economics

April 30, 2010

Linking Customer Loyalty With Social Networking

PEPSICO wants to sell its customers sodas whether they are near a grocery store, a restaurant or a gas station. With a new partnership that weaves its loyalty program into the location-based network Foursquare, PepsiCo gets a live notification when its customers are close to those sites, and can present offers that get them into the stores.

The Pepsi Loot app for the iPhone is intended to drive traffic to restaurants that serve Pepsi products.

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“Being able to drive foot traffic into our restaurant partners and our retail partners is a huge opportunity, because that’s where our product is sold,” said B. Bonin Bough, director of social and emerging media for PepsiCo. “Ten blocks mean a lot.”

Through smartphones that signal someone’s location, stores and brands like Starbucks, Tasti-D-Lite, Macy’s and Pepsi are getting live information about when and where people are shopping. Some companies are turning Foursquare into a virtual loyalty-card program, while others are creating their own location applications, offering customers discounts or other rewards for shopping.

“It gives us immediate feedback for what’s going on in the marketplace,” said Margery Schelling, chief marketing officer of PepsiCo Foodservice. “That’s invaluable.”

A phone is a simple replacement for a wallet stuffed with loyalty cards, but the real appeal for stores is in the location information provided by Foursquare and other location-based applications. Retailers can track when customers actually enter their stores. Such data can be used to learn things about store traffic, such as when men visit versus women. And it’s easier to note when the most loyal customers visit.

“If you check into work, then you leave work, you check into a bank and then you check into a store, that’s a behavior that, in aggregate, we might use to transform the way we market to you in the offline world,” Mr. Bough said. “We might see dayparts that are more likely for you to check out of some place and go to the store, and we might do advertising during that specific daypart in that specific place.

Because consumers are electing to broadcast their location and signing up for these services, the privacy concerns aren’t enormous, another plus for marketers.

“We believe it’s a real, new opportunity to transform loyalty programs in a way that we haven’t done before,” Mr. Bough said.

Foursquare is sort of a social application meets game. Its members press a button upon arriving at various locations to “check in,” letting them accumulate points — they compete to be “mayor” of a certain site, or the person with the most check-ins at that site, and can unlock badges for completing certain activities. The designer Marc Jacobs, for instance, gave tickets to his fashion show to four people who unlocked a Marc Jacobs shopping badge. Members can also direct Foursquare to list nearby restaurants, banks or grocery stores, and see where their Foursquare pals are at that moment.

In March, Foursquare introduced a tool that lets businesses see who is checking into their locations. It lists data like the total number of check-ins, the male-to-female ratio, the top days and times Foursquare visitors come, and the top visitors.

“Foursquare hopes to tell them a little bit more about their loyal customer — who checks in when, where they go before and after,” said Tristan Walker, director of business development for Foursquare.

Tasti-D-Lite wove Foursquare into its loyalty-card program this year. When someone registers the card online or visits the loyalty Web site, she can click to connect the card with her Foursquare account (along with Twitter or Facebook). Whenever the card is swiped after that, the customer accumulates Foursquare check-in points and Tasti-D-Lite loyalty points at once.

“Imagine the amount of data we now have in order to make better marketing decisions, in order to make loyalty decisions, about our customers, as opposed to the paper punch cards we had before that didn’t do anything for us,” said B. J. Emerson, social technology officer for Tasti-D-Lite.

Starbucks has been offering Foursquare badges when people visit a certain number of stores.

“The next generation of that is potentially understanding a little bit more about loyalty as well,” Mr. Walker said. “We’re driving people to different stores. What about people who visit the same store over and over?”

The location-based opportunity is particularly big for consumer packaged goods brands like Pepsi. Those brands market their product heavily, but they depend on drugstores or restaurants to actually get consumers into stores. With Foursquare and apps that track consumers’ locations, Pepsi can strike a deal directly with the consumer.

Pepsi’s Foursquare program will begin running in June. While the company is still working out details, Mr. Bough said that he expects that when a Foursquare user is near a Pepsi retailer, an offer to enroll the person in a Pepsi rewards system will appear. Once people are enrolled, whenever they check in at a grocery store or drugstore selling Pepsi, they will accumulate rewards points or badges that they can redeem for products or offers or donate toward charities.

Separately, Pepsi Loot, to be introduced in mid-May, focuses on restaurants; about 200,000, including chains like Taco Bell, are participating.

The app shows the participating Pepsi-serving restaurants on a map, includes menus for them, and allows consumers to sign in to those locations (that sign-in is done separately from a Foursquare check-in). Once they do, they accumulate points toward song downloads. The restaurants can layer in offers, too — Shakey’s is giving $3 off a large pizza for people who show the Pepsi Loot app, for instance.

Macy’s, too, has announced that it will use an app from a company called Shopkick to send customers offers when they are in or near the department store.

Rewards will be critical for getting more people to use Foursquare and similar applications, said Amy Manus, director of media at Nurun, a digital marketing firm that did not work on the campaign. “Offering something that is beneficial for consumers is going to be essential in mass adoption,” she said.

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