Location-Based Services and the Indelible Importance of Awesomeness

Privacy Concerns
My agency, White Horse, is focused on aligning user behavior with new digital marketing experiences. In March we conducted a survey of LBS app usage among 437 smartphone users (you can download the full report here). For the sake of clarity, consistency and perhaps even our own sanity, we focused on services whose main function was the ability to "check in" with one's network of contacts. These included Facebook Places, Google Latitude, Foursquare, Twitter Places and Gowalla. We didn't include shopper reward apps like Shopkick and WeReward. While those are undeniably of interest to retailers, consumers see them in a different context from other LBS services, so marketers must approach them differently.

We began with the question of actual usage. We found that 39 percent of smartphone users who are aware of LBS are using them. Given the relative newness of LBS, that's certainly encouraging.

But when we looked at the reasons that the remaining 61 percent of LBS-aware users are holding out, the results are more sobering.

One-third of nonusers cited privacy concerns as an obstacle to adoption. While assuaging data privacy worries is in some respect simply a day-to-day reality of digital marketing, location information is a special case. Our respondents were vocal on the subject, evoking the possibility of real harm arising from careless use of location details. One wrote: "It's not very safe to constantly let people know where you are … Someone I don't want to see or a dangerous stranger could follow me if they know where I'm at by using these types of apps."

The burden is on LBS app developers to reassure consumers about their data privacy. The broader issue for retailers contemplating LBS marketing is the consumer perception of the trade-offs between giving up location information and getting back something useful. A combined 45 percent of nonusers either perceived no benefits of LBS or saw them as redundant to other ways of connecting. Because these services place social connections at the center of the user experience, users must first find value in personal location sharing before they're also willing to share their location with marketers.

Discounts and Incentives
LBS players like Foursquare are betting that discounts and incentives will provide the benefit that consumers need to connect with marketers. Most of the LBS/retailer case studies to date have centered on discount rewards for checking in at a retail location. But the most revealing finding in our study was that discounts and games weren't important drivers for LBS usage: only 8 percent of consumers said discounts and rewards were the most important benefit of LBS, and only 4 percent were mainly interested in earning competitive rewards like badges.

Once again, the trade-offs between privacy, hassle and perceived benefit are at issue. In a typical LBS scenario, a consumer might have to eat at a certain restaurant, broadcast their location and hope that 19 other users of the same app do so at the same time in order to receive a discount for that visit. In the much-cited Ann Taylor/Foursquare experiment, consumers had to check in at an Ann Taylor location on five separate occasions in order to receive a 15 percent discount from the apparel retailer.

While some consumers will feverishly pursue such discounts despite the trade-offs, the data suggests that such experiences won't scale and won't necessarily provide you with greater access to your most loyal or influential customers. Just as display advertising clickthroughs have been revealed to be driven by a narrow segment of the online population, deal-seekers are emerging as a segment of the social and mobile population that doesn't repay discounts with loyalty.

Breeding Loyalty
So then what does breed loyalty among LBS users? What would persuade them not only to shop at the same store week after week, but to earnestly recommend the experience to everyone in their network? In a word, awesomeness.

One of the main lessons of social media marketing is that brands that thrive in social media aren't the ones that are inherently great at social media, but the ones that are inherently great at taking care of their customers. Those customers' natural inclination to evangelize the brand to their friends simply found its outlet in social media.