Foursquare is partnering with PepsiCo and Safeway to launch a pilot program which could serve as the future of the company's business model—and as an answer to competitors Facebook Places and Gowalla.
Today, the New York-based geo-location service will introduce a rewards platform built on top of Safeway's existing loyalty program. The platform enables users to link their Safeway loyalty accounts to Foursquare, and earn rewards from check-ins. It is designed to be scalable, which means any other national retailer—perhaps even Walmart—could link its existing loyalty program to Foursquare.
Foursquare has also designed a unique vehicle for check-in rewards that is far less linear and ephemeral than traditional location-based reward programs. Rather than, say, earning a free coffee for becoming "mayor" of Starbucks (or just giving away 10,000 pairs of free jeans like Facebook and Gap's one-off promo), Foursquare and PepsiCo have tailored rewards to user behavior, irrespective of in-store check-ins. Now, when participating customers earn Foursquare's "Gym Rat" badge, they might be offered a SoBe Lifewater; or, if you often check in bright and early, Foursquare will recognize you're a morning person, and may offer Tropicana orange juice or Quaker Oats—all specials on PepsiCo products, redeemable at Safeway stores.
"By connecting Foursquare to loyalty cards, it's seamless," says Tristan Walker, head of business development at Foursquare. "The idea is: How can we redefine what loyalty means not only for retailers but for consumer packaged goods? How can we give them an opportunity to connect with consumers through Foursquare and build affection for their brands?"
The three-month pilot program will start at some 300 Vons stores in southern California (Vons is owned by Safeway). Could this be the scalable business model that enables Foursquare to eventually monetize?
"Yes, 100%," says Walker. "But before we go gang-busters, we're going to see what works: see if we can drive higher redemption, and inspire repeat visits. We have really ambitious plans, and if you start to think of Foursquare as social loyalty, then you can start to see how it crosses the gambit of industry and products. If it works, I think we have something very special and very, very powerful."
The issue with past check-in promotions—like Facebook's deal with Gap or perhaps Gowalla's partnership with Disney—was that the platforms were not seamlessly integrated—and therefore not scalable. "How can we find ways to take the employees completely out of the equation?" asks Walker. The solution: by connecting Foursquare accounts to stores' existing loyalty cards and programs. "We are intimately aware that training employees is difficult. Today, when you see a special, you check in to unlock it and show your phone to redeem it. That's very hard to scale, particularly when you deal with chains that have thousands of stores, tens of thousands of employees, and high-turnover rates," he says.
"But the platform's most important layer is allowing opportunities for retailers and brands to learn more about their consumers—to learn a little bit about the things I like to do, even outside that venue."
Collecting consumer data outside the venue is incredibly valuable for tailoring an effective rewards experience. Before, check-in services offered minimal insight: users check in at Starbucks; earn and redeem vouchers for free coffee; and therefore drink coffee. (As if Starbucks couldn't have assumed that about their customers.) The services were also not viable for product manufacturers. PepsiCo, after all, is not a location that you can check in to.
How can consumer goods makers utilize geo-location? Imagine the potential of Foursquare's new program: Do we feel like drinking Gatorade after checking in at baseball practice? Do we want an AMP Energy drink when checking in at the library? A Mountain Dew when checking in at the ski resort?
It's these types of rewards that will create store and product loyalty, and that are attracting big brands such as Safeway and PepsiCo.
"Our goal is to learn how location will ultimately drive human behavior," says Bonin Bough, director of PepsiCo Digital and Social Media. "We know the opportunity is massive, so this is about digital R&D: What's working? How do you turn consumer insight into more engagement? How will these behavior triggers ultimately tie into a bigger strategy? That's what will separate the winners from the losers."
Walker even sees significant opportunity to inspire or change user behavior. He talks about how Foursquare's game mechanics and badges might help push users to eat healthier food, or buy a given number of vegetables, or to purchase products starting with every letter A to Z.
"That might inspire you to visit Vons one more time to unlock that badge, versus visiting the retailer next door," he says.
For us, the real question isn't whether your local Safeway can win against its competitor, but whether Foursquare can win against its rival. With 500 million potential users, Facebook Places and its recently launched Deals platform makes Foursquare (along with its 4 million users) the underdog. Was this program a response to Facebook's entry?
"It's not a response because we've been working on this for the past year," Walker says. "It's not about deals. Deals are certainly the icing on the cake, but when we think about creating loyalty, it isn't about only getting a coupon every fifth time you visit. Loyalty is about the local merchant remembering your name and order. Loyalty is about getting a sign on a table at Arby's saying only the mayor can sit here. Our platform can be a vehicle for that."
See more of Jill Beraud at Innovation Uncensored 2011.