Written by Shawndra Russell | Photos by Anthony Harden
Clark Harris and Matthew Simpson bring independent businesses together to create a community loyalty program.
People who prefer to support their neighborhood pub, local furniture makers, and farmer’s markets generally have the same approach when they go on vacation. They seek out locally-owned, community-minded businesses wherever they are, because that’s what is in line with their values and interests; and, ultimately, where they also want to spend their money.
To serve locavores’ appetites and mindsets, 34-year-old Clark Harris and 40-year-old Matthew Simpson founded LoLo, a smartphone app uniting local businesses that honor the LoLo (aka “Loyal Local”) qualifications: A majority—more than 50%—of the business must be locally owned, and it must have a unique concept, with five or fewer locations (i.e., it can’t be a franchise or part of a national chain).
Lolo allows the businesses to participate in a local customer loyalty program without having to manage their own programs. Even businesses that already have individual loyalty programs in place can benefit by reaching an audience that doesn’t want to be part of 20, 30, or 100 different individual loyalty programs.
“We’re trying to create a brand for a specific type of consumer, the Loyal Local,” explains Simpson. “They care enough to choose a locally-owned business and they want to experience the local vibe of a city.”
Specifically, this type of consumer cares more about experience than price point, and existing debit or credit card rewards programs don’t allow for consumers to be rewarded at local businesses. “We saw rewards were limited to chain gift cards, like Best Buy or Walmart, through traditional bank or credit card programs,” says Harris. “Our consumer doesn’t necessarily want those types of rewards for using their credit card.” The company’s ideal user also wants to be part of something, and developing a LoLo community is part of the mission, too.
Although they were at Winston-Salem’s Wake Forest University at different times, that common denominator brought the co-founders together: Simpson knew Harris’ older brother while he was in college. When Harris had an idea for a tech startup, Simpson immediately came recommended as a potential partner from their mutual contacts. He focuses on the tech side of LoLo while Harris works more with the local entrepreneurs who participate in the program. The idea is to strike a balance between providing a useful, fun, quality product for consumers—one which also benefits the small businesses that serve them—and being able to maintain the modest salaries that Harris and Simpson draw for themselves.
“We’ve been through about four different iterations by now,” Harris says. “When we first started, we were more focused on consumers, but then it became more about the businesses.” Simpson adds that from the outset, LoLo aimed to be the anti-Groupon. “We looked at the model, and we’re like, ‘How is this sustainable? How is this going to work?’”
Groupon certainly had its heyday. The daily deals site launched in 2008, and by 2010 it was doing so well it turned down a $6 billion acquisition offer from Google. Fast-forward to 2016: It’s now only valued at under $2 billion, due in part because its business model failed to factor in long-term customer satisfaction. Businesses eventually realized that they were giving a significant amount of profit to Groupon, yet due to the high demand after an offer went live, their customers were sometimes unhappy with a rushed experience, whether at a packed restaurant or a stressed-out massage therapist’s office. Harris and Simpson saw that as their cue to develop a consumer- and business-friendly program that could be maintained long-term, for the life of the business and not just brief flashes.
Originally, the missing piece in Harris and Simpson’s idea was the right technology. “Consumers are set in their own ways and don’t want to jump through hoops, so the right solution needed to be really passive,” says Harris. “We spotted this card-link technology and knew we’d found our frictionless solution. The technology is seamless with their normal behavior of paying with their credit card.” By linking almost any credit card with a LoLo account, consumers start earning rewards at LoLocations—numbering nearly 50 so far in Asheville and growing.
After tweaking their idea for about a year, they secured a seed investor whom Harris knew through work. “That investor allowed us to build and launch the initial product.” Jointly, the pair’s stake in the Member-Managed LLC totals about 50%, with Harris’ share at 30% and Simpson’s 20%.
Simpson says he was also motivated by years of working with small businesses when he owned his own marketing company in the ‘90s: “These local businesses owners don’t have the time or resources to create or execute loyalty programs or do their own advertising, so they turned to something like Groupon.” Simpson knew they could provide something better, which is one reason he’s been patient with their growth. “At first, we were trying to merge Yelp and Facebook,” Harris says. However, finding something that improved the lives of both consumers and business owners drove them toward creating LoLo.
Now, their focus is getting things right for all parties involved. Harris likes to call these entrepreneurs by another name—artists—and considers this a descriptor for anyone who executes an idea, including restaurants, bars, and makers of all types. “It’s not simply people saying, ‘This would be a successful business’; it’s people saying, ‘I’m going to go out on a limb, start my own thing from scratch.’ That’s the type of business owner who makes up the local vibe.”
Unlike Groupon, they feel LoLo has better long-term potential since consumers who sign up will likely continue to use it, because it’s rewarding them for a behavior they already do—pay with a credit card—and merchants also don’t have to change their processes. “Business owners don’t have to train their staff if they decide to become a LoLocation,” says Simpson. “The staff swipe cards like normal, consumers receive a digital receipt, and their bank of LoDough goes up—there’s no extra work for anyone as our technology tracks it all.”
More than Cash Back, Discounts, or Free Stuff
Being about more than just cash back has been an important differentiator from the start, notes Simpson. “We don’t ever want to use the word ‘discount’ and we never want to use the word ‘deal.’ As soon as you do that, you devalue the location and experience.” This sentiment comes up again and again throughout the conversation. It’s one of the reasons Harris considers their vendors to be artists because “business owner” feels incomplete for the experiential, unique businesses they seek out to partner with. Plus, LoLo aims to encourage true loyalty and community-mindedness for rewarding all purchases in one place, allowing consumer rewards accounts to grow more quickly and encouraging consumers to see these independent businesses as one connected ecosystem.
Since LoLo rewards can be redeemed at any LoLocation, the consumer has maximum flexibility and choice, which according to industry experts is a crucial component of satisfying peoples’ ever-growing preference for personalized marketing. Pardot, a B2B marketing automation solution by Salesforce, emphasizes that “businesses that personalize web experiences see an average of 19% increase in sales, while personalized marketing emails receive 29% higher open rates and 41% higher clickthrough rates.”
To help satisfy this preference for personalization, LoLo and its partner businesses have also curated special rewards featuring a specific unique product, tickets to events, or even customized experiences specific to the business. Harris highlights one example: “The Wedge doesn’t do tours, so we offered LoLos the chance to redeem their rewards points for a tour with the owner. I was on that tour, and when we were asked how many of us had been there before, nearly everyone raised their hands. So it was truly a customized experience that took their loyalty and rewarded it in a special, VIP way, and the owner got to interact directly with some of his biggest fans. Total win-win.” Other LoLocations offer a chef’s tasting, fishing excursion, or exercise class.
Of course, focusing on a particular niche of the population is another differentiator. Whereas discount providers aim to serve the masses, LoLo supports the local advocate who hasn’t been to an Applebee’s since high school—or maybe ever. “The businesses we work with have to be unique to their location. Chains that try to adopt the vibe of their location and customize the location don’t count,” says Harris. An independent vision chosen to be executed in a specific location is what makes a LoLocation.
They’ve also launched ThankLocal, a way for anyone to gift items and experiences from the LoLo Market. One advantage this has over physical gift cards sold in stores: If the recipient doesn’t redeem the gift, the giver doesn’t pay a thing. “We see it as a way for people to stay in touch with their local networks better, too, and for organizations to reward their employees or volunteers while keeping the money in the local economy,” says Simpson.
“Consumers are set in their own ways and don’t want to jump through hoops, so the right solution needed to be really passive. We spotted this card-link technology and knew we’d found our frictionless solution. The technology is seamless with their normal behavior of paying with their credit card.”
There’s a we-are-all-in-this-together philosophy that applies to LoLo’s concept of uniting independent businesses of all types. Harris recalls a conversation he had one time with the owner of Mother Earth Brewing, saying that there’s a lot to be learned from his attitude. “I asked him if they were intimidated by Sierra Nevada and these other big breweries coming in, and he said, ‘No! It’s a great thing because these guys have the money to invest in people transitioning from domestic beer drinkers to craft beer drinkers, and we can’t do that on our own. Anytime someone is drinking a craft beer, that’s a win for us because they are eventually going to try more craft beers, and then if they discover us and like our beers, they are going to stick with us.’” In similar fashion, Harris notes, if someone is spending money at a LoLocation, that means they are not spending money at a big chain. So, small businesses have to continually seek out ways to support one another, not view each other as competition. “We look to partner with businesses that have a ‘we’ mentality, not a ‘me’ mentality,” he quips.
Harris singles out Westville Pub owner Drew Smith as living proof that this mindset works. His West Asheville business started in 2002 as one of only two places that offered food in that area of town, and now the number is more than 20. “His business has gone up every year for the past 10 years because now West Asheville is a destination, and there’s a lot more going on,” says Harris.
The location selection for a new business is also key, whether it’s a local pub or a digital loyalty program. “We always knew we were going to be bigger than just Asheville, but it’s the ideal location for us to launch in because it already stands for what we’re trying to spread,” he offers. Asheville’s Buy Local habits serve as a beacon of sorts for encouraging the same loyalty to locally-owned businesses that exist in other such “creative class” cities. However, even here they saw room for improvement. “Go to East or South Asheville and stop at a chain restaurant. They’re packed! So they represent a group of people that need to be introduced to local businesses and converted into LoLos,” says Simpson.
Being more interested in seeking mentors over more investors has also been a winning strategy for these founders. Recently the startup won a spot in Venture Asheville’s professional mentorship program, Elevate, and in 2014 LoLo was second-place winner in the WNC SEED Challenge Pitch Competition. “We could have grown faster, bigger, but we wanted to be strategic,” explains Harris. They did, however, launch in a second city, Andersonville, Illinois, outside of Chicago, after connecting with its Chamber of Commerce at a BALLE (Business Alliance for Local Living Economies) conference in 2014. “They were enthusiastic about bringing LoLo there, and it’s a great cultural fit,” says Harris, suggesting that it was gratifying to get that second city under their belt.
Both Harris and Simpson were determined to work for themselves from an early age. “I knew very young I was going to be an entrepreneur,” recalls Harris. “So when I got to college, I decided to major in art because it’s what I knew the least about, and I saw it as a study of bringing a vision into reality, which is what entrepreneurs do.” Harris and Simpson both acknowledge that growing up in economically stable families came with many opportunities—Harris traveled the world after college—and feel this security allowed them to have a longer view of what they could build the business to be.
“The flashy thing to do right now is rapidly grow and secure a high-as-possible evaluation,” says Harris. “We’ve been content with building a product that is as flawless and mutually beneficial as possible, at a controlled pace.” Money does not rule their decision making, which has allowed them to focus on that controlled growth. As part of their five-year plan, they see LoLo adding features that will allow for a better recommendation experience for travelers. Since terms like “best” and “highest rated” don’t really guarantee a business is going to be the right fit for a consumer, Lolo wants recommendations to be tailored towards peoples’ interests, and, ideally, delivered by their own friends. As Harris observes, “We’d like to revisit our Facebook plus Yelp concept at some point in terms of making it easier to get your friends’ and locals’ recommendations.” Perhaps locations will eventually be categorized by their vibe and type of clientele and not just a star rating. They also want to continue to brainstorm ways that people can publicly demonstrate their “Shop Local” values through their LoLo membership, while also connecting with fellow members of the LoLo community—such as by adding the aforementioned social layer to their platform.
Another goal? Allowing people to curate their own wish lists as another way to tap into real-time marketing capabilities. “If people have a specific burger on their wish list, and they are walking by that restaurant, they’ll receive a notification that they have enough LoDough to go in and get that item they wanted,” says Harris, noting how such a scenario represents maximum relevance for the consumer and is a value-add for the business members. Adds Simpson, “The small businesses we work with are too busy to manage something like this, yet greatly benefit from the technology.”
Long-term, launching in other Southern cities—they anticipate launching in Spartanburg, Charlotte, Winston-Salem, and the Research Triangle area—and then expanding nationwide in creative, locally-focused cities—they’ve been in communication with businesses in Grand Rapids, Michigan, and Bozeman, Montana—round out their wish list. Ultimately, says Harris, they hope “to build one million loyal locals nationwide with thousands of businesses who are all benefiting from it. We’re rewarding people who are loyal to the local movement, not just Asheville or whatever city they’re from.”
For entrepreneurs seeking to build a lifestyle business as opposed to a hot startup, LoLo is instructive. It’s not the creation of workaholics in business solely to cash in quickly. Instead, Simpson and Harris might be out on a hike in the middle of the week, or spending time at home in the garden. As the pair sees it, they have not only designed a way for businesses to be part of a sustainable loyalty program and thus help future-proof these LoLocations, they’ve also carved out a sustainable business for themselves.
The original article is below. Click to open in fullscreen…