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Foursquare + Square = Killer Small Business Social CRM


Parker Smith wrote a piece that got me thinking. In Foursquare: Democratizing the Loyalty Program, he posits that Foursquare could be the loyalty program provider to small businesses. I think he’s right.

Then I noticed these identical product benefits touted by the companies themselves, Foursquare and Jack Dorsey’s Square:

For example, foursquare can tell you how many times a customer has been to your venue or the frequency of their visits. Many venues are now using this data to reward their most loyal customers with freebies or discounts.

Foursquare

If you frequent a place that accepts Square, we’ll let them know you’re a repeat customer. That 10th cappuccino may be on the house, no paper coffee card required.

Square

Would you look at that? Are these guys going to end up competing with one another?

A few years back, I was the personalized marketing product manager at Pay By Touch, which offered the ability to pay for items with biometrics (i.e. your finger). Once you could identify the customer and her spending, interesting loyalty program solutions became available.

Which brings me to what Foursquare and Square are doing. Square is still in beta mode, so it’s hard to predict fully its uptake in the market. But let’s assume Twitter co-founder Jack Dorsey and his backer, Khosla Ventures, are on top of this opportunity. And Foursquare is growing quickly.

Each provides pieces of what would be needed for a small business CRM. The companies are independent, but I can see new value created if they were to work together.

There is no CRM for offline small businesses

At least, not for businesses that operate in the physical world. Dry cleaners, restaurateurs, retailers and other small businesses. They may have loyalty punch cards, but generally don’t have any programmatic way to track and engage customers.

But they could use CRM as much as a large business does. I like this customer lifecycle framework by Gary Hawkins in Customer Intelligence:

It shows the stages of a business’s customers: new, existing, declining, lapsing. And the ability to tier active customers also is valuable. Each tier has its own dynamics. There is much more to CRM than a simple frequency loyalty program. It’s a deeper level understanding of the customer base. Understanding the statuses of customers from this point of view is powerful marketing information.

Modern CRM is more than the analytics and outbound campaigns. The social CRM movement is gaining strength, and it’s incorporating many social network principles into the customer engagement process.

And it’s not readily available for small businesses that operate primarily in the “offline” world. Unlike the digital platforms of e-commerce, offline transactions are not measured. At least not beyond the credit card transaction for consumer transactions.

This is an area of enormous opportunity. The company that solves the CRM issue for the 4.3 million small businesses in the U.S. has an enormous opportunity in front of it.

Complementary CRM strengths of  Foursquare and Square

The two services each bring unique strengths to a small business CRM solution. Take a look:

Start with the commonality Diagram. Foursquare and Square both provide:

  • Customer identity = who are your customers?
  • Visit frequency = Foursquare check-ins, or Square credit card swipes

When you see them both tout free products for repeat customers, this is how they’d do it. Identity + frequency = loyalty punch card.

But what about the services’ other features?

Foursquare provides the social fuel:

  • Social incentives: It’s fun to build up points relative to your friends, show off your Foursquare badges. And who doesn’t want to be Mayor of some local business?
  • Social interactions: People use Foursquare to to broadcast their location. This lets other meet up with them. Or in the case of crowded venues, find someone else there.
  • Game dynamics: This reporting in on your locations is an addictive game for many. It’s cool to get your first check-in daily bonus, to unlock a new location (hooray!) and oust someone as the Mayor of a place.
  • Social media word of mouth: By following people on Foursquare or Twitter, you can see where your network hangs out. This raise awareness for businesses, an incredibly important benefit.

Here’s an example on that last point. Socialtext CEO Eugene Lee often tweets this:

I’m at Coupa Cafe (538 Ramona St, at University Ave, Palo Alto). http://4sq.com/IITeJ

I don’t spend much time in Palo Alto, and I’d never heard of Coupa Cafe. But you know what? If I find myself in Palo Alto needing lunch or a coffee, guess which place I’d specifically look for?

Square provides the transaction processing power:

  • Dollar spend: Incredibly valuable information to track. Does someone come in a couple times a week, but spend heavily on food? Or do they frequent the cafe more often, but only buy coffee? Dollars spent is an important complement to simple visit frequency.
  • In-the-flow process: Square captures it’s information in-the-flow. That is, you don’t have to do anything extra. You’re have to pay, it’s part of the normal process. Foursquare requires a check-in, which is outside-the-flow of regular small business-customer interactions.
  • Transaction handling: By owning the transaction handling, Square can implement low-maintenance marketing programs. Businesses can create promotions tied to specific accounts, and execute them at the point-of-sale via Square.
  • Merchant account process: The process of getting businesses signed up for these programs isn”t trivial. It is standardized, but there’s a lot to tackle to provide good service. Some early reports indicate that Square has a superior merchant account set-up process, which may be its best innovation.

The in-the-flow nature of Square should not be underestimated. Getting adoption for any service is tough, and removing whatever friction to participation that exists is a critical element. This commenter on a post about Foursquare makes a good point:

The sort of people who will stop and record their restaurant visits and who have friends who also stop and record their restaurant visits and then write reviews of same. And while that’s a prime demographic, I’m thinking it’s not nearly as large as you’d hope. Most people just don’t have the time or inclination to “play” FourSquare.

This is why putting the process of playing Foursquare in-the-flow would be valuable.

Making it happen

The challenge is in connecting a credit card transaction to a person’s Foursquare account. Then I realized Square’s intentions are much bigger than a simple transaction swipe. The company lets people set up their personal accounts on Square. I assume you will enter your credit card number online, and when that number comes through in a transaction, it’s associated to your Square account. Thus Square can manage loyalty punch card programs.

Well, why not associate your Foursquare account to your Square account? When you swipe your credit card at the local business, Square processes the transaction the way it normally does. But it also does something else. It prompts an update to your Foursquare account.

I’m not talking a Blippy-style broadcast of your credit card purchase amount. Rather, your location status is updated automatically on Foursquare. Just as if you’d updated from your iPhone.

The small business then gets the social part of the CRM program.

What do you think? Two great tastes that taste great together? Small business could use the combined elements of Foursquare and Square.

I’m @bhc3 on Twitter

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About Hutch Carpenter
Senior Consultant for HYPE Innovation (hypeinnovation.com)

29 Responses to Foursquare + Square = Killer Small Business Social CRM

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  2. Bruce Wilson says:

    Intriguing and timely insights, thanks Hutch. As a user myself, I think FourSquare’s “game” and “tell your friends” qualities are both its strength and its weakness. Personally I found the game silly at first, while the number of my friends participating started out very low, so it took some time to become addictive. And it does take some effort to check in, as well as making a conscious decision each time to broadcast one’s location into the ether. But a partnership between Square and Foursquare – or simply building comparable features natively into Square (they may ramp up so fast they won’t need to partner with FourSquare, Gowalla, or other) – overcomes these negatives by making it effortless for people to discover the addictive social qualities.

    • Yeah, I’m not constantly checking in on Foursquare. Of course, a big reason is that with two young ones, I don’t hit a lot of the cool spots. But I do check in from retailers I visit.

      Like Twitter and its early competitors, someone will emerge in this location-based social networking field. Foursquare has the momentum right now.

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  4. Mark Carl says:

    This is an excellent post about some applications/features/API’s that may or may not already be on the radar at Square or FourSquare. I suspect there will be more input from some extremely bright people as both companies grow. There are certainly some intriguing applications that could be tied to each, and various different models of integration. One application that we service in our market is the integration of supermarket checkouts with convenience store gas pumps. In these applications, typically there’s a relationship formed between a chain of grocery stores and a chain of gas stations in the same area. The third-party application provider simply provides the interconnecting technology, so that customers shopping for groceries can get discounts at the pumps of participating staions. These technologies are the enablers for the small/medium businesses that compete with the superstores that seem to be popping up in more and more rural areas. If similar applications are integrated for other products, then it could turn the tide for small businesses once again. I agree with Bruce that the uptake on the FourSquare novelty could be slow at this point, especially for those of us that live in rural America. But if FourSquare can tell me what discounts are around me based on my checkins, and can facilitate those discounts, then my uptake is going to be immediate. I see the tie-in here for Square also, but at a much deeper level than what they appear to be doing today.

    • Good call on the adoption incentives needed with Foursquare. It’s got great ones now with the “competitive” aspects of points and Mayors and badges. I like your idea of adding location-based discounts too. Combined with a payment processor, this becomes even better. Take advantage of the discount right while you pay.

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  8. Great blog post I have really enoyed reading it

    I will be visiting your blog as often as I can

  9. Wayne Sutton says:

    Interesting read. I do think Square and location based apps could be the solution for social CRM for small business. The question is will it be Foursquare or another app with so many launching now. Also there is a CC processing app on the iPhone. Couldn’t a small business or someone use the api from social sites with one of those apps too? Either way location and social CRM will see a big push in 2010.

    • Foursquare has the momentum now. It’s quickly eclipsed Brightkite, for instance, in terms of buzz. But you’re right – the app that gets the biggest traction in the market will be the small business social CRM partner of choice.

      The hardest thing is to connect the credit card transaction to the user’s social profile on a site. It’s not a trivial issue. That’s why Square is so interesting, with its approach of letting users register their cards online. Traditional credit card processors don’t think this way.

      • Mark Carl says:

        I agree completely Hutch. There’s a lot of potential if @Square users can register their cards, or at least a particular card that they want to tie to their social network activity. If I use my card on a @Square device, then @Square should be able to tie that to whatever incentives the vendor is offering, without further exposing my card number. Of course, if it only works with vendors using the @Square device to accept payments, then it will be difficult to get significant uptake with cardholders. However, if you can tie it to some other models that have already proven successful, then uptake could be expanded significantly.

        One of those models is a branded loyalty card. I can foresee an @Square card or @Foursquare card that is either totally discount-based, or has pre-paid dollars, which could be integrated with any legacy POS terminal. I thought this model would also be slow for adoption, but it seems that Revolution Money was really starting to gain some traction before they were consumed by AMEX. If one of the brands such as AMEX got on board, then uptake would be much easier and quicker.

        There have been a lot of these loyalty applications over the years that never really took off. But in my opinion, if you could tie it to the viral nature of social networking, then it could be a game changer for the whole loyalty model.

        And if consumers are interested in using a single card that’s tied to their social network activity, do you think that one of the major card brands would be interested in having their brand on those cards? I’m thinking along the lines of “The FourSquare Card, Only from American Express”, or “The FourSquare VISA Card, it’s everywhere you want to be”.

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  11. This post is any eye opener.Square has all potential to act as social CRM. When we can social CRM it means application must connect mobile and got to be interactive to networking sites and got to have ability in transaction. Great great post.

  12. thos003 says:

    Are you sure your not a geek? I am pretty sure that I have a “Super Mayor or Geekville Badge”… and I am actually proud to wear it… in certain crowds. =)

    Foursquare is a great tool for businesses that know how to use it. Who needs mystery shoppers when you’ve got real shoppers?

    Plus… you can actually target your valued customers!

    Of course, pest control isn’t as sexy as posh restaurants, but I try.

    • LOL! Maybe “dork” is more like it for me…

  13. This is a great post you have written. Having this information will prove to be very useful going forward. Thanks.

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  22. r says:

    dude, what’s up with the digital snow??

    • Holidays, you know?!!

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