Checking in to check it out: An empirical analysis of customers' engagement on location based social media

Retailers are increasingly utilizing location-based services via mobile devices to enhance customer engagement. Unlike other 'new media' promotional vehicles such as online coupons or even mobile coupons, customers can utilize these location-based services by "checking in" to retail venues to obtain price discounts and to connect socially with others. Retailers need to understand the factors that drive customer engagement on location-based services. In this paper we analyze a unique dataset of restaurants in New York City. We develop a two stage empirical model to analyze both the spatial and temporal aspects of the location-based customer engagement (checkins) at Foursquare, and seek answers to questions like how could business characteristics, geographic proximity and demographic similarity together affect customer engagement. We find that customer engagement exhibits spatial interdependency that persists over time. We observe a spatial phenomenon that suggests that restaurants near locations that facilitate social interactions (such as universities and subway stations) benefit more, and we label it as 'social congregation' effect. Moreover, our time-series analysis shows that after controlling for demographic similarities, spatial correlation dissipates with distance, indicating a strong agglomeration effect in the restaurant industry.