Foursquare has made major strides over the past two years. In the last month alone, the location-based check-in service has signed up their 10 millionth user, agreed to remarket daily deals from Groupon and Living Social, and announced a game-changing partnership with American Express.

With the American Express partnership, consumers checking in on Foursquare at select merchants and paying with their American Express cards receive significant discounts (for example, spending $50 at Sports Authority, you’ll receive a $20 account credit), simply by linking the accounts.

At their core, LBS services are another way for businesses to track and reward their most loyal customers. And according to research from international payment systems provider ACI Worldwide, loyalty programs need a lot of work. In the study, ACI found that three out of four Americans are members of at least one retail loyalty card program, but 85 percent of members haven’t heard a word from the program since the day they signed up. Loyalty programs are simply another customer retention channel, and according to February's Harvard Business Review on Increasing Customer Loyalty, "91 percent of small businesses do absolutely nothing to retain their existing clients."

“Current loyalty programs are stale and commoditized,” notes Aaron Strout, the Austin-based head of location-based marketing at WCG World and co-author of the forthcoming book Location Based Marketing for Dummies. “Only a small group of people ever qualify for ‘Platinum Elite’ or ‘Gold Membership’ while most of the general population never gets to participate meaningfully. With location-based services, companies can now allow their diehards to earn additional points while giving away gifts, experiences and recognition for the newer and younger customers.”

In this guide, we’ll explore what types of businesses should be experimenting with Foursquare for loyalty, explain why combining traditional loyalty programs with Foursquare can be beneficial in acquiring and retaining customers, and the steps needed to actually combine the two.

Why Combining Traditional Loyalty Programs With Foursquare Makes Sense 

“There are really three things that matter when it comes to loyalty,” says Tristan Walker, the Palo Alto-based director of business development at Foursquare. “It’s all about recency, frequency and providing real value to your customer set, which is what we’re doing in the American Express deal. When you combine the data merchants have on their customers with our data, it becomes more meaningful.”

As Foursquare has grown, their data set has been solid in tracking frequency and recency, but only recently with American Express and other partnerships with Starwood Hotels, Safeway Markets, Pepsi and more have they tied in the value part of the equation.  And with the proliferation of smartphones here in America (nearly 78 million people in America now have them, according to recent research from Prosper Mobile Insights), tapping into buyer activity on their phones can really simplify the process. But for businesses, it’s about evaluating where your customers are. If they’re already checking into your location on Foursquare, you have an opportunity to build a stronger relationship. But Foursquare can only be a portion of your mobile marketing strategy.

“It may be surprising to hear me say this, but I don’t think you should abandon traditional loyalty programs for Foursquare,” Walker adds. “That’s because I think the most effective organizations will find a way to combine the two.”

Need an example? Perhaps no industry is as well known for their loyalty programs as supermarkets. That’s why the Safeway Markets partnership with Foursquare and PepsiCo, where they worked with their California-based Vons franchises, was such an interesting one. By swiping your Vons Club Card, it automatically checks you in on Foursquare and gives you the potential to unlock cool rewards from PepsiCo. That takes the guesswork out of a cashier needing training around how to fulfill a Foursquare deal, and gives automatic and tangible rewards. Another example is Tasti D-light, who connected traditional loyalty to their TastiRewards program. They have connected their two programs by integrating their point-of-sale with Foursquare, Twitter and Facebook.

“We saw our customers starting to check-in to Tasti D-Lite locations on Foursquare,” says BJ Emerson, the vice president of technology at Tasti D-Lite, one of the first brands to experiment with Foursquare in January 2010. “We realized that they were sharing their brand experience with their most trusted circle of friends and our desire was to reward them for their digital activity.  The timing was just right with our new loyalty program implementation and we thought enabling an automatic check-in through the swipe of a loyalty card would help increase adoption. Giving them extra TastiRewards points for enabling that connection was a way for us to recognize their loyalty.  We were doing creative things on Twitter to do this, but Foursquare gave us the mechanism to automate it.”


Evaluating Your Current Loyalty Program: Is It Working?

How do you know whether your loyalty program is successful? Companies have long asked a form of the question, “How likely are you to recommend company X to a friend or colleague?” And that question remains the best indicator of loyalty. But the key performance indicators (KPIs) need to be tailored to fit your individual industry and goals.

“If customers are already using mobile and location-based applications then making them more convenient to use as they interact with your business should make sense,” says Emerson. “Anyone who is listening effectively can see that there is already a great amount of activity online related to just about any business.  Rewarding these customers for their loyalty should be a priority.  Customers are creating valuable content such as tips and reviews around these venues and being a part of the conversation should not be seen as optional.”

Still, there are four general metrics to measure most loyalty programs on:

  1. The percentage of customers who are participating in the loyalty program
  2. The percentage of customers who actually earn a reward
  3. The percentage of customers who redeem the earned award
  4. The time it takes to earn that reward

“I think any company that has customers checking in regularly is ripe for linking a loyalty program to a location-based service,” notes Strout. “This activity will likely be better suited to the B to C space for at least the next year or two but over time, nearly any business could benefit from combining the power of these two types of loyalty programs.”

Before you can decide whether or not LBS services are good for you, you need to evaluate your program. And just like with marketing, loyalty needs to be a multi-faceted approach, which combining traditional and new loyalty programs can do. Foursquare’s “Specials” platform allows locations to grow business by offering both traditional deals (like a discount or special upon your first check-in) and loyalty incentives (rewarding customers who return and check in repeatedly.)

“Once you realize that satisfaction is the lowest level of acceptable service, you at once understand the power of loyalty,” writes Jeffrey Gitomer in Customer Satisfaction is Worthless; Customer Loyalty is Priceless. “How you achieve loyalty is a process, not a single action.”


Foursquare and Your Loyalty Program: Time to Combine the Two—What Do We Do? 

So you’ve evaluated your existing loyalty program and also recognized you want to combine it with a digital reward. How do you go about actually pulling it off?

Since so many consumers have smartphones in their pockets, brands and businesses can deliver customized experiences or offers at the most relevant time or the most relevant place, based on prior check-in behavior and more. So if a consumer checks in [on Foursquare] at a particular location, you might be able to push a direct offer to them to head down the street to your place of business.

Before doing anything, evaluate the Foursquare Developer site to understand what is possible with their open API. From there, there are a few options to connect your loyalty program (again dependent upon your industry) with Foursquare:

  1. Create a Foursquare Deal for all customers based on a set amount of check-ins
  2. Email Foursquare to create a custom program
  3. Bring an existing partner in and tie that to the check-in activity (similar to what Safeway did with Pepsi)

“Don’t think of Foursquare as competitive, but as additive,” Walker adds. “Reaching out to us and allowing us to help you think more about Foursquare and how it can and should augment your existing program, it’s a way to onboard a new demographic.”

At the end of the day, whatever you call loyalty marketing—CRM, retention marketing or more, it’s a business strategy to improve customer retention. And why wouldn’t you want to test out new technologies to do so? The best part about experimenting with Foursquare for Business is that it involves a relatively small investment, and only makes consumers more likely to recommend your company to their friends and colleagues, that one metric that truly matters.

“TastiRewards members can also connect their accounts to Twitter and Facebook and earn extra points when their loyalty activity is shared on those networks,” Emerson adds.  The adoption rate of Foursquare among these networks by our members is about 18 percent.  In other words, of those TastiRewards members enable connections to a social network, 18 percent have enabled Foursquare.”