Following on from yesterday’s post about Foursquare for users, today I’m going to look at Foursquare for business, in particular the Business to Consumer market (we’ll look at Business to Business tomorrow). During this series I’m making several predictions, mine are based on research, they are generated by getting involved in the development community and talking to people who are actually building these applications. When I see smart people like Mike Langford of Tweetworks diving into the Foursquare API it’s a clear indication that some good apps are just around the corner.

One reason businesses get involved in any new technology is the rate of adoption by the broader community, e.g. their potential customers.  The chart below shows the increasing rate of check-ins in 2009, an increase of approx 900% over the year.

(thanks to John Wiseman for the graph)

In considering the B2C market, I’m going to segment it into large brands & local businesses. While the core of this series of posts focuses on Foursquare, it really covers all geo-location services and their potential uses.

There are two major elements for businesses to consider when getting involved with any Social Media service. Firstly, what can they achieve by using or encouraging use of the application? The other is what can they derive from the application if anything?

Large Brands

Large brands are usually associated with large budgets. What this means is that they can, if they so choose, spend more to acquire a customer than smaller businesses. However, the mindset of doing that is changing. Social Media has made it possible to lower that cost. Geo-Location when used as a part of the Social Media movement can be leveraged quite cheaply.  There are some very obvious quick wins, which large brands can and do use when using Social Media. Promotions, discounts and activity based rewards are all a part of their arsenal.  All of these can have a geo-location element. Gowalla, another of the popular location sharing services uses these to promote its own service. They hide rewards at locations and provide clues to their existing users. This type of “Treasure Hunt” is a common use of marketing in geo-location and is inspired by geo-caching as a game.

The advantage of this type of marketing is that the brand does not need to have their own physical location, they are leveraging other locations, usually notable ones – The Golden Gate Bridge, Grand Central Station, Sydney Opera House etc. This means that brands like Coca-Cola or Hanes can compete with brands like Disney, Marriott etc that have well known physical locations.

The real win for brands is not however in the simple B2C competition, but in leveraging the fact that geo-location services like Foursquare and Gowalla are social. The real win is in the B2C2C space. This might be a reward not only for you but for getting your friends to take action as well. E.g. if you check-in at X location you will receive Y reward, however, if you get 10 of your “friends” to check-in at that location you will get YY reward.

An Open API Leads to Greater Adoption

The fact that, certainly for Foursquare, it is possible to extract this type of data via their API means that brands can promote rewards far more easily through networks.  Foursquare in particular, having opened its API, is making it possible to construct applications that have far reaching potential. Because Foursquare allows its users to auto-post their check-ins to Facebook & Twitter, any application that utilizes the Foursquare API also gets this benefit. In effect they piggyback on the permissions already granted by a Foursquare user.  So a brand could set up a location based competition application and have users take part and promote their activity to their entire network, without the brand ever having to gain direct access to that network. This is a very powerful application of, and extension to, tools like Foursquare that we will see more of in the coming months.

Local Business

The most commonly considered method for local businesses to use location based services is loyalty programs. This is a quick, easy and free/low cost method of using these services. Simply ensuring that your business location(s) are entered in the tool correctly and waiting for people to check-in is great way to achieve a small amount of free promotion. By actually telling people that they will be rewarded for checking in it is possible to increase this dramatically.

In fact, Foursquare actively encourages this on their website by providing a form for businesses to fill out when they offer specials at their location(s). While this is great, it isn’t the only way local businesses can utilize these tools.  Just offering a discount or a freebie will only work so often and for so long. Again, as for large brands, the real killer is not in just communicating with your customers but having them communicate with others and spreading the word. Services such as Yelp have gone a long way in doing this, but they lack the instant nature of geo-location services like Foursquare.

Unlike large brands, local businesses do not usually have the funds to invest in the creation of applications to leverage the networks of users, so they have to do it in a more analog fashion. Referal business is at the core of most successful small businesses, by encouraging referral activity via the use of social tools, small businesses are able to leverage the large networks that users build without cost. For example if I owned a dog washing service I might offer a free dog wash to the “Mayor” of my location, however, if a user brought in 3 other “friends” I might want to offer something more. Using the physical location to show these offers, combined with online announcements, encourages people to take part in these activities.

In the B2C space we are likely to see a lot more integration of applications. As more applications open their API to each other it will be easier for businesses to have their advocates share their message to a broader networks. So what would a future business to consumer app look like in the near future?

You have a local business that sells a major brand product, you want the local customers, the brand wants the loyalty of your customers. As a supplier they provide you with an incentive for your customers, some kind of promo, but instead of a coupon that has to be redeemed, it is validated via geo-location social networking. Having installed the brand’s application, when the customer makes a “reward” purchase, that reward is promoted to all of their network as well. “Matt just earned X, you can too”.

What features do you think Foursquare should have to get businesses to use it?