Check-in Royalty, Customer Loyalty and Foursquare’s Evolving Strategy

[tweetmeme] The mobile check-in wars are starting to get interesting. Several weeks ago Facebook announced  “Facebook Places” and the immediate reaction from the tech community seemed to be “Oh #$%@! What are Foursquare and Gowalla going to do now?!”. I honestly can’t weigh in on Gowalla, because I’m not an active user of the service, but I genuinely believe in Foursquare’s potential to take Facebook on, and survive and thrive.

Before I jump in, let’s address the obvious reason most people think Facbeook’s going to squash Foursquare and Gowalla -  Facebook has an absolutely massive user base. They probably eclipsed the number of daily check-ins Foursquare and Gowalla are generating in the first few weeks. That was a given. Afterall, they’re Goliath. A user base of 500 million means that all Facebook has to do is get 0.2% of Facebook users to try the service and they’ll win the volume game in the short term…but this war isn’t a short term game, and winning isn’t as simple as just putting a check-in button in front of the largest number of people possible. We’re not monkeys, we’re human beings and the main problem location-based services are trying to solve isn’t “how to get someone to check-in”, it’s “how to get them to keep checking-in”. The former is easy, the latter isn’t.

In this post I’ll discuss some of the major challenges location-based services like Foursquare are facing, talk a little bit about why I think Foursquare is positioning themselves the right way to survive, and share some ideas on what I think Foursquare should focus on over the next 12 months….

Checking-In Isn’t Just About Telling People Where You Are

The big thing the crowd seems to have glossed over in the frenzy over Facebook’s announcement is that Facebook only copied and released functionality that follows the basic check-in model. If you’re too focused on the tech, you’ll miss the subtleties of how mobile check-in culture is changing and what drives and motivates people to participate consistently. Facebook intentionally left out all of the small features that encourage participation like “Mayorships,” merit badges and other incentives earned by users who check in to Foursquare and similar services regularly. That’s a huge omission.

During the week following their release, I gave Facebook check-ins an honest shot. I checked in a few times, saw nothing special (yet) and I haven’t used it since. It didn’t feel like any thing more than a status update. There was no feedback, no extra sizzle. The formatting wasn’t even that much different to a status update in my timeline. Flat. Boring. “This is where I am”. Great. I could have typed that. And it’s still like that now, a month or so in and I haven’t noticed a lot of people using it yet. It doesn’t seem to be catching on – at least not with my friends – which may indicate that Facebook hasn’t gotten the UI or the feedback loop right yet for this round. More on that in a second.

Here’s what I think the main problem for all check-in services is: Anyone who uses check-in services regularly will admit in an honest moment that “checking-in” just to tell people where you are (for it’s own sake) gets boring and cumbersome quickly. Not only does pulling out your phone to click a button take attention away from the moment and the people you’re physically with, the act of broadcasting your location if no one is listening and responding at the venue you’re checking in at quickly starts to feel pointless and (lonely to boot). At some point after the excitement of the first few check-ins wears off, we all end up asking ourselves “what am I really getting out of this?!”. If the answer isn’t clear and convincing, the odds you’re going to keep checking-in plummet. I think that’s going to be the case for most Facebook Places users in a few months. So, while Facebook’s roll-out is just the first iteration, if Places really was a power play against the other players in the check in game, their first attempt seems to be more of an easily-dodged swat with a large blunt object than a precise, surgical strike. Now that I’ve had a chance to use the service a few times and see the way Facebook Places has been marketed, I honestly don’t think they’re going after Foursquare and Gowalla at all. I think they want the service to be something different – a service that’s not about game play…One that co-exists happily with other services that have a strong game-like element.

Fundamentals Of Game Theory Will Still Drive Adoption and Sustain The Foursqaure Community

Game play is still the beating heart of Foursquare. Foursquare lovers know why they check-in again and again, and it’s not just about the merit badges they earn. Checking-in is about earning status and reputation in places that matter to them, and about sharing that quantified status in context with others who care. It’s about interactions that create fun and boost self esteem. That’s why Mayorships are so highly contested. Even though most places/businesses still don’t offer users tangible benefits for checking-in, Foursquare still starts hundreds of vicious battles over virtual pieces of turf.  The game feeds our fundamental human desire for status and a sense of community (that we are tied to a place in a meaningful way that means something to others). At a very basic level, broadcasting where we are is an exercise in identity expression and self-branding. What differentiates Foursquare from Facebook Places is that Foursquare has done a great job of making users feel like they’re forming relationships with places AND creating a community where sharing that location-information has context and meaning. From my *brief* experience testing Facebook Places, there isn’t much built into the system that triggers a sense of community, identity or status for the user. It’s just reporting. Maybe it’ll get better when the data is richer, but for now it’s a “meh” experience. At least with foursquare you instantly earn points, maybe a badge, you can see tips others have left about the place (try the kobe beef burger!) and see who else has been there and who the most frequent patron is (the Mayor). All that meta information is consumed in a matter of seconds when we check-in and the system delivers us feedback. Don’t underestimate how important those brief flashes of information are to creating a sense of connection to a place. The more we know about a place, the more likely we are to interact…and game elements like “dethroning the mayor” and earning badges that owners of venues and fellow players can see make a difference to how much we play and interact over time.

Facebook and Foursquare Are At Different Phases in the Adoption Life cycle

What’s important to realize when comparing Facebook Places to Foursquare is that both services are at very different stages in the adoption life cycle. Facebook Places is in it’s infancy and Foursquare is starting to mature. Foursquare’s been around long enough to develop an active user base and to collect a heap of check in and user data. Without that data, the functionality that can be presented to users out of the gate is very limited, so the focus for the first stage of building the service is VERY different from the later stages. The first real challenge for a team at the beginning is to make the service fun and compelling enough for users to check in and build a habit without having to give them much information about other users (remember, if no one else has checked in, there’s no information for it to tell you where your friends are and to make it interactive). The adoption stage is about creating a fun experience where people actually want to add data points to the system when there’s not much interpersonal feedback between them and other users. There’s a long period at the beginning (especially in sparsely populated areas) where gathering geo-specific data is a lonely, single-user focused affair.

After lots of people use the system for a while, though, the focus for the team building the system shifts. Rich data gives you options. Now you can give users all kinds of cool feedback and information when they interact with the system because now the system knows more about you, where you go and what your friends do. This is the phase Foursquare is in – they’ve got lots of people who use the system regularly. Now they have to decide how to use and surface the data to make the system increasingly fun, useful and interactive. This is where Facebook wants to be, but they’ve got a long way to go. They’ve got a huge advantage because they already know lots about their users and their friends, but they don’t know squat about where people go, and how much they’ll contribute. The video ads Facebook put up to launch the service (see the second video in the next section) show us what Facebook wants us to share, but without any data, they’ll never be able to deliver – let’s see if they can get people to use the service first.

Check-Ins Will Become A Commodity, but Check-Ins Will Mean Different Things On Different Platforms

These next two videos in combination help illustrate the differences between Foursquare’s vision and what (it seems) Facebook Places will be in the near term. I’ll let them speak for themselves – they’re both short. The first is an interview with the co-founder of Foursquare, Dennis Crowley, discussing the idea of check-ins as a commodity (which we already see happening), as well as how the Foursquare team is dealing with some of the challenges they’ve faced. The second is the promo video for Facebook Places which gives us hints about why the Facebook team think people will want to use the service – it seems much more focused on accelerating a sense of nostalgia (recording where I’ve been and knowing where my friends have been etc), and encouraging interpersonal real-world interactions in real time.

It’s All About Creating Value After The Check-in

So what now? Well, we’ve got two very different visions from two competing services. When I say different visions, I mean that Facebook and Foursquare seem to be focusing on creating experiences that add value for users in markedly different ways when they check in. Facebook’s value proposition seems to be focused around nostalgia and creating opportunities for real-time, serendipitous social interactions with our friends, where as Foursquare’s seems to be around novelty, status and crowd-sourced exploration. The way that users perceive value will dictate not only the way that users want to use the system, but the evolution, trajectory and focus of the system over time. Remember…this stuff is always evolving, because what users want and their perception of value changes over time. Each development team will be challenged with maintaining and changing the system to consistently deliver value to users.

Foursquare’s founders have been very vocal and clear about what they want Foursquare’s value proposition to be and what (they think) makes the system work for users. In the video above, Foursquare’s co-founder Dennis Crowley admitted that “it’s about creating value after he check-in”. He’s absolutely right, and Foursquare has done a great job of building a reward and feedback system that’s worked up to now, but as they move into the next phase of their life cycle, they’re going to have to shift more attention towards getting businesses involved to beat the check-in fatigue problem a lot of users are feeling right now. Foursquare knows this, though. Dennis also said in an interview with Mashable’s Pete Cashmore that “Location-based services will thrive if they’re able to attract a “critical mass” of small businesses willing to reward regular customers”. You can see Foursquare pivoting and positioning themselves well to achieve this. They’ve started putting energy into back-end feedback systems for businesses that want to see who’s checking in to the locations they manage and interact with their most loyal patrons. This is a big step because it presents a never-before seen opportunity for real time data collection for businesses who want to know about the customers who are coming into their stores. For both small and large businesses, data tied to actual customer foot traffic is really valuable information and if Foursquare can beef up the back-end so that businesses can use this information to know their customers and interact with them in unique and interesting ways, they’ll have a lot of businesses seeking them out. Right now, though – and this is just my humble opinion – the Foursquare system itself needs a few major tweaks to add the kind of value after the check-in that most business owners are looking for. Here are some ideas on what Foursquare should consider focusing on over the next 6-12 months to deliver value to business owners….

Businesses Want Demographic Data

Many small businesses I’ve worked with, as well as people I’ve discussed Foursquare’s short-comings with have expressed an interest in the demographic data of their customers. They want to know information about age, sex, nationality, race etc when they’re looking at checkin data for their stores so that they can slice and dice the data over time. This is so that they know more about who comes by when, and to what type of events etc. Right now, using Foursquare’s business dashboard, they mostly just get lists that show their most frequent patrons, but not much aggregated data to work with.

You know what’s accelerating their desire for these types of data insights? Facebook. Their Facebook fan pages give them that type of information in easy to read formats… and it’s useful as hell. Facebook knows a heck of a lot about who we are, what we like and who our friends are already. That’s a huge advantage. In this respect, Facebook is educating business owners about the value of their own data and teaching them about their customers. Who wouldn’t want those kinds of insights?! I think Foursquare is going to have to follow suit at some point and get users to give up more information about their preferences and habits so that business owners feel like their getting that same information about their foot traffic – that would make Foursquare an easy sell to anyone who was still on the fence about promoting the service.

If Foursquare doesn’t deliver this type of data, and Facebook does…then Foursquare’ll be in trouble. Businesses are already clamoring to get their own Facebook business pages that give them insight they can’t get anywhere else. They’ll surely choose to create a “place” page on Facebook if that data is linked to check-in data, and if the data there is richer and more accesible, I’d venture that most businesses would focus their energy on just Facebook at that point, rather than take a chance on a less prominent startup”. We’ll have to see what happens in the next few months.

Transitioning The Game: From Mayorships To Exclusive Clubs

A few weeks ago, I had a great string of conversations with my buddy Joe Sorge who manages the “social media famous” AJ Bombers restaurant in Milwaukee. Joe called me to bounce some ideas around about a new program he’s running at AJ Bombers where the Mayor of AJ Bombers on Foursquare gets access to manipulate and order from a special menu. The idea is great – and I’ve gotta give credit to Joe where it’s due – he’s always a few steps ahead with social media and he’s constantly coming up with exciting new ways to leverage the web and online communities to drive sales in his restaurant. There’s only one problem with the promotion, though…his Mayor is really hard to oust. The guy checks in constantly. No one can beat him.

So as Joe and I were talking through the issue, I got to thinking….how does it really help a business owner to just reward one guy? Even if it’s a different person each week..or even a few days…you’re still only talking about a small hand full of people that we can run “Mayor” rewards for. That’s not “community”…it’s a no-win, exhausting, frustrating scenario for anyone who checks in one-less time than the Mayor. Imagine what it would feel like to check in 15 times in a month at your favorite restaurant and STILL not be the mayor, and have no reason to be recognized. That’s every other freaking day! You should get something for checking-in regularly, shouldn’t you? You should have already earned your right to be part of the exclusive club and be recognized as “a regular”.

That’s when we came up with the idea of rewarding not just the person with the most check-ins but everyone at the top who had checked in – say, the top 3 or the top 10 or 20 or 30….those are your most “loyal” social media using customers…you should treat them all like….royalty. When I discussed the idea with Joe, we threw around the phrase “Loyalty Royalty” and something resonated with us. Joe’s actually got a great post on his blog about a new promotion he’s running at AJ Bombers called the “Loyalty Royalty Menu”. He tells me he’s gotten a good response to it so far in his restaurant.

For businesses a system that allows them to recognize and reward a large group of customers at once, rather than have people compete for a top spot, makes a whole heck of a lot of sense. Business is about community, more than it’s about competition. You want your regular patrons to feel like they’re part of a club and that membership means something. They don’t want to feel like they can be ousted by someone who shows up one more day a month than they do. Now, it’s not that Foursquare’s system doesn’t allow business owners to do this…it’s just that Foursquare’s system doesn’t imply that it should or could be done (i.e. reward and recognize the most loyal customers as a group). As a business owner, you can figure out who your top Foursquare-using patrons are in the dashboard, but the whole “Mayor” promotion thing has been pushed hard and the system explicitly recognizes the “mayor”, so mayorship tends to be the focus. That’s gotta change, I think. Foursquare’s got enough data now to help businesses create all kinds of cool promotions that rewards lots of customers at once – the kind of rewards that events and large promotions can be run off – that’s where the value is going to be for businesses…and hopefully when they run those types of group reward promotions for their foursquare communities…they’ll have good data so that they know lots about who showed up.

Anyway, those are my current thoughts on Foursquare and Facebook places. It’s discussion time…