According to a recent article in the N.Y. Times, Foursquare is trying to transform its mobile social media “checkin” service into a more detailed and useful data-driven search service. But instead of a “search engine,” Foursquare wants to take its location-based “checkin” service to the next level, and create an online “recommendation engine” that can offer a more elaborate range of recommended restaurants, sites, small businesses, etc. based on the recommendations of other users.

With this move, Foursquare is trying to compete with Yelp and other small business review websites – but this one will have an added level of “social proof” since people can see their own friends’ recommendations and benefit from their friends’ shopping and dining experiences.

The latest evolution of Foursquare shows how “word of mouth” small business marketing is becoming more direct and more powerful and more trackable than ever before. As Foursquare and other recommendation sites become more popular and prevalent, if you’re a small business, you don’t need to spend money on advertising. Instead, you need to build relationships with real people who like you and who will talk about you online to their friends.

Instead of a “search engine” that gives you a result based on words typed into a screen, perhaps the future will bring a more sophisticated level of “recommendation engine” that automatically “knows” what you ought to see and do (and what to buy, where to shop) based solely on the collective knowledge and experience and preferences of your online network of friends.

It’s getting to the point where customers won’t even have to think or search or ask around for recommendations at all anymore! They’ll just be able to absorb the latest recommendations from the “collective intelligence” of the cloud.

Is this a “good” thing or a “bad” thing? Maybe a bit of both. Ultimately, it doesn’t matter whether the growing clout of online recommendation tools is a “good” or “bad” thing for small businesses. It’s a reality – this is where our search engine/social media/Yelp/Foursquare world is evolving.

Maybe small businesses should spend less time advertising/appealing directly to customers, and appeal to their customers’ friends too.

Here are a few ideas for how small businesses can adapt to the new world of “recommendation engines” represented by Foursquare:

  1. Find your biggest fans, and reward them. I’ve written before about how remarkable customer service is the best small business marketing. If you surprise and delight your customers, they will spread the word about your business. Tools like Foursquare make this principle more necessary than ever before.
  2. Not all customers are created equal. We’ve been taught for years that “the customer is always right.” What if one result of the new emergence of “recommendation engines” is that certain customers are more “right” than others? What if you can track and identify the customers who have the most clout and credibility with your market – you could see whose recommendations are sending you the most business. In the “old days,” restaurants would get nervous when a newspaper restaurant critic arrived for dinner – they wanted to pull out all the stops and serve a spectacular meal. Perhaps in the new world of “recommendation engines,” the critic will be replaced by the Foursquare “mayor” with thousands of online friends following his/her recommendations.
  3. Customers are “diving deeper.” One feature of the new Foursquare recommendation engine is that it will allow people to search not only for restaurants but for specific menu items like “tapas” or “cocoa.” This is another example of how social media tools are making everything more transparent – customers have more visibility into the details of your business’s products and offerings than ever before. It’s not enough to be known as a “good restaurant” – now people can comment, rank and recommend your individual menu items. There are risks and opportunities here – perhaps your business needs to focus on fewer “special items” rather than trying to serve a broad menu.

The Foursquare recommendation engine is yet another example of how customers are using mobile technology to interact with their world in new ways. Is your business ready?