ins on Foursquare 33% with a mere $1,000. Despite this, Wion stated that "I think…the entire location based services area holds great promises for all businesses."

It's fair to point out that Foursquare, however hot, is but one location-based service. There are others, including Facebook Places, so despite the fact that check-ins to popular stores like McDonald's, Starbucks and Walmart pale in comparison to the total number of customers these companies regularly serve, location-based services shouldn't be dismissed entirely.

But businesses looking to generate meaningful increases in foot traffic and conversions have a lot to consider this year as the sector continues to attract interest. Here are several of the questions brick-and-mortar businesses should be asking themselves.

Are we rewarding profitability?

Does it make sense for brick-and-mortar businesses to reward individuals for simply checking in when they visit? In most cases, the answer is probably 'no'. Like it or not, the check-in alone is a poor metric for most businesses. While it would seem to serve as a proxy for loyalty, most businesses don't thrive on loyalty alone. They thrive on profitability.

Rewarding the small fraction of customers who check in for multiple check-ins isn't necessarily an effective strategy as customers who visit frequently aren't necessarily profitable customers.

Where's the targeting?

Not all customers are the same. Businesses know that, which is why most of them have specific groups that they target. Right now, it's somewhat hard to target effectively using services like Foursquare and Facebook Places. Yes, these services might make it easy to connect with customers and potential customers who are nearby, but targeting capabilities are, at least for the time being, fairly unsophisticated when they exist at all.

Brick-and-mortar marketers should consider that trading targeting for proximity is not necessary a good trade.

How are we reaching the 99%+ of customers who aren't checking in?

The numbers don't lie: even if location-based services have immense potential, the number of customers checking in is dwarfed by the number of customers not checking in, and it will for a very long time. That doesn't mean that brick-and-mortar marketers shouldn't experiment and invest in location-based services. But it does mean that they probably shouldn't put attracting customers who use location-based services above attracting those who don't. 

An average store in a major city may have hundreds of thousands of potential customers within a one or two mile radius, and tens of thousands of those potential customers may be walking or driving by on a daily basis. Marketers shouldn't forget that.

Photo credit: whatleydude via Flickr.

Patricio Robles

Published 11 January, 2011 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (8)

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Andrew Bonar

I agree you should not forego rewarding your clients that do not use check-in services. However location based marketing offers huge opportunities for DM, and brick and mortar stores would probably be very well placed to encourage greater use of check-in services as that data if flagged correctly can be used to great advantage in ways that the old printed cofee club loyalty card cannot. Bricks-and-Mortar stores and I will use the coffee shop again as an example should continue to reward their clients loyalty using the old printed card method buy your 5 get your 6th free etc, but they should not overlook the huge potential available from location based marketing. Encouraging its take up with users is integral to its succesful future and I hope everyone agrees that this additional data stream can be potentially extremely lucrative in terms of marketing collateral. I recently interviewed the new Chair of the DMA, Scott Logie and he specifically referenced location based marketing as one of the areas with exciting opportunities in 2011. You can read his thoughts here: http://bit.ly/eRGR0x

over 7 years ago


Lewis Dickson

I am a FourSquare user and have worked in LBS for many years. I think a check-in service like FourSquare CAN create more revenue for some companies. I've seen this first hand. Chili's offers FourSquare users that check-in at their restaurants free chips just for checking in. When I learned this (via my FourSquare app) it made me a repeat customer. Thus this simple, inexpensive special created more revenue (lunches I bought there vs one of my many other nearby restaurant options)  for those restaurants. I suspect when you consider all the factors their ROI for their LBS "experiment" paid off.

An interesting side note .. none of the servers or even the store manager were aware of this offer until I showed them on my phone.

over 7 years ago


Vlad Ivanovic

I think ultimately it's a question of gimmick vs value with LBS at the moment. Yes Foursquare is kinda fun to begin with and we all love getting badges but ultimately what problem is it solving for me?

I was an avid Foursquare user and supporter in late '09 and '10 but after my 500th check in to my local gym or work place I asked myself, "does anyone following me really care? and what am i getting out of this?"

Possibly the most interesting eg I've seen was Shop Kick, who use Geo-Fencing to give you loyalty points for walking into selected retailers which I think is the start of LBS providing true value to all user segments. 

over 7 years ago


Rick Wion

While no one can deny that customers who check-in far outnumber those who don't, no one should lose sight of the benefits of being in this space. Connecting and marketing through LBS holds a two pronged promise. 1) companies can create stronger ties to existing customers--which if done right--should lead to an incremental increase in business. 2) you can attract new customers. That is why we are reviewing this area for McDonalds. Granted a .02% portion of our customer base is tiny, that number continues to increase, and if we are managing our investment in this area smartly, we should be able to develop programs that create a positive return. Does this mean every company should jump into an LBS program? Absolutely not. A careful analysis of customer needs and roI potential should be created along with an overall marketing strategy.

over 7 years ago


Jason DaPonte

LBS are still a far way from being mainstream but, are going to be crucially important. I see them as the most mature form of 'context tracking' what consumers/users are doing that allows media companies to give them increasingly useful messages and content at the right time/place/etc. Looking at what TV Guide is doing with TV check-ins and what some startups are doing with music check-ins, I think 'attention' check-ins will be the next wave. Imagine having a good base of where people are + what they're watching and how valuable that can be. Then imagine adding in the other types of context sensing that will be coming down the road - motion state sensing, emotion sensing, etc - and how these can be layered to create great personalised, relevant and value generating user experiences, products and services. It's a way off, yes, but I think LBS are just the start of a massive trend that can only be delivered via mobile.

over 7 years ago


Mike Dunphy, Director at MD Media Consulting Ltd

Two points really:

1) LBS can be great in context of a business. E.g. assuming all people around Old Trafford on a Match Day have some interest in football. However, I have always questioned Foursquare appeal when the context is LBS itself. I have worked with LBS on and off for over 10 years, at some point being Global Product Manager for LBS at Vodafone so I am into it as a concept. But when I saw FourSquare my first thoughts were 'oh no, this is not what you should do......', I would love to be proved wrong but not sure I have been yet.

2) 100% of those who checked in checked in. I see the argument time and time again....'but only x% of the population do y'. But if x is a decent size it does not matter. Or even if it is a small size but conversion is high then it does not matter either - as long as you have not got some agency charging you a packet to communicate with them.

over 7 years ago

Ciaran Norris

Ciaran Norris, Chief Digital Officer at Mindshare

Interesting stuff, and I tend to agree. I actually think that the launch of LBS by the mobile networks, whereby vouchers can be sent to people based on their proximity to a business judged by cell-tower locations, could be a simpler and better way of starting to target by location.

Yes, it's not as fun or engaging, but it means that there's potential to talk to a much larger group of people than the few on Foursquare or actually using Facebook Places.

over 7 years ago


Chad Lomax

If LBS was THE service of 2010 then check-in fatigue will be THE phrase of the year in 2011. I'm a Foursquare user but I don't use it consistently because it doesn't add any value. Sure, there are the free chips sometimes or maybe another small token but it's certainly not enough to make me a repeat customer. I would like to build a relationship with some companies and I want them to treat me different than everyone else because of my loyalty. I think George hit the nail on the head by incorporating a loyalty program on top of these services instead of a discount for all. Groupon suffers the a similar problem by offering great deals but not enough rewards from loyalty to get me to return unless I REALLY like the place or experience. Additional services on top of LBS would make that experience much better.


over 7 years ago

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