Groupon, foursquare, SCVNGR, Yelp, Facebook Places are just a few of the Location Based Services available from a mobile app.
As I write this post, Groupon has just turned down a $6 billion offer from Google for their local coupon service. I have to admit I was surprised by the offer value but Google ain’t stupid. It has been spending a lot of time and cash in developing local services and Groupon seemed to have fit this strategy well.
The rumor mill has it that Google got paranoid about Facebook working with merchants to offer consumers local business “Deals”. So something is going down in Mega Tech Company World with location based services and local stores. Mega Tech is either acting like Silicon Valley reef fish, darting this way and that after the Next Biggest Thing, or they are actually on to something.
My feeling is that they are on to something.
Sure Location Based Service penetration is low at about 4% of the US population, but so was Google or Facebook’s penetration in their early days.
Here’s my review of this burgeoning area. As always, from a wine retailer’s perspective.
What are Location Based Services (LBS)?
A Location Based Service is usually an app on a mobile smartphone that uses the GPS geo location (“… would like to use your current location”) functionality to offer some sort of information.
LBS use to be about SMS and location (based on cell tower triangulation) – it never really took off. But the mobile world has moved on and smartphone apps and GPS functionality has made this an intensely competitive part of the mobile world.
It’s about your friends
At it’s simplest it allows you to tell your friends you’re at such and such a place.
The location is confirmed because the app can tell that you’re at that place (it’s not as accurate as a tomahawk missile but close enough), and you can use a tweet to let people know. This process is known as “check-in“.
There are different ways the LBS app can notify your friends whether that be by facebook, twitter or a custom app messaging service. Some apps allow this check-in to be published for all to see or allow you to restrict it to just your friends. Most apps allow you to search your Contacts, twitter and facebook friends in order to pre-load your friends contact details.
The LBS apps usually allows you to leave a note about the place. They might be friendly tips… or rants about rude service. So, for a retailer, it is the social media dilemma of making sure you are part of the conversation, cause you can’t control it.
Now before you get too cynical about LBS (yes I’ve gone down that road too) think back to when you were in your teens and twenties when your life revolved around your friends. Perhaps it now revolves around work, partner and children (and occasionally yourself and friends 😉 ). Back when you were younger it was important to know what the posse was up to. You didn’t want to miss out on a party or free drinks or that hot chick you’ve been trying to pick up… you get the idea.
When you check-in you rack up points, these points can lead to “badges“, which are symbols on your foursquare profile page. If you’re the person who checks in the most then you become Mayor.
Some businesses reward you for being the mayor, a regular check-in customer, or special badge deals.
Badges seems to cater to people’s competitive instincts as well as being a (trivial) status symbol. Whatever the actual reason they certainly seem to work for a certain type of customer.
The app that seems to have taken gaming to the extreme is SCVGR (scavenger). This app presents users with trivial but fun things to do at places, called “Challenges“. This may be combined with “Treks” which connects the various locations with challenges and then rewards people who complete the Challenges (and Treks) with a reward.
The idea is to attract people, engage with them in fun ways and grow your loyal customer base. And there may be something to this idea for wine stores as there are all sorts of wine challenges I can think of that would make a tasting evening much more fun!
I guess strictly speaking this started as a local business review website to help people find local places to “eat, shop, drink and play”. But it wasn’t long before the mobile version came. Then they added a check-in feature after seeing the success of foursquare in January 2010 and last month introduced rewards for check-ins.
I won’t cover the review component here other than to say it is an important part of your overall internet marketing strategy and also helps with local SEO on Google. Make sure you “claim” your business and at least diplomatically respond to negative reviews. It also has some great advertising possibilities.
So it’s strength, in a mobile context, is helping customers read reviews about places they may be about to go to when they’re out and about.
And now the 800 pound gorilla has walked into the room – Facebook.
I remember reading about Facebook’s launch of Facebook Places. The foursquare founder was at the launch in San Francisco and by all accounts he looked extremely uncomfortable as he watched a “partner” offer essentially the same core service as Foursquare (though without the gaming features).
I can see why Facebook has launched Places though, as the social network of friends are at the heart of their service. You want to know where your friends are and let them know where you are.
Using it is essentially the same as other LBS apps – you simply open your Facebook app (or facebook on your browser) and check-in. You can add comments and reviews.
Here’s a review by the LA Times:
Let’s come back to Groupon. If you’re a regular reader of this blog you’ll know that I regard discounting like I do taking heroin. It may give you a short term high but it is deadly in the medium term.
Of course that’s a sweeping generalization and many retailers successfully use this as part of their promotional strategy. My issue is that a small wine store just can’t compete this way – the margin ain’t there. If they start training their customers to expect discounts then the slow death begins. Rant finished ;).
So it’s with a large amount of skepticism that I’ve looked into Groupon. Here’s how it works.
Consumers sign up to receive daily local deals from Groupon. If they like a deal they go ahead and enter their credit card details.
Then here’s the smart bit. The deal is only activated if enough people sign up. So you’re encouraged to let all your friends know – which is where social networks step in. You let your facebook friends, twitter followers (and email list, SMS contacts etc) know in order to activate the deal. Groupon (“Group Coupon”) calls this “Collective Buying Power”. Smart huh!
If it is activated then Groupon charges the consumer credit card and sends the consumer a coupon. The consumer can print this out or download to their mobile phone, and redeem the coupon at the store. (So the store receives money from Groupon not the customer.)
Consumers can also search for nearby deals by using the Groupon mobile app that utilizes GPS. The same app allows you to also purchase deals.
On the merchant side the advantage is obvious – traffic and lots of it. But at a price.
The word (not official policy) is they want at least a 50% off deal. They then get half of the remainder. So you offer, say, $30 worth of wine for $15. The customer pays Groupon $15. The day after you should get a check from Groupon for $7.50, your share of the coupon purchased for your business.
See what I mean by expensive! You get $7.50 for a $30 wine.
Groupon justifies this by saying:
- its encourages trial and you get lots of repeat customers post promotion
- it is better than advertising because you can track customers and only “pay” groupon for sales (via the discount)
- you get the benefits of exposure to a local audience
- facebook fans and twitter followers increase
- traffic is overnight, there isn’t a delay
Which is great spin as most internet marketing programs can claim the same sort of advantages.
What I do accept is that they have a list of interested active subscribers – so it’s more of a direct marketing play than strictly LBS in my mind. Without the list the service would not be successful. The list combined with the technology is what makes this a powerful promotional tool.
Actually I shouldn’t be so dismissive
If you can track the number of repeat customers from a Groupon promotion you may find it is a worthwhile promo. Give it a test. And please let us know how many of the Groupon customers become repeat non-discount customers (just comment below).
I’ve seen Groupon used well with one wine store called NY Vintners. They offered a 50% off deal for a wine tasting event. This makes sense to me as there is the gross margin to play with for an event compared to wine bottles.
Here is what I really love.
Retail Navigation App – Aisle 411
It allows anyone with a smartphone to find products and promotions quickly and easily – down to a specific shelf in a store. It even uses voice recognition technology to make it easier to input your search.
Here’s the promo video:
Damn that’s smart! Here’s the hands on demo:
I’ve got a serious case of techno love over this idea :roll:.
Your customers could be directed to the correct shelf and even get reviews for particular wines through in-store usage of online technology.
So that’s where I think the future is. All the hard work you put in to your website can be accessed by people in the store or near the store as well as on the world wide web. My next post will be about using mobile technology in-store.
What’s your thoughts?