Could LBS Bring Traditional Retailers Back to Life

COULD LBS BRING TRADITIONAL RETAILERS BACK TO LIFE?

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Times have been tough for brick-and-mortar (BAM) retail locations over the last few decades.

First, increased numbers of big-box superstores with wider selections and lower prices drove consumers away from the traditional mom-and-pop shops. Then came the rise of e-commerce, which enabled consumers to find and pay for the merchandise they needed easily and securely from their homes.



High unemployment rates, increased prices for goods and services, and often steep discounts for buying online have all resulted in a significant decrease in consumer foot traffic to BAM locations, and in turn, lower revenues. Here in the U.S., Home Depot saw a 1.9 percent decrease in in-store customers this year, while Lowes, its main competitor, saw a 3.4 percent decrease in customers going to stores that have been open more than 13 months. And even though the consumers who are shopping at BAM stores are spending more than usual, the lack of volume is having a significant impact on retailers’ bottom lines.1

Many big-box retailers are looking to traditional solutions to this issue, such as reducing overhead costs by decreasing the amount of space their stores occupy and focusing their efforts on building online sales. However, exploring new social media marketing strategies may actually be the key to

increasing foot traffic to their BAM locations. Widespread consumer adoption of social media networks and location-based services (LBS) like Foursquare, Facebook Places, Gowalla, and Loopt create a completely new avenue through which retailers can interact with their target customers and give them shopping incentives that go beyond simple discounts and sales.

The number of BAM businesses and industries that are tapping into this goldmine of consumer engagement potential are growing every day. Many location-based service applications were originally designed to give consumers a fun way to stay in touch with friends and colleagues while on the go. They have quickly evolved into marketing tools that enable businesses to grow their reach among consumer audiences in specific geographic locations and create value-based interaction with customers in ways unique to social media.

Though retail giants like Wal-Mart, Home Depot and Best Buy tried to stay competitive by adding shopping functionality for consumers to their Web sites, this strategy has not been enough in these tough economic times.

Location-based service campaigns enable BAM brands to directly engage consumers within location-specific areas, encourage patronage and increase positive brand perception and recognition like never before.



HOW LOCATION BASED SERVICES WORK

A free web-based account that’s connected to the phone app tracks a user’s participation and turns day-to-day activities into a game. Users are rewarded with points and badges for check-ins, provided with reviews/comments from other consumers about the places they are checking in, information about the location and what’s nearby, and recommendations for additional activities. Interactions with location-based services can also be shared with a user’s social networks, such as Facebook and Twitter, enabling them to easily communicate about where they are and what they’re doing with others.

Consumer adoption of location-based service applications is growing exponentially year over year.

Research firm SNL Kagan estimated that the number of U.S. consumers registered with some kind of location-based service social networking application jumped from 12.3 million in 2009 to 33.2 million in 2010.2

Though current concerns about privacy issues involving smartphones and location tracking systems/services embedded within their software have been a subject of public debate, explanations by smartphone

Consumers who subscribe to one or more location-based services use an app on their mobile phone to “check-in” at locations around the globe.

manufacturers about the use of such technologies by government mandate since 2000 and assurances that such information will be better encrypted in the future are not expected to hinder growth in this sector. This, plus equally exponential increases in numbers of smartphone users per year, greater value/usability offered by emerging location-based services applications, and more accessible pricing for mobile data plans all indicate that consumer adoption of location-based services applications will continue to surge.3

This convergence of communication and expected growth opens the door to limitless possibilities for marketing and direct-to-consumer engagement between brands and their target consumer, especially brands that rely on BAM locations as a core part of their business model. A targeted location-based services strategy to connect the Borders bookstore brand to consumers in the immediate area surrounding each of its BAM locations, and creating an opportunity to amplify those connections through users’ social networks, may well have been just what the company needed to boost traffic to its stores.



Take, for example, Samsung Mobile’s* “Explore with Nexus S 4G” campaign, a mobile treasure hunt that was held in Kansas City, Mo. on June 4, 2011, and executed by Samsung Mobile’s ad agency, One Agency. For this program, Samsung Mobile partnered with SCVNGR, a location-based service that takes the check-in a step further by offering challenges that consumers can perform at their destination in exchange for points used toward earning rewards (a free item, a percentage off of a check, etc.). The SCVNGR revenue model is based around brands creating “challenges” for consumers to be completed at geographic settings in order to make advertising experiential.4 In the case of Samsung Mobile, teams of two used Nexus S 4G phones (provided by Samsung Mobile) to check in through SCVNGR and find out where to complete challenges throughout

downtown Kansas City. By doing this, they racked up points, competed to win prizes – including a grand prize of $20,000 cash – and got to try out all of the premium features that the Nexus S 4G offers.5

This program not only used location-based service technology to place Samsung Mobile products into the hands of target consumers, it also offered the media a huge opportunity to cover the event and jump-started word-of-mouth discussion around the Nexus S 4G brand that was amplified through SCVNGR’s social networking applications.

In addition to rewarding behaviors favorable to supporting business, location-based services provide brands another medium through which to communicate relevant content to target audiences.

* MWW Group client

OPPORTUNITIES TO ENGAGEMore and more brands are using location-based services apps to motivate consumers to visit BAM locations, check-in, and earn incentives – essentially digitizing the loyalty card and expanding the reach of word-of-mouth promotion.



OPPORTUNITIES TO ENGAGE

Because consumers turn to location-based services for tips and recommendations about what to do, eat, try, explore, ask, watch out for, etc., brands can own the conversation in this space and become a valued source for trusted information.

For example, if you check in through Gowalla at a restaurant, Zagat might offer recommendations for wines or dishes to try, tips for where to go for a nightcap, what other sources of entertainment are in the area, or other information that is meaningful to consumers. It’s this type of engagement that Loopt co-founder and CEO Sam Altman says is part of Loopt’s business strategy moving forward: “Local mobile search is often less about discovering a new place or location to visit and instead is more about “what you do when you get there.”6

The key to successful social media marketing is providing meaningful content to consumers so that they build affinity for your brand and find value in interacting with it.



Even brands that don’t necessarily offer BAM locations for consumers to purchase their products can use location-based services applications in their marketing strategy. During the 2011 South by Southwest (SXSW) interactive film and music festival in Austin, TX, Nikon* used a location-based service strategy to create an opportunity to make itself relevant to audiences important to its business growth.

Nikon’s PR and Social Media agency partners developed a virtual treasure hunt featuring actor and Nikon spokesman Ashton Kutcher, as an integral part of its overall strategy at the event. “The Chase” placed consumers in Austin in direct contact with Kutcher, who provided visual and

text clues as to his location through connected Twitter, Foursquare, Facebook, and Vimeo channels.

Based on the clues, participants had to figure out where he was, go there, and check in for a chance to win various prizes, including free cameras and passes to an exclusive Nikon/Vimeo party. Kutcher and a team of Nikon product experts were on the branded Nikon Bus Experience at the final location. Participants there were able to meet Kutcher, explore the latest Nikon products, and get tips from the pros.

Social media engagement with festival participants and those who were not in attendance was tremendous. The activation generated more than 77

million Facebook and 58 million Twitter impressions.

These types of strategies open up opportunities for forging new business partnerships and instituting more tangible reward programs in industries in which these types of strategies could not be implemented through traditional means. Additionally, the digital nature of location-based services applications allow for more accurate measures of program effectiveness and new ways to gauge consumer engagement. Most location-based services offer some kind of analytics program that enable brands to track the interactions consumers are having with their location-based services campaigns, how often, when, where, and even what is being said.

BEYOND BAM

* MWW Group client



Location-based service-focused engagement should be a part of just about any social media marketing strategy. But before you move ahead with designing a program for your brand, make sure that this type of medium is relevant to the audiences you’re trying to reach. Are they smartphone users? Are they technology savvy? Are they familiar with or interested in location-based services applications? Have they adopted location-based services? If so, what do they use?

Another consideration is the type of content that your brand can provide. According to JiWire’s Mobile Audience Insights Report, Q4 2010, the top four types of information on-the-go consumers are interested in receiving through an location-based services are store locations, points of interest, checking in, and sales/promotions/coupons.7 Does offering this type of content make sense for your business? Are there alternative ways of engaging your audiences using this medium.

Once you decide that integrating location-based services strategies in to your existing social media marketing plan is right for your brand, get creative in developing approaches to generating meaningful and consistent interactions with your audiences. Start simple, closely monitor and evaluate the engagement that results, and build from there. Some simple suggestions include:

THE TOP FOUR TYPES OF INFORMATION ON-THE-GO CONSUMERS ARE INTERESTED IN RECEIVING THROUGH A LOCATION-BASED SERVICES:

RECOMMENDATIONS

STORE LOCATIONS

42%CHECKING IN

27%

POINT OF INTEREST

42%SALES/PROMOTIONS/COUPONS

26%JiWire’s Mobile Audience Insights Report, Q4 2010



DESIGNING INCENTIVE PROGRAMS THAT WILL ENCOURAGE TRAFFIC TO BAM LOCATIONS:

This is an easy and often cost-effective strategy for BAM brands. Most location-based services provide applications for creating badges and instructions for placing content on a location’s site, while there are specialized firms that can design customized mobile loyalty cards that fit your brand’s needs. Rewarding behavior that drives your business – such as extra perks for frequent visits to a location – is the key to success with this strategy.

BECOME THE VOICE OF A COMMUNITY OR AREA:

Provide timely and accurate information that will help consumers decide what to do once they get to their location. Look for opportunities to leave tips and comments at established locations that provide value to the consumer and build an affinity with your brand. At SXSW, Nikon provided photography tips for many popular tourist locations in Austin. When a consumer checked in, he or she was able to access tips were designed to offer practical advice that an amateur photographer could use on-the-spot.

EXPLORE PARTNERSHIP POTENTIAL:

If you don’t have a BAM location, see if there are any other brands that you could partner with for an incentive program. This can result in increased sales, affinity, and engagement for both of your businesses.

RECOMMENDATIONS



If used strategically, yes. They are powerful tools for helping to balance the revenue scales in favor of retailers. And given that location-based services technology is only just emerging as a consumer tool, continuing innovation and development make the possibilities for commercial adaptation limitless. On July 12, 2011, Foursquare announced distribution partnerships with daily deal providers LivingSocial, Gilt City, zozi, BuyWithMe and AT&T, helping all of the players to work together.8 Foursquare also recently announced a national deal with American Express to offer discounts to cardholders when they check in on their cell phone at certain shops or restaurants, helping to make location-based services even more mainstream.9

We fully expect to see dramatic changes in how location-based services are used by both consumers and businesses in the coming years.

For example, manual check-ins will become a thing of the past since the process serves as an interruption to daily life. The next generation of location-based services technology will likely offer consumers the option

to automate their check-ins (with their permission, of course) based on their location and preferences. Soon, smartphones may also be able to generate alerts about deals and specials in an area without the user having to check-in at all. The GPS would automatically trigger the alert.

In addition, location-based services will most likely completely replace customer loyalty cards. We may also see greater integration with credit cards via services such as Square, which enables you to swipe credit cards and process payments right through your iPhone, iPad, or Android system. That swipe of your credit card could serve as your check-in at that location should such a partnership take shape.

Location-based service interaction may become increasingly important to the smaller BAM business as the possibilities for real-time interaction become more tangible. Say you use a location-based service to check-in at a local bistro you eat at regularly, the owner or manager could receive notification that a frequent customer has arrived. This opens up opportunities for direct interaction, such as a tableside visit from the chef or a complimentary glass of wine.

The possibilities for increasing customer service are endless.

Consumer adoption of location-based services will also rise as more relevant applications are integrated into the devices that people rely upon daily. Apple’s announcement of the free “Reminders” native app for iOS 5, which spans the iPhone, iPad, and iPod touch, has already started to change the game. What is essentially a simple to-do list/calendar type of application provides consumers with added functionality by delivering pre-programed reminders to users when they reach a certain location. For example, if you know you always forget to pick up batteries at the grocery store, you can program a reminder that you need batteries into your iPhone that will pop up whenever you get to the store.

All in all, the future for location-based services and the BAM business is very bright and will likely become increasingly useful and valuable for consumers in all categories of industry.

FINAL THOUGHTSCould location-based services aid BAM business in a time where e-commerce and an ailing economy have taken the reigns?



SOURCES1. “ Walmart, Big-Box Retailers Struggle To Get Shoppers Into Stores As Sales Drop,” The Huffington Post

http://www.huffingtonpost.com/2011/05/17/walmarts-us-sales-international-decline_n_862934.html

2. “ 33.2 Million Location Based Services Users?,” Mobile Marketing and Technology http://www.mobilemarketingandtechnology.com/2010/toppost/33-2-million-location-based-services-users/

3. “ Location-Based Services Poised for Rapid Growth - Part 1,” Chain Link Research http://www.clresearch.com/research/detail.cfm?guid=273A9E17-3048-79ED-9942-D6E4D8A860FC

4. How SCVNGR And Founder Seth Priebatsch Hope To Win The Location Game,” FastCompany, June 13, 2011 http://www.fastcompany.com/1766648/colocation-with-howard-lindzon-scvngr-in-cambridge-ma

5. “ Samsung Mobile and SCVNGR hosting city wide mobile treasure hunt,” AndroidCentral http://www.androidcentral.com/samsung-mobile-and-scvngr-hosting-city-wide-mobile-treasure-hunt

6. “ Loopt Adds Fresh Twist on Q&A to Improve Local Reviews,” Blue Cake Interactive Media Consulting http://bluecakeinteractive.com/2011/04/20/loopt-adds-fresh-twist-on-qa-to-improve-local-reviews/

7. Insights, JiWire’s Mobile Audience Insights Report, Q4 2010 http://www.jiwire.com/downloads/pdf/JiWire_MobileAudienceInsightsReport_Q42010.pdf

8. Expanding the foursquare Specials platform to more partners http://blog.foursquare.com/2011/07/12/expanding-the-foursquare-specials-platform-to-more-partners/

9. A Start-Up Matures, Working With AmEx http://www.nytimes.com/2011/06/23/technology/23locate.html?_r=1

FOR MORE INFORMATION, PLEASE CONTACT:

Molly Mulloy Executive Vice President, General Manager, San Francisco 415.464.6423 | [email protected]

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Could LBS Bring Traditional Retailers Back to Life