Here Is Foursquare's Pitch To Advertisers

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Photo: Deloitte

We recently had a chat with Holger Luedorf, Foursquare VP and head of business development.In our interview, he outlined the three main benefits that Foursquare offers businesses:

  • Analytics. Verified merchants can access an online dashboard which shows them insight into their customers, including “an overview of check-ins over the course of a month, over the course of a day, social reach (how many posts have gone out to Facebook and Twitter), gender and age breakdown” and so forth.
  • Customer loyalty. Foursquare wants to replace be “a digital version of a stamp card—you know, ‘buy 10 coffees, get the 11th for free’.” This is where check-in specials come in: free drinks for the mayor or for the nth check-in. 
  • Yield management. This is a big opportunity, because local merchants have high fixed costs. This is how Luedorf described it: “[The] ability to run highly-targeted ads based on location and real-time. Take the example of an empty restaurant somewhere in Paris. It is Sunday around noon, it is raining outside. The restaurant owner is interested in driving traffic into her restaurant [to cover her fixed costs.] With the foursquare merchant platform, she can run Specials like ‘the first 20 customers who check-in at our restaurant in the next hour will receive a free appetizer.’ If this works and the restaurant fills up, she can discontinue the ad real-time. If she does not see enough traffic, she can go back in and play with the discount, e.g. ‘free appetizer and a free first drink.’ [It’s] similar to what major hotels and airlines are doing every day.”
Foursquare screenshot

Photo: Foursquare

This last one was the most surprising to us, because it brings them in direct competition with one of their biggest partners, Groupon, which is going after the same market with Groupon Now. In the past, Foursquare had mostly portrayed itself as a loyalty platform. A merchant would use Groupon to get customers in the door, and Foursquare to get them to come back.It’s also surprising because it puts much greater demand on Foursquare’s platform, in a way: for real-time yield management to work, Foursquare needs a critical mass of users in a location with their Foursquare apps open (or with Foursquare notifications enabled). This means that Foursquare—as it is striving to do with its Radar and Explore—must move “beyond the check-in” to become an all-purpose city guide app that people open frequently.

It may be a hard slog—as SAI’s Nicholas Carlson notes, Foursquare’s engagement seems to be lower than peer apps.

We break down the business model of location-based services in our special report →

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