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Alistair Goodman

Alistair Goodman

How Location-Based Services Can Boost Your Small Business

Posted: 12/28/10 12:00 PM ET

Consumers armed with smartphones are increasingly relying on these devices to decide where to spend their money. With this in mind, a multitude of new location-based services (LBS) for small businesses are being used to drive traffic into stores and retain customers. These services recently gained steam with the August launch of Facebook Places. Not to be sidelined, Google is furiously deploying new services for small to midsized businesses, and companies like YP.com are also offering similar services to their user base of millions to promote their offerings.

So how do you make sense of what services might be right for your small business? By thinking about three key tactics: discovery, deals and retention.

Location-based technologies target consumers in the 'purchase state of mind.' What they offer brick-and-mortar businesses is simple: communication with nearby consumers who are in the mindset to make a purchase. Most of these services are mobile apps or include mobile as a central component, putting your business directly in the palm of a consumer's hand at the moment of truth.

1. Discovery: Get found
The next evolution of the yellow pages involves a variety of services that enable businesses to create venue pages and present offers to people searching in a category.

With 39 million users, Yelp! combines search functionality with user reviews and ratings. You can post announcements, special offers and events on your venue page. Yelp! takes advantage of a user's location to prioritize search results and showcase them on a map.

It is critical to set up a profile on Yelp and encourage happy customers to 'yelp' about your business. Savvy businesses are placing desktop PCs or iPads within their venue and asking happy customers to 'Yelp' on the spot. Consider this the next-generation comment box.

Others include Google Places, which offers free trials and links to AdWords, YP.com, and Where. You want your business listings to be correct in these services -- make time at least to claim your place.

2. The Real Deal: How to attract customers with LBS specials

As value-conscious consumers use their phones to discover deals, a new category of services combines the fun of social networking with the thrill of deal-finding.

With 21 million users in North America alone, Groupon is the standout leader in the space. Groupon offers a daily deal based on your location, and now serves 150 markets in North America. "Grouponomics" operate on group-buying dynamics: a deal is posted, and once a pre-set number of consumers purchase it, the deal is on. You offer the product at half-off and then split the revenue 25%/25% with Groupon. The economics may not always work in your favor, but it can be a great tool for a new business, or to smooth out low-traffic periods. If you're not sure about how your business will fare, check out this New York Times post on Groupon. Additionally there are at least 20 other companies offering Groupon-style offers including LivingSocial as well as similar deal-programs run by your local newspaper.

Groupon is not the only way to attract new customers. Facebook Places enables users to check-in to a venue and find deals there or nearby. With 30+ million users, Places provides huge reach.

Foursquare, with 5 million users, is a location-based social network based on the check-in model: users check-in at your venue, and may become 'Mayor' by visiting often, or earn badges. This requires active consumer participation, as opposed to push messages triggered by geo-fences. It's unclear if the check-in model is sustainable, and a number of us in LBS are researching consumer receptivity to check-ins vs. geo-fence triggered messages. Foursquare provides small business offers, and they have posted some good case studies on how to use the service.

Other similar services include SCVNGR, Gowalla, and Whrrl.

It takes less than 20 minutes to setup specials and profiles on each of these sites, and most are completely free for SMBs.

The dark horse in this category is Twitter, now geo-tagging tweets and offering "promoted tweets" on a pay-per-retweet model. When combined with "Advanced Search" capabilities, this tactic enables a business to build a local fan base and respond to anyone who is a fit for your business. For example, a search for "near:Sacramento within:20mi burger?" gives a restaurant in Sacramento information about anyone tweeting about hamburgers in their area.

3. Retention: The rinse and repeat of retail
Smart businesses realize that their best customers keep them in business -- by coming back, time after time.

Placepop is one of several companies operating in this space, offering a mobile loyalty card app to reward users who visit local businesses. Businesses get increased foot traffic and a more predictable stream of customers based on their offers. Cards are pre-populated for local businesses -- all you need to do is claim your profile and start making offers when you get to a critical mass of check-ins.

Some services succeed in both attracting and retaining, like Foursquare and Gowalla. Most of these products also automatically link to services like Facebook and Twitter so that a consumer can let friends know about great deals, which brings in the viral component. Other companies to check out in this space include Fanminder and Loopt.

Putting It All Together

The last service worth looking at is Geotoko, which is built to be more for multi- location businesses and agencies, but which also claims to serve small and medium businesses. What's interesting about this platform is that it enables a business to create a mobile offer and immediately syndicate it across multiple services: Foursquare, Gowalla, Facebook and Twitter. This is a great way to learn quickly which services may work best for your business.

The most successful small businesses will combine a number of social media and location based services in order to compete. Forrester analyst Augie Ray shares this LBS/social media success story: "Word of Mouth and Social Media: A Tale of Two Burger Joints" describes the creativity and determination of Joe Sorge, owner of Milwaukee burger joint AJ Bombers. Sorge noted that FourSquare promotions allowed AJ Bombers to increase sales 30 percent on select items, saying, "This is a restaurant built by social media."

There's much potential to be explored in social media, location, and mobile. Many services require getting to critical mass on check-ins, and it is still too soon to tell if check-ins will gain mass appeal. However, most offer analytics that allow you to monitor your promotion, and are available at no or low-cost -- at least for the time being. It's a great time to experiment and literally get something for nothing.

Now that's a deal worth taking.

 

Follow Alistair Goodman on Twitter: www.twitter.com/Placecast