“What people don’t realise is that we need to work together to keep the local economy funded”, says Andy Craig, co-owner of Whittington’s Tea Barge, a successful floating cafe moored on the Thames by Reading Bridge.

While most people like the idea of supporting local businesses, there is plenty of clever marketing that steers them towards using national brands whenever they are seeking a plumber or a cup of coffee.

Craig champions a new loyalty programme called LoLo as a way to fight back. LoLo is an easy to download app that rewards consumers who buy from local businesses.

Working together is a good idea because more of the money that is spent stays in the community. An analysis of 10 economic studies shows that on average 48 per cent of money spent at an independent retailer stays local. This compares to less than 14 per cent for purchases at chain stores.

Reasons to support LoLo

There is a tipping point for all loyalty schemes before they become successful. The monthly active users (MAU) metric favoured by social media is a useful way to think about this. The more people who take part and the more frequently they do so, the more value that is created.

LoLo works by giving consumers £20 worth of tokens to spend when they signup to the app. Any trader who takes part must offer at least a 5 per cent discount. This discount is paid for by using tokens but also generates new tokens for future use.

For example, customers of Whittington’s Tea Barge are offered a 20 per cent discount on an afternoon tea. Let’s say that the price was £10 before the discount. The customer pays £8 and uses £2 worth of tokens. After the transaction takes place, the customer is credited with £1.60 of tokens and asked to review the experience. Completing a review earns an extra 60p worth of tokens.

The tokens are portable. The consumer’s next discount may be from a plumber. As a participant, Craig benefits from the goodwill of offering the discount and also from the data that the app is trapping. He will be able to target consumers for his promotions based on the purchases they make from other local businesses as well as his own.

This idea of many local traders collaborating to build a marketing platform is a key benefit, Craig says. This takes the pressure off an individual business owner to be constantly providing promotions to their limited customer base.

Local is where you say it is

In the past, a trader’s marketing plan may have been to call themselves AAAAA Services so they were the first name a consumer would see in the Yellow Pages.

Today, consumers search for answers by using social media apps on their mobile phones. Or by asking Google what is available “near me”. All independent businesses need to have a strategy to be found in the digital world.

LoLo Loyalty, which promotes the app through the mylolo.com website, presents itself as an alternative to the big digital platforms that want to be gatekeepers to consumers’ lives. It is much cheaper to use than the big national apps, taking a 3 per cent commission from net sales through the app.

To take part, a business needs to have a physical address. This will be used by a consumer to find a business and by a business to target customers. Collaborating makes sense, Craig says. For example, he would like every independent cafe in the Reading area to take part because this would make consumers aware of how many choices they have.

Four shops in a parade can work together to grow footfall as part of a wider network of businesses in a particular suburb or village. You can view LoLo’s flexibility as a strength or a weakness. However, taking part will help you develop your online presence and widen your local business network.

It is too early to tell if LoLo will be a gamechanger for small enterprises. However, the upside appears much greater than the downside.

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