While I have been robotically checking in all over the place for the past year or so, I’ve asked myself about the game mechanics at Foursquare and why there are 18 locations listed for the Fort Lauderdale airport making it confusing to know just where to check in.

In short, when things get confusing, the fun goes out of the balloon. There are some issues to be called out but I also acknowledge a big untapped opportunity with location based services for business, both large and small.

The issues:

• The earliest stages of Foursquare usage had a competitive element among linked friends. It was fun to see who was checking in most often and where. Once people realized they could enter a venue for their office or master bedroom and check in umpteen times per day, keeping score on check-ins in your network lost its meaning.
• In the beginning there were Mayors and the Mayors got all the goodies. Because the number of visits needed to win mayorship is not transparent, becoming mayor of some places is not at all motivating, especially when more times than not there are four geeks ahead of you who call the local Panera Bread home.
• User generated environments encourage creativity, but databases and creativity don’t get along very well. My example at the airport is simple: multiple instances exist and are differentiated only by the level of data entered by the user the first time around – many time incorrect data to boot. It’s hard to know which “airport” is the one you’ve been checking in to for the past year, and I don’t need a part time job dissecting competing venues just to have a little “fun”.

Standardizing the venue database and refining rules of the game are issues that I am sure Foursqaure is addressing. I expect we will see big progress in both areas soon.

The big question that remains is why merchants have been so slow to capitalize on the Foursquare opportunity.

Foursquare is doing its part, publishing links on its home page to help businesses “connect with your customers”. On that page, they sketch out a four-pack of ready-made promotions that can be used by small (or large) businesses. I’ve listed them here (they should be familiar) along with some loyalty perspective for each one:

• Mayor Specials: Reward your single most loyal customer
  • What about rewarding customer value, not just frequency?
• Check-in Specials: Variable specials that are awarded upon check-in
  • Training front line staff is key to making this work – I’ve had several staffers give me a weird look but no goodies when I show them I’ve checked in
• Frequency-based Specials: Something given free or at a discounted price every “X” check-ins
  • This one makes my loyalty spider-sense tingle. At least we’re rewarding all customers who exhibit some incremental behavior, not just the mayor
• Wildcard Specials: These are Surprise & Delight “instant” offers that will have people looking for your location
  • Why not use Foursquare to “shout out” to anyone checking in nearby or just grazing through nearby merchant venues? It’s better than hiring the sandwich board guy

Merchants are catching on and seem to increasingly understand that creating awareness can lead to incremental visits and help them find new customers – all at a much lower price than old school methods, Yellow Pages included.

Tomorrow, I’ll share a day in the life of Foursquare to illustrate how quickly merchants are realizing the opportunity. We’ve only scratched the surface and the fun has just begun.

Amazon announced it is selling more Kindle books than hardcovers, the US Postal Service is in jeopardy, and Continental Airlines will begin allowing travelers to scan themselves on board flights. As change marches on, what other familiar aspects of our lives will join the milk-man in a mythical global retirement home?

Keep an eye on traditional points-based loyalty programs, because they just might be next.

Points programs have been around for decades because, as my friend Jim Ryan told me, “they work”. Jim, the former CEO of Carlson Marketing, knows this business cold and although we both agree that points-based loyalty currencies are an effective medium to change & measure consumer behavior, the companies which foot the bill for these programs are increasingly opting for something different.

I did a market scan recently and found a few examples of how Loyalty Marketing is being redefined:

• Ford ran its “Fiesta Movement” campaign (to be profiled soon in Loyalty Truth) over a year ago, recruiting 100 agents to drive a Ford Fiesta and document their experiences through written and video blogs. The results? Ford created over 11 Million social networking impressions, created a 37% awareness of the new car across Generation Y (Millennials), and enjoyed one of the best new car introduction campaigns in years.

• Tropicana launched Juicy Rewards, a hybrid of the on-carton coupon model which typically requires consumers to enter codes online till their fingers bleed in order to win something of value akin to a paper clip. The difference here? Tropicana has aligned itself with a strong portfolio of merchants offering discounts that equate to 5X the value of the product purchase price.

• Clorox launched CloroxConnects, a social site that serves three key audiences, consumers, partners, and employees. Better described as an Engagement Platform, Clorox encourages participation from each group and awards badges and recognition rewards based on proprietary game mechanics.

Don’t miss the subtlety of these new loyalty program formats. Each program has well defined business objectives, predictive analytics and financial modeling are used to refine audience targeting, and a loyalty processing platform is needed as the backbone to run the program in most cases.

In other words, the fundamentals to engage, interact with and retain customers remain consistent. The key difference is that instead of keeping score by awarding points, companies are moving towards scoring as much by social behaviors as transactional.

For the past 30 years, Loyalty programs have been designed by Boomers for Boomers. The influence of a digitally connected generation is more apparent than ever, and consumer engagement will only happen if you re-tool marketing strategies to embrace the Millennials and others who want more transparency and immediacy in their brand relationships.

Are you equipped to make these changes?