Are Check-In Apps Losing Their Shine?
Written by Todd L. MichaudColumnist Todd Michaud has spent the last 17 years trying to fight IT issues, with the last seven years focused on franchisee IT issues. He is currently responsible for IT at Focus Brands (Cinnabon, Carvel, Schlotzsky’s and Moe’s Southwestern Grill).
Jamie used to think that using the check-in apps on her phone was cool. She could let her friends know where she was, and she was often crowned the “mayor” of her favorite pub down the street from her house (when Justin didn’t take it away from her). There were some rumblings about “free appetizers for the mayor,” but nothing materialized. The coolness factor of checking in and becoming mayor started to fade a bit. Jamie began to wonder whether it was worth the hassle anymore.
We are witnessing a race that will determine the success or failure of many Quick Service Restaurants’ rewards programs. On one side, we have the socially enabled “check-in” applications like Foursquare and GoWalla, where friends share their location and compete to earn badges. On the other side, we have brands trying to offer perks through these applications. Today, these perks are inconsistent in terms of both which locations offer them and the value they provide to customers. If the industry as a whole doesn’t start to provide consistent value to the consumer through these new tools, I think the social aspect (the game) may pass by as nothing more than a fad, leaving brands right where they started.
One of the biggest challenges with loyalty and rewards programs in the Quick Service Restaurant (QSR) space is determining if your customer is actually in the restaurant. Unlike supermarkets or more casual dining restaurants, where a loyalty card or even a barcoded key fob might be used (and socially accepted), consumers haven’t shown a lot of interest in toting around various QSR brands in wallets or on key chains. As a result, it is very difficult for many of these brands to engage with customers via traditional rewards programs.
That has changed with the growing popularity of check-in applications. These mobile applications have the ability to alert retailers that customers are in the restaurant that very second. In a stroke of blind luck, these brands had their single biggest challenge solved as a side effect of a game played on a cell phone.
But there is a lot of noise about these applications losing steam. There seems to be somewhat of an “over-sharing backlash” from the constant updates these tools provide. And people are already talking about how these tools are no longer as fun as they used to be.
There are also concerns about personal safety when it comes to stalkers or even people breaking into houses because they know the homeowner is enjoying being the “mayor” at the pub down the street.
-Marc
October 7th, 2010 at 9:44 am
Well said Todd! I am also evidence of those losing interest in checkin marketing apps – I was victim to the Foursquare outage this week (see that other Storefront article for my comment). Shopkick does have potential, with points accumulation over time feeding what is certain to become redemption options for the consumer in the future. We all like to earn to save later. What’s great about points is that retailers can control the value of points based on what is offered in return when redeeming them. What appears promising about Shopkick is that you earn additional points for actually entering the store, which is validated by stores using 2-way wireless transmission devices with some type of proximity awareness functionality. What Best Buy, Macy’s and others seem to be doing with it involves earning extra bonus points for stopping by key departments within the store (reward the behavior you seek). From what we all read, it is feasible that while you are standing in the Gamer section of the store, you could see content on your phone app for products in other departments within the store, say TVs. If by seeing the promoted content, I go to TVs, earn more points by the proximity factor, then buy a TV, earn a discount on that purchase at checkout, and earn more points for taking advantage of the promotion, I could earn lots of bonus points in one store visit. That seems more effective for a retailer than a consumer trying to be mayor while checking in from the parking lot. While it boils down to reward the behavior you seek, and may work for multi-department stores working to cross-sell their entire store offering, will this work in the QSR sector? I think it will depend upon, on one hand the cost of the wireless devices and supporting technology, the required investment in points you may have to make, the cost of any redemption rewards (free soda, etc.), and if on the other hand the potential benefits are enticing enough to consumers to drive an increase in same-customer visits and spending per visit, and an increase in new customers who try your offering because they saw their friends playing the “checkin game” at your locations. Time will tell if checkin has legs, and if VCs have the patience.
October 7th, 2010 at 10:56 am
The only reason I really use Foursquare at all is because it is tied to my WeReward app. I think WeReward has the right idea – issuing points that, when you reach a certain threshold (1000 points), can be cashed out ($10.00). I like the idea of discounts but I love the idea of cold, hard cash. It is a little more involved than Foursquare but the payback is much better.
October 7th, 2010 at 1:47 pm
Rob,
I agree that the opportunity with these apps is significant. With QSR, it’s far more about “walk before you run”. Just knowing someone is in the restaurant would be a HUGE win. Then offering contextual information/advertisements (up-sell or cross-sell) based upon the behavior traits captured in the CRM system would be even bigger.
The question is, do you invest heavily in something like this, knowing that the platform itself may cease to exist?
If a new, regular customer is worth $500/year ($10/visit, 1 visit per week) and the profitability on that is say 15% or $75. Why wouldn’t you offer people $5 gift card for each of their friends that check in more than 2 times in a month?
If your food cost is, let’s just say 30%, that means that you are giving up $1.50 for each customer that you are training to come in multiple times a month. You’ll make that up on the two meals bought by the friend.
If you got 100 people to participate: The promo itself pays for the costs, and you could get 200 extra meals (100 people each get 2 people to come and check-in twice) and 20 new customers (10% of those 200) delivering a value of $10,000 a year in sales.
Seems like a no-brainer to me.
October 7th, 2010 at 1:58 pm
What’s worse “fad” applications tend to draw transient customers, most likely to shop elsewhere without ever developing any brand affinity or loyalty. Success in the retail space still boils down to the fundamentals: having great products and delivering a superior customer experience. “tricks” and “fads” don’t build brand equity in the long run.
October 14th, 2010 at 1:26 am
Successful reward programs deliver value to consumers when consumers deliver value to the merchant: by purchasing goods. Checking in to a location doesn’t directly translate to an increase in sales. That’s what merchants want, more sales. Check in applications are a fad and a gimmick. Those that are gaining traction are doing so because they are riskless to the merchant – if they deliver a few more sales, great, but the downside risk is minimal so brands like Best Buy and Macys are willing to participate. What they really want is customer engagement that drives sales leads which result in sales lift. Foursquare doesnt do that. Shopkick doesnt do that. What is needed is rewarding consumers for purchase AND engaging their networks based on the purchase. Personal referral (word of mouth) is still the best marketing to drive both leads and sales. Doing that will result in an improved revenue lift which merchants love and the appropriate discounts, coupons, offers, and rewards given consumers for making transactions will generate more brand loyalty. Shy of that these technologies are fads which arent addressing the market problem.
October 18th, 2010 at 9:17 am
Todd, Good counter-points. I wasn’t thinking of the “word of mouth” factor (friends and incremental benefit from them) when questioning if cost of location based marketing in QSR can work. I was focused on existing customers. Absolutely correct question in any retail or QSR environment is about “worth the cost given vendor survivability being uncertain?”. A startup just grabbing almost $20MM funding but prioritizing new office space over server infrastructure should raise such questions in the minds of the astute. What’s the point if the customer can’t reach the server to checkin? Time will tell…