From the March 2011 issue of Entrepreneur

Could location-based mobile apps possibly have a beneficial business purpose? Survey says … yes.

I'm not ready to say that this past holiday season was the tipping point for mobile, but I know I found myself doing a lot more with my mobile phone in December. Primarily I checked in to retail stores and locations.

And I wasn't just advertising to my Facebook friends and Twittering to relations about how much I was spending on their gifts ("Look! I'm in Tiffany's!"). Mostly I wanted to see what merchants were willing to offer me for simply walking through their doors.

When the right offer came along, I bit--whether on 10 percent off at Radio Shack or a free eggnog latte at a coffee shop in the mall. Then I posted the find to my social graph.

Loyalty programs or lead generation? You make the call. But I know I wasn't headed in that direction until I checked in to Foursquare, Gowalla, shopkick, Loopt or one of the other geo-location services.

Where y'at?
Location-based mobile services are becoming easier both for consumers to find and marketers to use. Facebook and Google have launched services in the category, but here are the independent hot spots

Foursquare: About 5 million members worldwide check Foursquare regularly to locate friends and to find tips and offers in places they've never been before.

Loopt: With more than 4 million users, Loopt recently announced plans to migrate Loopt Star, its standalone rewards-only app, to the main platform.

Gowalla: An admitted underdog, the 600,000-user app has made itself compatible with both Foursquare and Facebook Places (which claims 30,000 users.)

Whrrl: Allows members and brands to set up "societies" based on shared interests; brands can offer real-world rewards for digital actions such as check-ins.

Scvngr: Really a game layer built on the Facebook social grid, SCVNGR stresses interesting scavenger challenges that brands (such as AT&T Retail, Coke and American Eagle) can design and offer rewards for.

Critics have been quick to point out defects in the location-based strategy. Yes, the incentive to check in is pretty thin when your only reward is a badge or some other sort of honorific. (How hot are you to become "mayor" of your local dry cleaner, anyway?)

And, yes, the number of people who have downloaded the apps to their phones is relatively small. Foursquare, the category leader, has about 5 million downloads worldwide. That's a sliver of the 60 million smartphone users in the U.S. alone--and doesn't even take in the much larger U.S. audience (170 million or so) who are still using regular feature phones and can't access the app.

The question is, are those objections true for your business? If you had customers who would respond to a location-based game and you could find a way to give them something valuable as a reward, would they check in?

They have for Murphy USA, a gas retailer based in El Dorado, Ark., that operates more than 1,000 kiosk-style gas outlets, most located next to or near Wal-Mart's big boxes. Buying gas is not exactly the kind of activity you'd expect to tweet to your pals, or even enjoy. And frugal Wal-Mart shoppers might not seem a target audience for a campaign that requires a smartphone and some mobile savvy.

Nevertheless, the company ran a promotion last July on the Whrrl location-based social network. Users who downloaded the app could check in at the pump and win instant prizes, from free beverages and discounts to a daily $50 gas giveaway.

Murphy, already active in creating loyalty among brand fans, publicized the campaign on Facebook and Twitter. It also put up a point-of-sale message at the pumps, with instructions on how new users could get engaged with the Murphy community on Whrrl--or "society," as the groups are known on the platform--and what they stood to win.

The results compiled from the three-month pilot were impressive, says Casey Petersen, senior Internet business specialist for Murphy. For example, the industry average for pump visits is two a month. Customers who checked into the Murphy Whrrl society visited four times a month on average, and almost half of those checking in bellied up to the pump an average of six times a month. What's more, the average fill-up ticket per visit by Whrrl users was $30--twice the industry average.

But the most amazing result was that the check-in drove new customer acquisition at an astounding rate. During the pilot period, 44 percent of those checking in to the brand's society on Whrrl had never been to a Murphy station before.

"We're a low-cost, high-volume chain, and we've been careful in everything we do online not just to do something because it's a fad," Petersen says. "We really want to provide value for our customers, not just a badge." In fact, 85 percent of the check-ins said they chose Murphy over a nearby competitor specifically because of the Whrrl promotion.

Going with a location-based strategy was perhaps counter-intuitive. Murphy USA tracks Wal-Mart demographically and geographically, so the average customer is going to be female with a family. According to a Pew Internet survey in November, only 3 percent of women have used check-in services on mobile, compared with 6 percent of men.

On the other hand, an earlier survey by game maker PopCap found that 55 percent of the player base for social games--like FarmVille and Mafia Wars--are women, and their average age is 43. So maybe the best approach is to ignore the polls and the wisdom about edgy tactics and simply go out, see what your target prospects respond to and build a mobile promotion around that.