LocalResponse Turns Check-Ins Into Instant Marketing Opportunities

If you managed a major brand-name product, how much would you pay to be able to advertise directly to consumers right as they were arriving at a place where your brand is sold? Nihal Mehta, CEO and co-founder of New York-based LocalResponse, is betting that most consumer-products makers would say “a lot” when asked that question.

Today LocalResponse launched a new tool that allows companies to see, in real time, people “checking in” to places where their product is sold. But LocalResponse can detect check-ins far beyond those that are registered on Foursquare and other location-based social-media sites. Mehta and his team developed and patented a technology that translates natural language into check-ins. So if a fitness freak tweets “On my way to the gym for a workout,” Coca-Cola can see that person is likely headed someplace that sells its Powerade sports drink, and answer back with a coupon for the product.

LocalResponse’s brand platform is the latest step in the company’s top-to-bottom reinvention. Mehta started the company in 2007 as Buzzd, a site that aggregated check-ins from Foursquare, Gowalla, and other location-based sites. “It was like a heat map for consumers to see what was happening in their city,” Mehta says. He managed to raise $3.5 million, but realized rather quickly that success was far from guaranteed. “It was a very crowded space, and Foursquare was starting to get a lot of attention,” he says. “Plus it was hard to monetize that business.”

So Mehta and his team decided to turn the company from a consumer-based site into a business-to-business platform. In December, they raised $1.5 million from a slate of investors that included Verizon Ventures, Penny Black/BOLDstart Ventures, Charles River Ventures, and Greycroft Partners. Then they worked as fast as they could to try to get out in front of a market that Mehta believes they have an opportunity to lead. “Foursquare accounts for only 3 percent of all check-ins,” he says. “The ability to create check-ins around natural language is what makes us unique.”

On April 19, LocalResponse launched its first tool, a platform that allows local businesses to target customers who are visiting their stores, restaurants, or other venues. Those companies can see how many customers are checking in at any given time and what site they’re using to communicate their location. They can even view mini-profiles of each customer, complete with the photos those people posted on social-media sites.

During a meeting at his small office in Manhattan’s Chelsea neighborhood, Mehta grabbed his laptop, logged onto LocalResponse, and typed in “Shake Shack”—the name of a hot burger joint in New York. A page popped up showing that 16,000 customers had checked into the restaurant recently, including one young woman who tweeted that she was taking her parents there to show them “what a real burger tastes like.” The service, which is free for local businesses, allows them to send messages to 16 people at a time, offering coupons, discounts, and the like. More than 2,000 companies have signed up so far, Mehta says.

LocalResponse’s newest tool offers more potential to create revenues, Mehta says, because the brands will pay LocalResponse a “cost per click” every time a customer responds to an offer. Several major brands participated in the beta test, including Coca-Cola and Kraft. Mehta says he has 200 campaigns “in the pipeline,” though he declines to provide details.

LocalResponse is gearing up for a major marketing push, which will be led by Kathy Leake, who joined the company May 5 as president and founding partner. Leake is an ad-agency veteran who founded Media6Degrees, a social-targeting company. She was looking for a new challenge when a VC introduced her to LocalResponse. “This was by far the most interesting idea I ran across,” Leake says. “Social targeting is part of our fabric now, and this is the new generation of marketing.”

But Leake will have to convince some of the world’s most powerful companies that LocalResponse can do targeted marketing better than they can themselves. She believes the beta test provided powerful evidence of that. The six campaigns that were part of the test produced click-through rates of more than 25 percent and redemption rates of more than 30 percent, the company says.

“Most social targeting that’s done online is an educated guess,” Leake says. “We can provide the ability for brands to know where their customers are.”

Mehta says LocalResponse is about to close another round of financing. And his team is putting together a plan to offer premium services to local companies, so they can monetize that side of the business, too. But his experience with Buzzd taught him that he can’t count on being the market leader, and he fully expects rivals to challenge LocalResponse’s early lead. “We want to own the market,” he says, “but it’s going to be a land grab.”

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