Social Commerce Platform Review: Foursquare – Turning Check(in)s Into Cash

The concept of using a mobile phone to “check-in” to a business such as a store or restaurant to declare one’s location is foreign to many. But to the 10 million users of geo-location social network foursquare, such activity has become commonplace.

By checking in via a smartphone app or SMS, foursquare users share their location with friends. Those who check in a certain number of times accrue points and collect virtual badges. Users who check in the most times at a certain venue will be crowned “Mayor.”

Checking-in, collecting points, winning badges, becoming mayor all sounds like fun. The best part is, that “fun” can be turned into profit and serve as a means through which brands can obtain, engage and retain customers.

How Brands Can Use Foursquare

There are two primary ways brands, especially retail brands, can leverage foursquare’s platform:

1. Claim a Venue

Through its merchant platform foursquare allows owners of retail outlets – including national chains – to “claim” their venue and provide special offers to those who check-in using a mobile app. The types of specials that can be offered include:

• A discount with purchase. “Spend $50 and get $10 off.” This is a way to drive up the average order value.
• Something for free. For example, “Enjoy a free dessert if you buy an appetizer and main course.” These are often low cost and high impact.
• Special treatment. Check-in to receive something exclusive to Foursquare users.
• Reward the best customers. “Free coffee on your fifth visit” is a common offer.

2. Create a Page

A second way for brands to leverage foursquare is by creating a Page. Though brands with retail outlets can use this feature, it was intended for those with large audiences, but that have no physical location per se. That could include media outlets such as the History Channel, Wall Street Journal or People magazine, fashion brands such as Louis Vuitton, or CPG brands like Redbull or Pepsi.

I have to admit to not really seeing the relevance of foursquare pages. Though they bear some resemblance to a Facebook Page or Twitter feed, the functionality is very limited. Page owners can leave “tips” (akin to status updates or tweets) and link to other web properties they may own. Tips are fine for brands with brick and mortar stores – they show up when someone checks-in – but are less useful for those without in my opinion. Lastly, foursquare users can “follow” pages, but there is no facility for interaction between the brand and followers.

There are a couple of other ways in which brands can take advantage of foursquare for advertising and marketing purposes:

• Partner badges – Earning foursquare badges for performing certain real-world actions is a key platform component. Partner badges are branded versions of those that businesses can use for promotional campaigns.
• API Platform – Foursquare’s open API has been used to developed literally thousands of apps. All of the features available in the foursquare mobile app are available via the API.

Benefits to Brands

That’s a synopsis of “how” to use the platform. In terms of “why” to use it, the appeal is simple, but compelling: Through its check-in deals and special offers, foursquare provides a means to attract new customers and retain current ones. The fact that check-ins are broadcast to friends, brands also benefit from the word of mouth value of implicit endorsement that checking-in offers.  For some users, the attraction is the game aspects of earning badges and becoming mayor. For others, it’s about status (“look at the all the cool places I’ve visited”). Still, for others it’s a way to connect with friends. Whatever the motivation, businesses can take advantage to turn check-ins into sales.

Relationship to Social Commerce

“Checking-in” is where its at in terms of foursquare’s relevance as a social (and mobile) commerce tool, and that applies only to brands that have physical locations. To the degree that check-ins are not only shared with friends and contacts (therefore offering word of mouth value), but also typically result in rewards (discounts, exclusive offers), foursquare is part of the emerging breed of “social rewards” social commerce tools (along with ShopKick that we covered last week).

As a case in point, in December 2010, Radio Shack ran a nationwide marketing campaign using foursquare’s platform to each of its 5,700 locations. The result: foursquare users spent 350% more than the average Radio Shack customer.

(Too see a list of 24 other Foursquare campaigns, read the Social Commerce Today post, Brands@Foursquare | 24 Big Brand Campaigns.)

That’s not to suggest that activities like building brand awareness and gaining new followers aren’t worthwhile, but from the standpoint of getting the cash register to ring, the check-in’s the thing!

Foursquare Competitors

Foursquare is first among a cadre of competitors, which include: Gowalla, Brightkite, SCVNGR and what Facebook used to refer to as Places. With the possible exception of Facebook, none have cornered the market in terms of the number of merchants, check-ins, or transactions as Foursquare. If size matters, then foursquare would be the first choice for retailers to promote their brand.

Oh, and perhaps the best part of using foursquare is that, with the exception of partner badges, it’s free both for users and merchants.

Foursquare by the Numbers (April, 2011)

• Community: Over 10 million people worldwide;
• Over a billion check-ins, with millions more every day;
• Businesses: Over 500,000 using the Merchant Platform;
• Employees: Over 85 between headquarters in New York, NY and an office in San Francisco, CA

Sample Screenshots

Company Information

Foursquare Founding

The seeds of foursquare’s invention were planted when co-founders Dennis Crowley and Naveen Selvadurai met in 2007 while working in the same office space (at different companies) in New York City. Working from Dennis’ kitchen table in New York’s East Village, they began building the first version of Foursquare in fall 2008, and launched it at South by Southwest Interactive in Austin, Texas in March 2009.

Foursquare Funding

Foursquare is funded by Union Square Ventures, O’Reilly AlphaTech Ventures, Andreessen Horowitz and a handful of angel investors. Total capital raised to date, $71.4 million.

Management Team

• Dennis Crowley – Co-founder
• Alex Rainert – Chief Product Officer
• Holger Luedorf – VP, Mobile & International
• Tristan Walker – VP, Business Development
• Naveen Selvadurai – Co-founder

Foursquare Headquarters

New York, USA
36 Cooper Square
New York, NY, 10003
USA