Consistent rewards programs pay off in consistent customer loyalty.

I’ve previously commented that FourSquare hasn’t managed to become enough of a player in the rewards programs of major chains, leaving the ground-breaking application a little on the flat side of a robust loyalty-program enhancement. Well, finally, a major consumer-frequented chain has instituted something substantial in the way of FourSquare promotions…. Starbucks reportedly is now officially turning their FourSquare loyalty program into a bonafied, dividend-paying rewards system (albeit on “trial” basis) to provide actual guaranteed loyalty program rewards to those who frequent the coffee-house chain frequently enough to become “Mayor”.

While the program expuires on June 21st, both FourSquare and Starbucks reportedly think it could easily be extended thereafter. Is this the future of FourSquare? I think that this is the kind of use FourSquare needs to institute (read quickly institute) on it’s own to become a salable offering, or an IPO able to generate substantial sales of shares in the near future. Certainly it’s a step in the right direction for all involved, including the customers of Starbucks and the users of FourSquare. Kudos to Starbucks for taking the lead here. (Hint to FourSquare: shouldn’t you really have created a universal and fully customizable retailer loyalty program by now that retailers could opt into? And isn’t that a regrettable missed opportunity for FourSquare?).

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Comments
  1. JC Hewitt says:

    The founder of Foursquare already had a bad experience with a Google acquisition.

    Most M&As are great for the investment bankers, but awful for the companies in question. It’s a balance sheet strengthening exercise that crushes corporate culture and morale in a whacky attempt to preserve the stock price.

    An acquisition by a company like Google, Microsoft or even Yahoo will never be a great fit for Foursquare just because of the incentives involved.

    Those companies will always get more revenue from their core businesses, so they have little incentive to take care of the new-comers.

    Corporate culture matters!

    This is the way to go for 4SQ. They just have to move past corporate conglomerates and the “Mayor” system to get their revenues up before other companies outmaneuver them.

    I.E. companies that are currently developing quietly with less attention-crazed executives and VC funds.

    Take a look at Facebook: their IPO was essentially just blocked by the Senate. It’s really not a great time to go IPO, and won’t be for a long time.

    Even if the Senate didn’t beat them up, their revenues are just absurdly low relative to the valuation. It doesn’t matter if the company is profitable if they can’t repay the investors.

    The trouble with taking money from VCs is that their funds are structured to provide insanely high returns.

    If I were on their team, I’d tell them to stop screwing around with the technology and focus on business development full time. Get an in-house sales team together to reach out to more companies that will do similar deals to this one.

    Why did they need to raise so much money in the first place? That’s what confuses me. It makes things much tougher for them. A company like this would probably be better off remaining independent and seeking a private equity buyout to repay the investors quickly.

    • Mark Brimm says:

      Staggering good points made here on the financial dimension of 4Sq’s current business strategy, JC. It does seem that business has been a bit of a secondary consideration with 4Sq and I think this is often a problem with many if not most tech companies. They think that R&D is their prime function, when in fact it really isn’t. Being in demand actually is.

      Incredibly poignant response, as usual.

  2. I agree that FourSquare is setting a rather slow-paced example of a booming flagship social media brand. Nice points by all thus far.

    Great to see a new post from you the very day I get back from across the pond!

  3. Jeanine says:

    I use Foursquare a lot and I love Starbucks! This is definitely going to encourage me to come in more often (like I needed that!).

    Great post, Mark! Keep it up!

  4. Marlita says:

    I never understood why anyone would bother using something like 4-Square, except possibly narcissism. This actually makes sense from a marketing perspective and I agree, Mark, that this should have been instituted early on. As much as you’ll hear me blather on about megacorporations and rampant consumerism, everyone loves a good deal. If I thought I could do sustainable purchasing (local-based, organic, fair trade, etc) and get discounts for doing so, I might be willing to use something like Foursquare. As for Starbucks, um, well, I’ll wait until other coffee shops come aboard.

    • Mark Brimm says:

      Thanks for the comments, Marlita!

      As someone who has previously commented on the frequent shallowness of 4Sq in the past, I can agree with you on your points here. Also agreed that supporting local and smaller is a great way to encourage local businesses. Personally, I don’t frequent Starbucks very often, but it’s encouraging to see viable social media originating companies like FourSquare coming into a greater usefulness for the average consumer with more meaningful and sustainable offerings. Let’s hope that it encourages all the smart social media companies emerging out there to give more depth to their social media brands while doing something viable that actually engages with the marketplace.

  5. Mark, you are SO right that 4SQ should have created a customizable retailer loyalty program from the start! It would actually provide 4SQ with a (slightly) less superficial existence! I saw one small biz owner (restaurant) put out a sign indicating who was “mayor” there, and it made me wonder why a loyalty program wasn’t already in the works.

    Excellent points made by all. (Although I shudder to think how many Starbucks visits it would take to garner an award!).

    Great post, Mark,

    Diana

  6. Troy Addler says:

    We’d like to do this for our local cafe but don’t where to start other than to offer a freebie every time someone gets a badge. I guess that works for Starbucks, so maybe we’ll try that, too.

    • Mark Brimm says:

      Hi Troy, thanks for the comment!

      My personal advice to all small biz owners out there who want 4Sq to work for them is to 1) Ask 4Sq to step up a real universal point program. And then 2) don’t wait for an answer, go with the badges thing for now. And maybe post a blog post about how you’re navigating the issue for yourself in the absence of organized leadership.

  7. Hi think it is important for 4Sq to build up traction as a fun service that people use because they enjoy it – rather than as another corporate plaything or marketing tool. The kinds of early adopters who use this type of service are quite wary of advertising and marketing, and the second wave is even more so. It is a fine line to walk between providing a useful service to Starbucks customers and “selling out”.

    There is stacks of obvious money-making potential in 4Sq (something that is harder to see in, say, Twitter), but 4Sq might be right to hold off actively chasing the corporate (Star)buck just yet. It might be better off focusing on continuing to build something that people genuinely want to use because it’s fun. And then to implement loyalty program features in an innovative way that stays true to that principle. Only time will tell.

    For what it’s worth, I am yet to understand the attraction of 4Sq, but that might be because I don’t get out much (and GPS doesn’t work when you are inside).

    • Mark Brimm says:

      Hi Adrian,

      Thanks for the comments. Interesting points. Let me just say that I don’t know how a mobile app company can really “sell out,” but I’ll agree that there does seem to be a lot of emphasis at 4Sq on “building traction”. I think in the end that traction, if they’re not very careful, is most likely going to amount to paving the way for a leaner, hungrier company with vision to take the niche away from them.

      • Maybe “selling out” is a bit strong, but users seem to be very sensitive to advertising on the services they like and think should be free.

        From a business perspective, I would say it makes sense to wait for someone like Starbucks to come knocking on the door. Together, they have the resources to collaborate on a loyalty program that works. Otherwise, 4Sq will have to employ hoards of people maintain contact with and providing support for operators of smaller venues.

        I’m surprised Starbucks itself hasn’t built a location app… but I don’t think anyone will steal Foursquare’s crown just yet.

      • Mark Brimm says:

        I guess I’m thinking along the lines of automated unmanned online registration, low-budget maintenance (read: practically free). The only reason I suppose I feel antsy about 4Sq, a service that I don’t personally use much, is because I see it as a step up the ladder to bigger things and to empowering local businesses in communities world-wide, something sorely needed but as yet without any real marketplace leadership.

      • Automated unmanned online registration must be bulletproof and user-friendly, which requires a lot of development and a watertight strategy.

        But you are right, 4Sq needs to move quickly because any application can be linked to location-based services. On the other hand, their competitive advantage is the gaming aspect, they need to nail that first.

        It’s a tricky one, but with Starbucks now helping out (an obvious first partner as they are big and global), they can probably do it.

      • Mark Brimm says:

        All good points. I still feel that the dev aspect would be easy enough to set up lost cost, but development does run up a hefty bill when you’re trying to nail it in front of a huge audience. Then again I look over at Facebook, they’re constantly letting their audience down and seem to be quite cavalier about it, and in the most critical areas of trust, of all things. In many ways Facebook doesn’t quite get anything right. Just being around long enough is sometimes a ticket to being a household name.

      • I’m very far from a coding expert, but I think it’s harder than it looks to get this stuff right, particularly when you are working with third parties and need to make money.

        Going down the wrong route now could screw everything up in the future. As I said, I think Foursquare is doing pretty well so far – and it is still a very young company even by web standards.

    • Karim says:

      It’s great to find someone so on the ball in a marketing blog!

  8. Dean Schmit says:

    Hello everyone,
    Great topic, and great comments. Very timely as well – in fact, I saw an article this morning indicating that FourSquare IS getting into the rewards game, and not just for mayors. Read text below from Mashable….

    Badge Rewards
    ________________________________________
    Perhaps the biggest news — apart from the impressive growth metrics — is that Foursquare is addressing badge fatigue by experimenting with adding value to badges — which Crowley describes as “digital candy.”
    Crowley used Internet Week as an example, stating that users who check-in at an Internet Week venue will unlock a special badge. That badge — when presented to bouncers — will guarantee users priority entrance into some Internet Week parties and events.
    Foursquare already makes it possible for businesses to offer specials around mayorships or checkins, but the badge rewards system could be the equivalent to a modern day VIP program. The company is still testing the concept, but there’s obviously huge potential here.

    • Mark Brimm says:

      Good call, Dean. Since this article new developments with rewards did indeed take place and I was happy to see them. I’m sure I’ll be returning to the subject to track their progress. I believe that if we want to shape the internet, we probably need to speak up a little more clearly about the kind of social media experience we want. An example of failing to do so seems more clear with FB, which only in recent months has managed to hear their users clearly enough.

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