Why Location Based Services are Slow to Catch on

During the Quick-n-Dirty Podcast today this NY Times Article LINK was posted in the chat room as they discussed LBS (Location Based Services) market acceptance for both consumers and businesses. I want to discuss philosophy and theory when it comes to consumer behavior

The Holy Grail for LBS is to bridge the last mile with consumers leading to a sale. The challenge is how to do it in ways that create a desire in the consumer to engage in this fashion. Will it be useful for them? Today I will use Restaurants as a case study. In a future post I will cover retail.

Restaurants. This is one that should be huge. Luring customers with specials and offers off the street. Well I can see a service that if I am out of my home and seeking to find a restaurant a service that would help me. Why not the Yelp! App on my Droid2? That would help me find restaurants correct? I can see the names and cuisines and go from there. I can even see reviews and possibly ask friends on Twitter. Done. I am eating.

But what if I am a business and I wish to lure you in. How do I know you are there? And if I know you are there wouldn't the rest of the businesses, and all of us will send out our specials or deals competing for your business. The problem is if I have to keep increasing my offer to compete it erodes my margins and profits. Plus if I don't have an easy and quick way to sift through the special offers and it takes too much time I will give up. Isn't Chili's by giving free Chips and Salsa on FourSquare just telling everyone Free Chips and Salsa for everyone? Is than any different than free bread or C's n S's at say every Mexican Restaurant that exists? Is that really special?

What about an LBS type of loyalty program. Wouldn't that work? As I frequent more I will get more back. Well this might work. But most of us like variety in what we eat, even among the same cuisines. Maybe I love your burgers but really feel like visiting your competitor. Once again you are back to increasing the bribe to get me in, reducing your profits. Doesn't a little card that I get stamped each time I visit work the same?

The point is we like variety. We love to try new places. We love to be able to tell people where we went and how it was. Even if we prefer one place for a specific cuisine we still will go to others just to mix it up. We will be open to some sort of a listing to browse specials and offers. I can see an APP that aggregates tonight's special dishes at local restaurants, or maybe Happy Hour specials (this one exists). 

Now I will say LBS has potential to bring in NEW customers. It is very much worth doing something to tease me into your seat, even if it means dropping your margins this one time. But after that you will start devaluing your business in my mind or your profits.

So what is the solution? Hmmmm......

Make kick ass food, give kick ass service, have an awesome atmosphere, friendly staff, and priced to fit all you offer. Do you really want to be competing at levels lower than this and have to reduce your prices just because you feel you need to use LBS? And if you are best in class do you really need an LBS technology to fill your seats? I think not.