Commentary
The Starbucks Mistake: Five Ways Foursquare Advertising is Getting Less Interesting
- by Augie Ray , June 15, 2010
Foursquare, the geolocation social tool, has been a media darling as of late. Not only is it growing, but people innately understand the monetization model, which is not something you can say about every social site and tool. As people "check in," or report where they are to their network, Foursquare serves them offers from nearby businesses. It's a win-win-win situation: Businesses can market to people who are able to immediately take action; Foursquare earns revenue; and users get valuable offers they can use.
But Starbucks' current program on Foursquare may kill the goose that lays the golden eggs (or at least demonstrate how that goose may die a slow, lingering death of neglect). I believe (and I'm curious if you agree) that Starbucks' ubiquity combined with the offer's difficult redemption is decreasing attention for Foursquare's other offers. If other large chains follow suit with similar promotions, those "Special Nearby" tabs within Foursquare's mobile apps won't get as much notice, and that means problems for advertisers on the Foursquare platform.
If you're a Foursquare user, you've undoubtedly seen Foursquare offers, but for those who are not yet acquainted with the joys of mayorships, here is how it works: When you check in at a location, Foursquare will alert you when an offer is available in close proximity. With a click, you can view that offer. The first couple of times I saw this, the offers were interesting and immediately relevant. For example, I checked in at SFMOMA and was alerted I could get free entry to an art museum across the street.
But I am now finding that Starbucks' promotion, which offers a buck off a Frappucino for the mayor in any of their stores, is becoming noisy and bothersome for five reasons:
- Oversaturation: First, since Starbucks are everywhere (Jerry Seinfeld once joked the company was beginning to open Starbucks inside of other Starbucks), I seem to receive no offers other than Starbucks. Every time I check in, there's the same offer over and over again--it's a little like watching a 30-minute sitcom and seeing the same Starbucks ad eight times! No one can find an ad so enticing that they want to see it repeatedly.
- Difficult Redemption: The second problem is that the offer isn't one that people can use immediately. Becoming a mayor takes many check-ins and few people can and will visit a Starbucks location enough to claim this offer. I'd guess that becoming the mayor of an average Starbucks store probably takes 30 or more check-ins in a 60-day period-and after all that, the customer is rewarded with a discount of a whole buck!
- No Behavioral Targeting: The third reason the Starbucks offer has become irritating is that it isn't targeted based on users' preferences or data. Considering what Foursquare knows about us, wouldn't you think relevant and interesting advertising would be a slam dunk? I'm not a coffee drinker, and Foursquare should know this; probably fewer than one percent of my checkins are at coffee shops, and I doubt I've checked in at a Starbucks more than once.
- No geo-targeting: The fourth problem may at first seem odd for a company in the geolocation business, but the Starbucks ad lacks sensible geo-targeting. I just checked in on Foursquare in Boston, 3100 miles away from home, and there's that darn Starbucks ad again. Foursquare knows where I live and hang out, so why display a mayor offer in a location where I cannot possibly become mayor? Doing so make this offer completely irrelevant.
- Employee competition: As marketers begin to leverage geolocation for loyalty purposes, they face a major headache: No customer can possibly visit a business more than a full-time employee. With checkins from employees and customers going into the same pool, mayorships are being claimed by the paid help and not the paying patron. Complaints are surfacing that customers checking in at Starbucks are finding their barista is the mayor, effectively blocking them from earning the discount.
Foursquare and marketers win when they make advertising relevant. If they do, people will want and pay attention to the offers. But if consumer attention and interest in those offers wane, then advertising attention decreases, revenue shrinks and Foursquare advertising goes the way of so many ad channels before it.
Because Foursquare is new and the Starbucks offer is the largest program to date, I'm sure it's proving relatively successful, just as the very first Web banner ad performed so remarkably. But if Foursquare and other geolocation platforms (are you listening Facebook and Yelp?) want to build long-term success, it's going to take unique, customized and relevant offers, and not the same "Please check in here a lot and we'll give you 100 pennies" offer.
So, Foursquare users, are you seeing those Starbucks ads all over? Are they changing your purchase behavior? And are they increasing or decreasing the attention you give to Foursquare offers?
Extremely helpful and insightful post.
Great analysis. My g/f and I have been in a bit of a fun argument of late on Foursquare. I maintain that I am slowly getting bored with FS because other than seeing the last place my friends have been, I am getting little to no actual value from the program. I have seen very few "specials nearby" and I live in NY which is amazing to me. And if I'm in a specific neighborhood and I want to check if any of my friends have been somewhere good around my location I can't quickly check that on my Android FS app. So if a friend hasn't just recently been where I'm at, the entire check-in usefulness really goes out the window.
I think your points are very well taken. It seems as though FS needs to serve their specials just like a website displays geo-targeted or behavioral ads. But clearly FS does not have a sophisticated enough mobile ad server. One of many shortcomings I'm seeing as I continue to check-in and hope one of my mayorships actually provides me with some tangible value.
I'm eagerly awaiting some new and useful features from FS. And I can only believe that I'm in the large majority who feel the same. I want FS to succeed, but they simply have stalled and ridden the wave of all their press coverage to gain users.
Step up FS, or step aside.
Great observation.
It's going to become like the "Entertainment" coupon guide. They are filled with offers from national chains.
Why - because they can make one call and close lots of business.
It's ironic that the so called hyper-local space is not getting filled with truly local content.
Sadly most small retailers aren't social media savvy, so don't know how to play the game.
I can't see that changing any time soon.
I love the idea of FS (et al), but it can't all be consumer led if its going to work long term
Our blog post of a few weeks ago, about the problem with Mayor-based incentives and whether FourSquare's ad model was conducive to advertisers, made these same points about Starbucks.
http://www.attentionspan.tv/asmblog/2010/05/27/be-the-mayor-of-goto4wallasquaretohellvngr/
The ubiquity of "playing" Foursqaure also presents the same challenge when one has their Check In posted to Facebook or Twitter. Eventually friends and followers tune you out. It speaks to the relevance of information and not the omnipotence of it. Good article and observations!
More time suck. Read a menu, look inside. Unless you really know someone else has the same taste buds as you and wants the same kind of food as you where you happened to be located, you might as well as the next person on the street, a leaving patron or the owner. Knock yourselves out.
One of Foursquare's problems is they lack a more precise transactional engine than traditional couponing. One company could own this space in ten minutes: http://orrenmedia.com/2010/06/14/the-currently-lost-opportunity-with-iads/
Very interesting read. Obviously, we keep a close eye on everything Foursquare related because they are our competition and the issues raised in this article are no surprise. I think the benefits of partnering with big brands such as Starbucks probably outweigh the negatives though for Foursquare at this stage.
Great post. The moment I saw my first of many Starbucks FourSquare ads I questioned their offer. Why reward just the mayor? I immediately lost any incentive to keep hitting up Starbucks. They should provide an offer no different than the punch cards we've all collected over the year. Give me a free drink after my 5th check-in.
I find it amusing that the special pops up as I am checking into one of the three local coffee shops I am currently mayor of.
What I would like to see is foursquare targeting local small businesses to teach them how to offer specials and use that to leverage their business - not just for mayor, but for foursquare users that check in, or are at the top of their leaderboard for the week. Between tips and vying for mayor, I think that this is a tool that really benefits the little guy and boosts foot traffic and loyalty.
Starbucks can keep their dollar.
It would appear that closing the Starbucks deal was brilliant in that it created instant credibility for FS & it's location based strategies for other brands.
Most people don't view redemption as difficult - besides, it was created to also benefit the business; sure, it may be looked at as a challenge, yet it still remains obtainable. And if you're the business, this is just another new creative experience for consumers - and something that even Starbucks can benefit from. (I'm the mayor of a SB location - and I'm loyal to that one location as I don't want to be ousted)
The (lack-of) behavior targeting is definitely an interesting concept - one that FS could surely grow into as more offers crop up...
The geo-targeting is a bit more difficult - are you expecting the app to know the length of your stay in the different city? What if you moved - but it was only temporary?
Employee competition can be managed w/simple venue ownership moderation tools; owners & managers can already claim a venue & edit profile info, add tags & specify who is an employee.
Bottom line, I'm looking for additional offers - and I'm sure the delivery/display method will be solved...initial usability is top notch & will only evolve as FS does...
Good points across the board - all items FS should have on their watch-list. (& probably already do - including those we haven't thought of yet)
I'm surprised that the author referred to Starbucks employees as "paid help" - it's kind of demeaning, no?
As follow-on reading, may I recommend Gawker's article: http://gawker.com/5506461/if-you-use-foursquare-you-are-an-annoying-jackass
sadly I started FourSquare last year when the only deal that ever popped up was for Tasti DeLite (blech). I was a diligent check-in-er and was briefly excited about getting badges. After that waned, I figured out a few ways to amuse myself by creating fake places ("In Hell" at 666 Mephistopheles Plunge is mine). Now everyone knows about FourSquare and it still hasn't gotten any more interesting. Only a mayor gets a deal? That would be like only one person getting to use a coupon at a store. They're going to have to come up with more ways to keep people engaged over the initial badges and interact with more small businesses or it's going to die off. I t hink it already is.
Charlene, so YOU'RE the culprit (among many) making up imaginary places to check in! I actually find that to be a flaw of the FourSquare system. People are making up names for their apartments and homes (or worse yet, making up alternate names for places that alreayd exist) and this is polluting the Foursquare location data. I am getting tired of trying to check in at a place and seeing a bunch of nonsensical names crowding out the place where I want to check in! Like you, I am finding I am checking in a bit less, which is a big loss and challenge for Foursquare!
Ksenia,
You are right--using the term "paid help" is demeaning! I only used it because I was trying to make a play on words--paid help vs. paying patron.
But, the point is still relevant: Foursquare and advertisers lose (at least when making mayor/loyalty offers) when employees crowd out customers!
Eric, based on the feedback I am getting here and on the forrester blogs (http://blogs.forrester.com/augie_ray), it would seem MANY people agree that mayor offers are, in fact, difficult to redeem. My recommendation to 4square would be that mayor offers should NOT be made under the "Special Nearby" tab since they are not immediately actionable. I think "Special Nearby" offers should be reserved for first-visit discounts (which drive awareness and trial) while mayor offers should only be made AFTER a person has checked in (to drive loyalty.)
Thanks for the input. I appreciate your feedback on all of the points in my post!
Eunice and Anne, I actually expected more comments like the ones you made! I figured many people might suggest that Starbucks isn't their favored coffee shop and that local shops could use FourSquare to compete against the national chain.
There are some great success stories of small businesses using Foursquare to succeed. Do a search on AJ Bombers, a small burger joint in my home town of Milwaukee. They've gotten some national press (and I even wrote a blog post about them) about how they've used social media to create true business results.
Steve, great point! Any interactive offer that is better made via a simple punched card is one worth questioning! Mayor offers seem a whole less interesting when you consider that an offline loyalty program does the same thing better.
Gaarrett, Nice blog post. Thanks for sharing it.
Thus the problem with Foursquare in its current iteration. Mobile consumers will quickly bore of "Mayor" gimmicks and check ins just as they bored of ringtones, wallpapers,etc.
My prediction is that Foursquare will ultimately find that its best business model will be to enable brands to build unique location-based campaigns and experiences through a mobile platform, application, etc.
The below link is to an Imedia Connection article I wrote on the subject this week:
http://www.imediaconnection.com/content/26969.asp
Thanks for the great insight!
Great article, thanks Augie.
To me Foursquare is just way to open to problems and abuse to be a useful marketing tool. Do the Starbucks marketing people actually believe Foursquare users care about their negligible $1 off incentive? I doubt it... I think they will probably benefit more from the media exposure in articles such as this one than they'll benefit from the offer itself.
Truth is, there are far better LBS marketing platforms out there than Foursquare and in time I'm sure they will surface.
Joseph - I am a big fan of DreamWalk. You obviously have far better incentives than Foursquare, a solid redemption system, true location-based promotions etc. etc. How is your user base going though? If DreamWalk had the user base of Foursquare it would be a real game-changer!
I first experienced the Starbucks offer when I became the mayor of Caribou Coffee. And actually, because the special tab popped up immediately after the notification of becoming the mayor of Caribou, I assumed that the special was for Caribou. I literally read it 3 times before I realized it was for the Starbucks a mile or so away.
Once I made that realization, my first thought was that Caribou needs to do some catch up on social media. But as I thought more about it, I had some of the same conclusions. Specifically, if I'm a loyal Caribou customer, how many times would I need to switch to Starbucks to become the mayor to get the $1 deal? Maybe because of this annoying fact it also bothers me that I keep getting the same deal over and over, which is also annoying.
Good post, Augie.
Kirsi Dahl, Go East