Avoiding the "Brand partnership" trap

Dec 14, 2011

Table of contents:

  1. The problem
  2. Foursquare’s success
  3. When services struggle to find a business model
  4. The solution

Foursquare pioneered the Brand partnership business model which combined geolocation, rewards and real time intelligence of your loyalist customers. Now every new start-up that has an element of geolocation seems to be jumping on the brand partnering business model bandwagon. Here is why 99% of them will fail, and why they should stop being lazy or unwilling to try something new.

The problem

Foursquare have become the number one geolocation service right now and were really one of the first companies to allow Brands and Merchants to reward loyalty based upon when a customer was physically at their location. As with any new business model that works very publicly for a rising star like Foursquare, other’s see what they are doing and try to imitate it using their user service. We are now at the point where there are so many user services that are offering Merchants a way of rewarding their loyal customers and getting that marketing feedback loop, that it is drowning the experience.

Ultimately their will only be a handful of companies that manage to make a real success of this business model. As with many examples in the past, their will be a few outliers, whilst the rest will have little to no engagement. Foursquare need not be worried about people clutching on to their coat tails. Rather if you are manoeuvring your service to use this business model, you are making a big mistake.

Foursquare’s success

Foursquare began it’s journey in it’s simplest form as a way of announcing to your friends your current location. Then came tips, lists and recommendations of the places around you. These features moved Foursquare into a utility application, rather than a vanity app, where the more you (and other users) invested, the better the whole experience would become. Foursquare have been doubling down on these areas in recent iterations, adding the Explore and Radar features. Foursquare has also recently firmly established itself as the number one check-in app after rival service Gowalla first pivoted, then was acquired by Facebook. Foursquare is one of the rare services that not only has a strong growing user base, but has also been discovering an evolving business model that has opened up a path to profitability. Partnerships with Amex and American Express have been two of the recent high profile success stories of Foursquare.

When services struggle to find a business model

Everyday there seems to be a new online service that caters for a very specific niche or use case. Many combine various aspects of other services like Foursquare, Groupon or Instagram in an attempt to create a service that resonates with their target audience. Not every new start up is flush with cash that enables them to build a huge audience then find a business model at some point down the line. Arguably Foursquare have been lucky in that they have received funding and breathing space to find a model that is suited to their user base. However other services that are not so cash rich seem to grab onto the business model that is publicly doing well.

It’s really just the same old story. One company will have a breakout success, then other companies copy that model or try and emulate it and try to fit it to their situation. “Brand partnering” and “location services connecting consumers and merchants” seem to be the current fashionable business model for vanity type online user services.

The problem with this is, you can’t just copy and existing business model that is working for one service, and modify it to your experience. The ironic thing about online services is, inherently they are supposed to be innovative. Yet, if they are copying, or just combining aspects from other services, they are being anything but innovative. 99% of these services will die as the uptake by both consumers and merchants will be too low to really ever catch that critical mass.

The solution

If you are reading this, and you’re thinking “Oh sh*t, that’s me!” here’s are some steps for forgetting all the fashionable things, and getting back to the reality of your users.

1. Stop reading TechCrunch

TechCrunch is all about the vanity metrics. You don’t want to concern yourself with what anyone else is doing. Concentrate on your vision.

2. Stop referring you yourself as the “We’re the insert popular service of target industry

If you need to refer to yourself in this way in order for people to understand what you do, you are already too complicated. Simplify.

3. Find the value that you are creating

Finally look for a business model that is core to the value you offer your users. Be innovative and look to make as many mistakes as you can until you find the model that is right for you, your service and your users.

Don’t fall into the trap of becoming another me-too service. The fact that you even have users is huge, don’t try and cash in on them with a tired business model that does not suite your service.

Philip Brown


© Yellow Flag Ltd 2024.