Reaping social-media rewards

The value of networking tool Foursquare is in building customer loyalty.

Glen Sloan is the mayor of Starbucks, though he admits he didn’t do all that much to earn the honour.

Every morning Sloan, a motorcycle mechanic, orders a hot chocolate at the Starbucks on the corner of College Street and Euclid Avenue in Toronto’s downtown. As he’s standing in line for his travel mug to be filled, he uses his iPhone to maintain his “mayorship” via the website Foursquare.

Foursquare is a social network that members use to “check in” at businesses and other locations they often frequent. The person who checks in the most is thereby crowned the “mayor” of that location.

Recently, Starbucks began using Foursquare to offer the mayors of each of their stores a $1 discount on their drink of choice.

“I think platforms like Foursquare offer a real opportunity for loyalty programmes,” says Phil Barrett, the vice-president of digital and mobile at Toronto’s marketing communications agency BStreet.

“In the past, businesses would send coupons to homes, and maybe you’d go or maybe you wouldn’t,” says Barrett. “With Foursquare, you’re motivated to go back time and again to maintain mayorship and get points. It drives beneficial behaviour for the retailer.”

According to a statement from Starbucks, Foursquare represents a natural evolution of its social-media strategy. “What’s great about Foursquare is that it links the real-time, in-store experience to the online community,” it said.

Sloan agrees. “It brings the Internet into the real world,” he said. “You can go and have a tangible experience instead of vicariously living through people. It’s more like a morale boost.”

At last tally, Foursquare had about 1.8 million users — a relatively small number compared to Facebook and Twitter — but the website has become part of a geo-positioning social-media phenomenon, and is growing by about 15,000 users a day. On July 2, the website hit a milestone — over one million people checked in that day. Then, the next day, it reached that number again.

The company recently an??nounced that it had locked down a new round of $20 million in venture funding, led by Silicon Valley’s Andreessen Horowitz. And while its business model remains a work-in-progress, marketing deals with location-based branded companies such as Starbucks are a clear priority for driving revenue.

Those who use Foursquare often refer to it as a game, because the process of checking in earns users online badges and honours, depending on frequency. According to Barrett, that’s the true business opportunity.

“The real opportunity isn’t for mayors — that’s limiting and short-sighted,” he says. “Knowing that the top 5% of customers generate the majority of the revenue, it’s a whole new loyalty platform. And it’s a lot cheaper than Aeroplan.”

He adds that Foursquare discounts are not foolproof: “The disadvantage is you now have employees becoming mayors and preventing the best customers from en??joying rewards.” In Canada, it’s still early days in terms of businesses utilizing Foursquare. Especially compared to the U.S., where Barrett says he’s seen businesses offering everything from free drinks to happy-hour discounts to those who check in.

“It really is something that could take off,” he says. “What [these businesses] want is foot traffic, and [Foursquare] will drive it in.