Location = Loyalty?

An article I read in the New York Times today stated that, according to the National Venture Capital Association, venture capital firms have poured $115 million into location start-ups since last year; most popular of them being Foursquare, Gowalla, Shopkick and most recently, Facebook Places. These location-based apps offer services that allow people to inform their friends of their physical location online, so users can connect with their friends or receive coupons/discounts from businesses.

The rise of such location technology opens up a new avenue in influence marketing. Even though adoption has been largely confined to young, tech savvy urban dwellers, these apps have immense potential for gathering valuable consumer data. Location apps can provide large amounts of behavioral data, which can be used by market researchers to reach possible target segments. I will use Foursquare to showcase how such apps can be used to a researcher’s advantage.

Identify your loyalists: A key part of Foursquare’s interface, for instance, showcases which users have checked in at a given location. From this, a programmer can demonstrate how many times each user has visited, the duration of each visit, locations each user has visited before and after coming to a particular venue, the number of other visitors that user is friends with, and the reach each visitor has. Such information is greatly helpful in understanding and evaluating target personas and understanding the behavioral patterns of heavy users.

Provide incentives: Foursquare does this by rewarding a location’s mayor. A mayor is the most frequent visitor of a location and is likely a heavy user of the service. By providing incentives to the mayor, businesses can keep current loyalists happy through coupons or discounts. Businesses can now visit Foursquare + Your Business to get further information on the program and browse ideas that other venues have implemented.

Information from an app like Foursquare can be used to focus on new or repeat customers; it can be used to target and treat customers with heavy influence and reach differently; it can be used to be creative with reward strategies, for instance to reward those who recommend Foursquare to a certain number of friends and their friends sign up, and so on.

However, for all the attention and money these apps are getting, only 4% of Americans have tried location-based services, and 1% uses them weekly, according to Forrester Research. Delving more into the statistics reveals that 80% of those who have tried them are men, and 70% are between 19 and 35. So, this is far from being mainstream. The loyalists using the app are a far smaller subset of the percentages I mention above. Also, the users seem to be skewed toward men.

The young user base is promising when planning for future sales support and marketing. But at the present, even though location apps can provide a new, deeper outlook into consumer behavioral data, they are very restrictive. The overall user base is small; hence the target segments are small. Additionally, people have qualms about sharing their physical location online, even though they might be comfortable sharing other information on the web. So, even among young people there will always be resistance because of security issues. May be for specific information like location, there HAS to always be some incentives. May be rewards are the only way of making such app-use seem worthwhile, because they can prevent the privacy trade-off from crossing consumers’ minds.