NearbyNow: Location-Based Shopping

NearbyNow allows shoppers to find products that are sold at their local stores. So far the company has received two rounds of funding worth 2.5M & 5.5M US$ both led by Draper Fisher Jurvetson. My conversation with Dan Steinman, Co-Founder & VP of Customer Relations, shed a light on the company’s strategy, mobile shopping usage behaviour, and the product decisions that drive user acceptance of promotional mobile alerts.

People are increasingly researching products online before they buy. But the majority of them still prefer to purchase in-store. NearbyNow is helping the “search online & buy offline” type of buyers to find and reserve the products available in their local malls from their computer and also giving shoppers at the mall a chance to get discount alerts and coupons on their mobiles.

Below: Amount of Offline Spending Influenced by Online Research

The 5 points below describe how NearbyNow operates:

1. NearbyNow talks to shopping malls around the US and signs up their retailers to make available their product inventory feeds.
2. Each shopping centre gets its own customized website (such as this). The site includes all products being sold by all retailers and is available to anyone on the internet to browse or search. In other words retailers’ products are marketed on the internet without the need to create a specific e-commerce website.
3. People with the intent to buy a product from a nearby store can go to the mall website and search for their product to see where they can find it, its availiblity, and pricing. The site as well as the entire product catalog is acessible through the search engines.
4. Search results for products on the shopping centre site include relevant ads and coupons.
5. Alternatively shoppers walking around the shopping mall can also search for products and coupons through NearbyNow’s text message service.

NearbyNow Mobile: location-based product search
Originally the service allowed shoppers at the mall to send a text message to shortcode ‘NEARBY’, with the mall code, and the name of the product they’re looking for. The service would then send you back two text messages telling you how many stores carry that particular product and the names of those stores.

After doing some focus groups and talking to customers the company determined that shoppers are more interested in sales and discounts. And they refocused the ranking of their search results to give a higher weight to stores with discounts and special offers. So when you send a text with ’shoes’ you will get back a list of stores that have shoes on sale. NearbyNow needs to limit ’search results’ to a minimum because of the inherent limitations of SMS. So for example, if PaylessShoeSource was having a store-wide discount and Macy’s was only having a dozen shoes on sale then PaylessShoeSource gets priority over Macy’s.

NearbyNow is working on an upcoming mobile product that consists of a mobile website that allows shoppers at shopping centres to search for products and get richer, more interactive search results. The application will work on standard mobile browsers including the iPhone’s.

Alert Marketing & Promotions
NearbyNow also allows retailers to send marketing messages (or ads) to shoppers in the mall. Those ads can be appended to the end of the search results SMS (like Google Adwords sponsored ads) or sent individually.

Mobile coupons are becoming more and more popular. Let’s say you sell ice cream at the shopping center food court, you can give out a 25% discount on sundaes to shoppers who can show you the code on their mobile.

NearbyNow wants to make sure that its customers enjoy their mobile experience. It limits the number of promotional text messages to 1 to 2 messages per hour depending on the mall. And the company tries as well to keep messages contextual. A promo message for FootLocker gets sent out only to people who have previously searched for shoes. The company assumes that the shopper has left the shopping center if more than 30 minutes have passed since his last mobile interaction and stops all marketing messages. Customers are undoubtedly very sensitive to receiving spam messages on their cellphone and Dan thinks that being relevant is key to maintain a good relationship:

You can do a lot of things that are very contextual and extremely targeted because when someone types somthing into their search box or puts it into their mobile they are telling you something very specific about their interest. So you can respnd with something very specific as well. And that’s the key to advertising on a search-related environment - making sure that every single offer you send is relevant.

Marketing of NearbyNow’s Mobile Service
NearbyNow markets their SMS-based mobile service through marketing material at the mall. There are handouts, posters, and banners in various places. In addition reception or info-booth attendants are knowledgeable about the service and are trained to answer questions about it. The big idea for the marketing messaage seems to be “Search the mall using your cellphone”. And shoppers at the ValueFair mall, for example, are invited to send VF to NEARBY. NearbyNow replies with a text that tells the user how to go forward.

In addition, the company runs seasonal events to increase usage of its mobile service. So for example, right now they’re holding a ‘back-to-school’ sweepstakes. Everytime someone searches for a product then they get entered into the sweepstakes and in the first 4 days of the promotion the company got around 16,000 searches across all malls. According to Dan, it is curious about how many of those shoppers will continue using the service after the promotion is over, but thinks that it is clear that people are interested in doing the searches from the mobile.

Business Model
NearbyNow has signed up 105 shopping centers so far. Its business model is 100% advertising. NearbyNow allows retailers to advertise their products to local shoppers sitting at their home PC as well as those searching for products from their mobile at the mall.

Three Location-Based Services Highlights
You can have your own opinion if NearbyNow’s mobile product can be considered a location-based service. To me, it clearly is. The application gives shoppers shopping information based on where they are. There are three important highlights I’d like to point out for all you LBS developers and product designers out there:

• Rudimentary positioning works. Unlike other LBS applications NearbyNow does not need to continuously monitor a user’s movement. There are only two cases. Is the user at the mall or not. To say that ‘I am at the mall’ the user sends the two-letter-code of the shopping center to NEARBY. To say that ‘I am out of the mall’ the user does not need to do anything. He is automatically checked out 30 minutes after his last interaction.
• Alert marketing is OK if you’re highly relevant. NearbyNow’s marketing alerts coud be considered pretty invasive outside the shopping centre context. But users are happy receiving them because they are:
  • Contextual: related to what they’ve searched for previously.
  • Valuable: informing users about discounts and special offers.
  • Timely: received only when the user is in ’shopping mode’ at the mall.
• Old fashioned marketing works too. NearbyNow’s mobile product is high-tech, but the marketing for it doen’t have to be. To tell users about the service the company is putting up posters and banners. Location-based-services have this “in real life” or immersive attribute. And I expect to see this pattern of low-tech marketing of high-tech mobile products with other upcoming LBS applications.

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