December 29, 2012

What’s next for local businesses in 2013?

The tools in a local business owner’s marketing toolkit typically drive discovery, promotion, and loyalty for his/her business. For many business owners, this is also the typical order of operations. First, a business needs to be “discoverable.” This means it should be in a good location, have good signage, and be able to be found by customers looking for it—online and off. But business owners are not typically satisfied with the traffic that comes from Google search or Yellow Pages, so this leads owners to promotional efforts. Oftentimes, this is an advertisement placed in the local newspaper or a direct mail piece with coupon. In recent years, some merchants have tried daily deal promotions and relied on the reach of the daily deal company and a deep discount to drive foot traffic. But we all know that many local businesses have been burned by unprofitable bargain-hunting consumers who never return after a daily deal. Loyalty has often been the last marketing tool deployed, and traditionally the methods used to drive it have been rudimentary. Sometimes coffee shops will use a punchcard to drive repeat business and increased frequency of visits. Another method is to collect email addresses at the point-of-sale in return for a prize giveaway. In recent years, capturing relationships to drive loyalty has gone online with businesses posting their Twitter handle or Facebook Page at the counter. However, businesses continue to struggle with having their Facebook fan counts match their actual foot traffic and translating fans into increased frequency of visits and word-of-mouth acquisition.

So what’s next? How will these tools continue to improve with technological innovation? Two trends are currently transforming the local business owner’s toolkit: Mobile and Software as a Service (“SaaS”). We all know that Mobile’s impact on local business owners has been percolating for the last 2 years. As an example, business owners can claim their Foursquare place today, and when smart phone users “checkin” to their business, they can communicate with those customers. While this is really interesting, checkins via social networking apps remains a niche behavior that has had relatively minor impact on local business owners. What about SaaS? Are we seeing powerful cloud-based software delivered to local business owners at incredibly low costs? Square could be the first example of this. Instead of having to buy expensive credit card processing terminals, Square is giving any smartphone-owning small business owner access to low cost credit card processing at incredibly competitive rates. But I would argue that Square is also a niche phenomenon that has primarily impacted zero employee businesses and freelancers.

If we can innovate to reduce friction in mobile app adoption and make modern SaaS applications ubiquitous among local businesses then we can revolutionize ALL the tools in the local business owner’s toolkit. Mobile will drive discovery, enable relevant location-based promotions, and fuel universal loyalty programs. SaaS will help merchants capitalize on the mobile-driven traffic and mobile-enabled identity immediately at the point-of-sale and facilitate ongoing relationships that result in word-of-mouth over time.

What will this look like? The primary tool for discovery for smart phone users today is to just go into their Yelp app and find nearby restaurants. Some fraction of users then typically go into another app to checkin to a store, but then the merchant still does not know who you are at the point-of-sale. But what if you could go to your mobile phone and find lots of nearby restaurants that are highly rated AND have a timely happy hour promotion AND where you can earn more rewards based on your past spend? And then if you could walk into a restaurant, and they would know immediately who you are, your preferences, and if you’re a VIP? At the point-of-sale, they would be able to call you by name and give you a free drink since you are one of their most frequent customers. Sound far-fetched? All of this can happen in 2013 and be ubiquitous by 2014. My company, FiveStars, is one of the many companies trying to make it happen. Merchants will be able to drive discovery, promotion, and loyalty all in a single platform that can be described as part POS, part CRM and part marketing automation platform. 

In my opinion, there are some startups out there that aren’t seeing this complete picture or trying to assemble all of the pieces. They think it’s all about earning points but not about facilitating a better service experience. They think it’s about more app downloads and not about driving ubiquitous adoption and transforming all of commerce. I see a world where the local business owner has the tools to turn every transaction into a real, ongoing, two-way relationship. If this happens, I think not only will local businesses be stronger but so will our communities. Looking forward to a great 2013!

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