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FourSquare: social media for small businesses

It's not enough these days to open a business and advertise the old-fashioned way. To stay competitive, you have to use all platforms of social media.

On "The Early Show" Monday, CBS News Business and Economics Correspondent Rebecca Jarvis took a look at one business that's using social media in interesting ways to expand.

Back in 2009, entrepreneur Luke Holden wanted to bring high-quality lobster to New York, but at reasonable prices. So, near the height of the recession, he took a risk: He opened his first restaurant -- Luke's Lobster -- in the East Village.

Holden said, "We are a young, hard working team who've never had a whole lot of resources. (FourSquare) has enabled us to grow during hard times, and efficiently, more than (other) small businesses are able to."

To make it work, Holden held onto his day job at a bank and spent nights and weekends serving $14 lobster rolls from a less than 300-square-foot storefront.

A few months later, he took another risk: Shunning traditional forms of advertising, he put Luke's Lobster's campaign online. Holden teamed up with a tech start-up called FourSquare.

Holden explained FourSquare is an easy way to get discounts when you're on the go.

"Forget about loyalty cards, coupons; (this) makes it so it's more digital and virtual," he said. "(I'ts) a digital wallet that you can carry around and its constantly rewarding you."

FourSquare is a mobile application that enables its 10 million users to virtually "check in" from their smartphones when they visit a local business like Luke's. The information is then shared with everyone in the individual's social network

Holden said, "Word-of-mouth from your friends is stronger than any other form of advertising in my opinion."

The information is also shared with the business where someone's checking in, so a company knows exactly who its customers are.

Dennis Crowley, chief executive officer and co-founder of FourSquare, explained, "We are also helping local merchants connect with the people that are most likely to become really great customers. And through that, allowing businesses to offer specials and discounts to a lot of these local merchants."

Luke's Lobster has capitalized on this by offering specials and discounts to those who "check in" through FourSquare. The most frequent customer is rewarded with an extra discount and the title of "mayor."

Christopher-Ian Reichel, the current Luke's Lobster "mayor," said he's been there twice in a recent week, but about 107 times this year - according to the count FourSquare provides.

Jarvis noted it's virtual customer loyalty with a very real impact on businesses.

Holden said it it's not smart to do business today without these social media tools.

He said, "If someone takes the time to do some type of action outside or inside of your restaurant that doesn't involve buying food at the counter, then that action should be recognized."

Jarvis added on "The Early Show" about 250,000 businesses use FourSquare. They range from mom and pop shops like Luke's to larger companies, such as Sports Authority. Of FourSquare's 10 million users, 40 percent are based outside of the U.S.

Jarvis said services like these are more common in bigger cities. She said business owners can learn basically for free who their frequent customers are, what time they come an establishment and the types of products and services they're interested in.

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