Can your business make money using Location-Based Marketing? Four experts at TIMA share what you must do to make it work.

If you have a retail business, you can use location-based services and other forms of local social media to attract and retain customers. Location-based marketing uses psychology, tech-enabled word of mouth, and a sense of community to influence customers as they’re about to spend money, according to yesterday’s Triangle Interactive Marketing Association (TIMA) #geolocal panel on “Doing Business the Hyper-Local Social Media Way.”

Couldn’t make it? Here’s my in-depth recap of the event at Hotel Indigo RTP in Durham, North Carolina. Social media evangelist Wayne Sutton moderated a panel of three experts on location-based marketing: Yelp! community manager Christina Gates, Twongo CEO Brad Halferty, and TriOut creator Lawrence Ingraham.

Top 4 Local Marketing Lessons from the TIMA Panelists

1. People browsing online reviews are very close to making a buying decision — and 70% of consumers refer to online reviews — which means local businesses should make the effort to engage customers on sites like Yelp! Events and promos through Yelp give businesses the opportunity to get in front of the region’s most influential consumers, aka the “tastemakers of the Triangle.” (Christina Gates)
2. A group buying service like Twongo sends customers to a local business that’s not running at capacity. Because 30% of consumers are brand-agnostic “shifters,” the goal is to capture people willing to change vendors after experiencing great service during a trial. There’s value in reaching hundreds of thousands or millions of users with one offer a day. (Brad Halferty)
3. Being a “recommendation engine” instead of just a location-based check-in service keeps platforms useful beyond the usual 60-day honeymoon period. TriOut has to take time to educate local business owners about the need to engage customers via technology, so the small business can stay relevant. Ultimately, companies committed to customer service and engagement tend to get good reviews online, and uncaring companies get bad reviews. (Lawrence Ingraham)
4. Mobile-based services on consumers’ phones aren’t yet widespread, but they’re growing fast. If you’re not doing mobile, you’re going to miss out. (Wayne Sutton)

Want more? Read on for my analysis, comments, and the details, and please share your comments below.

Analysis: Many Opportunities for Small Businesses to Win, If They “Get” the Need for Marketing

The panelists painted a picture of the types of businesses that should and shouldn’t be doing location-based marketing. My summary:

• Profile of an ideal business to benefit from location-based marketing:
  • Local retailer that has a basic marketing plan already
  • Committed to engaging with customers
  • Not currently at capacity
  • Ready, willing, and able to offer discounts to customers and prospects who are active on location-based services
• Profile of a business that shouldn’t use location-based marketing:
  • Doesn’t care about customers
  • Doesn’t have a physical [retail] location
  • Isn’t willing to engage with customers
  • Can’t scale up to absorb increased customer traffic
  • Can’t or won’t offer targeted discounts to most frequent customers
  • Doesn’t already have a marketing strategy

Owners of local businesses can plug into existing networks like TriOut, Twongo, and Yelp, to take advantage of their access to opted-in consumers.

The key seems to be that location-based marketing reaches consumers right as they’re about to make a buying decision (where to eat dinner, where to join their friends for lunch, etc.).

In the case of daily-deal services, there’s an urgency: customers make a “yes/no” point-of-purchase decision as soon as they receive the promo email. There’s some psychology, too: scarcity (daily expiration dates), cooperation (the more that buy something, the less everyone pays), social proof (if other people are doing something, then you’ll do it, too), and the role of influencers (people with a strong following can make more of an impact).

You have to be able to scale up. If your restaurant is already full, you don’t need to do a daily-deal promotion. You also need to be listening to what people say about you, on Twitter, Yelp, and other services.

Using daily-deal services like Twongo to reach the “shifters” who aren’t brand-loyal makes sense, but it seems they’re more likely to abandon you when another good deal comes along (if they haven’t converted to “shoppers” or “advocates”). That seems to prove the need to provide good service all the time, since you never know who’s making a “will I come back?” decision.

The education hurdle seems to be pretty big — if a small business owner is busy keeping the store going, the location-based marketing company has to sell them on the need to make a marketing investment. Obviously, some small businesses “get” marketing more than others.

I was surprised to hear that 85% of Yelp reviews are positive (3+ stars). I’d have expected more than 15% negative reviews, even when the spurious negatives are removed by the automated filter. When I followed up with Christina Gates afterwards, she mentioned this proportion has been consistent since the service launched in 2004. The company now publishes rating trends and distributions for businesses that have a minimum number of reviews.

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My Comments: You Need an Overall Marketing Strategy, and Be Ready to Deal with Controversy

Panels can sometimes ramble, but that wasn’t a problem here. Wayne had a great list of questions for panelists that hit on all the key information the audience might want to know.

I think the event missed just one overarching concept — the panel didn’t address the need for an overall marketing strategy first. As Wayne noted at the Triangle AMA social media boot camp, “Don’t say ‘Let’s do location based marketing!’ if you don’t have any marketing plan yet.”

More of a detail, but I also wondered how a small chain might manage multiple locations — multi-location promos on Twongo, centralized updates on Yelp, or centralized administration on TriOut. For instance, I imagine every Kerr Drug location in NC has some info that a single marketing person could update, even if the individual store managers “own” the pages.

Yelp has drawn some criticism and lawsuits from small business owners, who allege the Yelp sales team threatens to remove good reviews if the business doesn’t buy a $300/month advertising package. When I followed up with Christina Gates afterwards, she noted that there are 11 million businesses on Yelp and that only 10 of them chose to be involved in a lawsuit.

Christina pointed me to the company’s official response, and also highlighted how the company revised its review-handling process in April 2010. Specifically, users can click a link to display reviews the algorithm hid as suspected spam, and advertisers no longer can choose a specific review as a featured review. They also added a trends graph to show how ratings are distributed. Certainly, there are two sides to every story — the sales team wants to make sales, and business owners don’t like getting negative reviews.

Final item, on the “lunch” aspect of “lunch-and-learn.” I recently joined the TIMA board. At our last board meeting, we voted to double the food budget (without raising event prices), so if you didn’t like last month‘s soggy sandwiches at Marbles, you’ll probably like whatever we’re having there in August.

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Details: Location-Based Marketing Panel on July 14, 2010

Christina Gates (@YelpNCTriangle), Community Manager at Yelp! in Durham, NC

• Christina is Yelp’s community manager for the N.C. Triangle. Yelp started actively reaching out to the Triangle in January 2010. Yelp has 33 million monthly uniques on the web worldwide, and 2 million uniques on its mobile app.
• On why location-based marketing has become popular now: Technology has advanced, obviously; there are more capabilities on the go. There’s also more communication between services; cross-posting and feeds help things go viral. According a Nielsen survey, 70% of consumers making a buying decision look at product reviews online, and this reliance on reviews is likely to continue.
• On how Yelp addresses misconceptions about location-based marketing: They use an algorithm filter to protect the integrity of the site from fake, malicious, or shill reviews. The automatic filter hides suspect reviews (although users can now click a button to display them). This is different from other sites, which may have anonymous reviews. Provides a free suite of business tools to track traffic.
• On examples of local business connections: They run a monthly event for the local Yelp community. The event showcases a venue and brings out the most active and influential users on the site (“tastemakers of the Triangle”). This gets the sponsors in front of influential people. She finds the events help bridge online friendships to the real world.
• On how to increase their user base: As competition increases, Yelp will offer more integration with other services. For instance, you can biw make an OpenTable reservation from a restaurant’s Yelp review page. They also added a Restaurant.com tie-in for gift certificates, along with movie reviews for nearby theaters. The goal is to provide useful information to people who are looking for what to do.
• On the “gaming element” (fun gaming strategy) of their service: Check-ins were initially to add weight to their interviews (e.g., Wayne gave a positive review to DSI Comedy a year or two ago; the review is now old, but he’s checked in there 10 times since then, so he presumably still likes the theater). Based on feedback from users — who demanded badges — Yelp added badges.
• On dealing with critics who say location-based marketing is a passing fad: “Where I might go to Facebook to stalk pictures of my ex-boyfriend, Yelp is where I go to decide how to spend money. It’s close to a business transaction. It’s a great arena to get the conversation going.”
• On mobile apps: Saw 27% of recent local searches were done via their mobile app. Over 2 million uniques on Yelp’s mobile platforms last month, plus 500K calls made to local businesses from Yelp’s iPhone app. She noted that this is one call every five seconds to a business as a result of Yelp.
• On receptiveness of business owners to Yelp’s “you should claim your page” outreach (question from Angela Connor): They’re typically positive. Biggest issue is that owners are already busy and Yelp is “another thing to do.” Christina gives power users “You’ve been Yelped” cards to leave in the payment billfold at restaurants, encouraging the business to claim their Yelp page.
• On how business owners can manage crowdsourced negativity (question from Janet Kennedy): Yelp is new in the Triangle, so there are “no mean, troll-y people.” Right now, it’s a “pretty fresh and happy group of people in the Triangle.” Yelp did a graph of the star ratings. The distribution skews positive; 85% of the reviews are 3+ stars. The automated filter should flag a one-time hit-and-run 1-star ratings.

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Brad Halferty (@TeamTwongo), Co-Founder and CEO at Twongo.com in Cary, NC

• CEO and co-founder of Twongo, a daily deal “group buying” service based in Cary that went live in January 2010. They send out a daily deal; the more people who buy it, the lower the final price for everyone.
• On why location-based marketing has become popular now: The concept started 10 years ago with permission marketing. Today, saving money has become a badge of honor. According to an IBM survey, 30% of consumers are “shifters” (that is, they’re not loyal to one particular vendor in a channel). The goal is to get them in the door to see/try in-store experience, and then convert them to regulars (“shoppers” and perhaps eventually “advocates”).
• On why businesses should think local marketing first: Twongo focuses on deals that send customers to local small businesses when they need it, as opposed to overwhelming the businesses at already-busy times. It’s not intended to be a monthly promo, but something that local businesses can do 3-4 times a year.
• On an example of a local business success: Twongo sends five deals a week (they’ve sent 100 total since they launched). The featured business typically gets 200-500 “sales” via Twongo. The biggest success to date was The Meat House, which sold 1,000 vouchers. The voucher is good for 60 days, so this means Twongo brought in an average of 16-17 customers a day over the course of the deal. A typical Twongo client is a business that isn’t operating at capacity (because a packed restaurant doesn’t need Twongo). The business needs to be able to handle a bump in business.
• On how to increase their user base: Without much marketing spending, Twongo is growing 5-10% a week, so they can go back to a client and say, “Your potential customer base grew 500% since your last promo.” Twongo’s goal is to expand to new areas and continue their organic growth.
• On the “gaming element” to their service: For all of the panelists, the goal is to increase active participation. Games help. For Twongo, it’s not so much checkins or a leaderboard, but that the more people who participate, the lower the price for everyone.
• On dealing with critics who say location-based marketing is a passing fad: Quoting Mitch Joel from an article about the venture capital valuation of competitor Groupon, Brad said, “Who’d have thought a company selling a single product a day is worth a billion dollars?” He noted, “There’s value in reaching hundreds of thousands or millions of people,” as opposed to blasting out coupons three times a week. There’s a sense of anticipation when subscribers go to their inbox. The timing of deals adds a sense of urgency; it becomes a point of purchase decision (read it; decide “yes” or “no” immediately).

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Lawrence Ingraham (@lawpower), Creator and Developer at TriOut in Chapel Hill, NC

• Lawrence is co-founder and the lead developer for TriOut. TriOut is a location-based service that has morphed into a recommendation engine, driven partly by where users like to go most. It’s a local company; the partners are based in Chapel Hill and Raleigh, NC.
• On why location-based marketing is suddenly so popular: The technology has grown. Social networking services like FaceBook and Twitter make it easier to get the word out. Also, the “economy sucks.” People are looking for coupons.
• On how TriOut addresses misconceptions about location-based marketing: By default, TriOut checkins are automatically private. TriOut doesn’t share your location publicly unless you want to; it stays within your circle of friends. “Privacy is huge” and was a priority for them from the beginning. In contrast, privacy is an “opt-in” for some competing services.
• On success stories for local businesses using TriOut: TriOut provides analytics to local businesses on check-in information, including where customers go afterwards. [NOTE: I assume the "where they go next" data is on an aggregated or otherwise anonymized basis.] Businesses can automatically give out free coupons at check-in. About 45 companies have used such coupons, and there are currently about 100 coupons available to redeem. TriOut’s goal is to convert businesses to Premium, where TriOut sends them a message immediately when a user checks in.
• On how to increase TriOut’s user base: The two challenges are technology and education. On technology, users need a smartphone or other web-enabled device to check in. A lot of people don’t have that yet. The other challenge is educating businesses. Lawrence said he’ll walk into businesses that have never heard of Twitter or Facebook. The local business may have created their website in the early 2000s and say, “What do I need to do? I’m on the web!” They don’t have the funding to  hire someone to monitor their Twitter feed; they’re lucky if they have a verified/claimed Yelp page. TriOut tells businesses: “You don’t have to monitor constantly, but here’s the minimum you need to do to be relevant today.”
• On the “gaming element” (the fun aspect) of TriOut: They started as a location-based service, so initially, the award was the only thing they had to offer. The problem is that the ‘fun’ feeling wears off after 60 days (for TriOut and for other competing location-based services, too). The question is, how do they keep people engaged? “In many ways, check-in awards are like loyalty programs” (the ‘free coffee after 10 cups’ programs). Can also do weekly leaderboard contests. Sponsors have included Golden Corral in Cary and Empire Eats in downtown Raleigh. More check-ins gets people more points, and more entries in the contests.
• On dealing with critics who say location-based marketing is a passing fad: Any time you can provide value to a user that’s tangible, that’s a good thing. Lawrence said TriOut saw how competitors’ users get tired after 60 days; services need to do something after that. For TriOut, it’s about becoming a recommendation engine.
• On the value of having a mobile app: People make decisions on a whim (for example, the line’s too long at your original choice, and you suddenly need to find a nearby family-friendly restaurant). As an aside, Lawrence said: don’t make restaurant or band websites in Flash, because mobile users can’t access them, and you’re losing business or word of mouth potential.
• On dealing with the crowdsourced negativity in reviews (question from Janet Kennedy): Users can leave reviews, which goes into TriOut’s algorithm. TriOut can automatically cc new reviews to a business’ Twitter account. [If they're smart,] businesses must have a Twitter account, since they can see if/when anyone left a review and respond appropriately. Not having a Twitter account means they can’t respond to customers via Twitter. The company can follow up via TriOut’s business portal. TriOut also offers a premium service that does instant notifications when someone checks in at the business.
• On dealing with entitled customers, who threaten a bad review if they don’t receive a favor (my question): It really comes down to companies that do or don’t provide engaged customer service. A low-service chain restaurant in a strip mall may get bad ratings. If a business doesn’t care about service, it probably doesn’t care about engaging its customers. Ideally, instead, you should engage customers and follow up. Have those conversations.
• On a case study of terrific service: For instance, The Pit in Raleigh is the most popular restaurant on TriOut, with 80-some users who’ve checked in there. Their employee, Eric, responds to people on Twitter, about reservations and other comments. It’s “crazy how far they’ve taken it.” Eric gets the check-in notification, and he’ll come by to find people, to thank them for coming. Sometimes he gives them a free dessert. If you have that marketing budget, it shows what you can do with social networking. [NOTE: And the "time" budget, too, to commit an employee to do the social media workload.]

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Wayne Sutton (@waynesutton), Business Development/Marketing Strategist at TriOut in Raleigh, NC

• Wayne is the business development and marketing strategist at TriOut, among other roles.
• Some of the questions he asked the panelists: Why is location-based marketing suddenly so popular? What are some examples of local business successes with your services? How do the services’ gaming elements drive usage? How does your service address misconceptions about location-based marketing? What’s your response to people who say location-based services are a passing fad? How important is it to reach consumers via mobile apps or otherwise on their phones?
• Based on a hands-raised survey of the audience, for participation in TriOut, Twongo, and Yelp: Participation is still relatively low, which means the services are fairly new to the audience.
• On mobile marketing: Mobile is the future. If you’re not there, you’re going to miss out. Geolocation is a big trend. Not ubiquitous yet, but growing fast.
• On local community: If you’re a local business, you’re targeting local customers. If your community is using local products, why not use a local service, rather than a national one that has you set up everything online and then walks away?

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Conclusion

There you have it — location-based marketing can help your business if you fit the profile and commit to making it work. What were your biggest takeaways from the TIMA social media panel?

Analytical marketer Karl Sakas uses creative systems to help companies quickly find new ways to make more money. He’s available for hire on a full-time or consulting basis from Raleigh, North Carolina. This is the 8th in his series of marketing event recaps.

Photo credits: Karl Sakas (You’re more than welcome to re-use these photos with attribution if you include a link back to this article.)

Tagged as: customers, experience, marketing, mobile, research triangle, social media, tima, trends