During the 2007 recession, Clark Harris became frustrated with the credit card rewards program he was enrolled in.

“I couldn’t travel, so I could only redeem my points on gift cards, but there wasn’t an option to use my loyalty points on local companies,” says Harris, a real estate and marketing professional in Asheville.

Harris wanted to support local businesses with the rewards he was accruing, so he began mapping out an idea for a local rewards program run through a mobile app rather than a physical card. He later met Matthew Simpson of Nashville, and together they developed the LoLo app that launched in 2013, just as the “Shop Local” movement began sweeping the nation.

LoLo is a free rewards program that Harris and Simpson believe will fix the disconnect between small businesses, nonprofits and their customers by rewarding locals who shop at participating merchants. Founded in Asheville, LoLo launched in Durham and Chapel Hill this month as part of an expansion beyond western North Carolina. It now operates in eight cities, called LoLocations.

LoLo, short for “loyal locals,” rewards shoppers five percent for every dollar spent at participating merchants—users simply load a credit card into the app and LoLo tracks their purchases to determine when rewards are earned. Users build up points over time and can redeem them for “LoDough” like free merchandise, discounts or VIP experiences that include private chef tastings and behind the scenes tours. The rewards are up to the merchant.

LoLo stands for “local loyals,” with the mission of encouraging locals to support local small businesses through a mobile rewards program. Credit: LoLo

LoLo also has a gifting feature that lets people order and send digital gift certificates from local merchants, and a way to donate LoDough to local nonprofits.

According to Harris, LoLo’s mission is to organically increase enthusiasm for local brands in thriving communities across the country while replacing antiquated punch card-based rewards programs.

The Business of Building a Mobile App

Harris and Simpson took a calculated approach to launching their business back in 2013. They wanted to be sure it met the needs of Asheville business owners, so they established a focus group, many of which turned into LoLo merchants. 35 businesses participate there today.

“I used the focus group businesses as anchors to build the pilot group of merchants,” Harris says. “It’s a chicken and egg game and everyone wanted to know who else was participating.”

The LoLo team also pulled together an advisory board of specialists in digital marketing and small business sales, as well as professionals that were engaged with the Asheville business community. According to Harris, members of the board helped the co-founders refine their sales pitch and define the app’s initial feature set.

LoLo raised $250,000 from investors to build and launch the app initially. Jeffrey Fisher, a Durham attorney and owner of Unique Places, LLC, is LoLo’s founding investor. According to Harris, Fisher was involved with LoLo from the early stages, leading the seed round and guiding the company to follow-up investors. In total, LoLo has raised $400,000 in three rounds of funding.

More recent funds and efforts have been dedicated to the company’s expansion plan. In 2016, LoLo was one of 30 startups accepted into the Venture Asheville Elevate program, which is modeled off of MIT’s Venture Mentoring Service. Harris says the peer interaction and mentoring has been pivotal in helping the founders keep an open mind about the direction LoLo is going.

The Elevate program has also educated the team about the evolution of the mobile app market and helped the founders strategically approach common business challenges in sales and marketing.

LoLo team. (From left) Matthew, Co-Founder; Jordan, Community Manager; Jessica, Marketing Communications Manager; Clark, Co-Founder. Credit: LoLo

Expanding to the Triangle and Beyond

Participating in the Elevate program also helped prepare the team to manage a business in multiple locations, including Chicago, Charlotte, Durham/Chapel Hill and a handful of cities near Asheville.

In Durham, over 25 small businesses have already signed up to participate as merchants. They include local restaurants and shops Bagel Bar, Bullseye Bicycle, Chapel Hill Tire, Dirty Bull Brewing, Mama’s Hot Chicken, Neal’s Deli, Toast, and Top of the Hill.

Tyler Kober, owner of Bullseye Bicycle, is interested to see how the app affects client flow. Though nervous about how many users will make purchases in his store or only redeem LoDough, he is willing to give LoLo a chance.

“If people are spending at locations because they have the app, this is definitely going to help us,” says Kober. “It has seemed to work out well in other communities, so we will see if it gets momentum and is used widely here.”

Kober also hopes the app will encourage cross pollination and support throughout the network of merchants it is creating.

Bullseye Bicycle offers four LoDough rewards, ranging from a $5 gift certificate to a full tuneup.

LoLo has signed up with over 25 merchants in the Chapel Hill and Durham area.

A benefit for app users is that LoLo won’t let anyone forget about redeemed rewards. When the app is enabled, a user will be notified when in the vicinity of a merchant where a reward is waiting. This not only generates quality customer service, but is a steady marketing tool reminding consumers where they need to shop to earn more rewards.

That’s helpful, considering around 77 percent of women and 74 percent of men told Crowdtwist that they are more likely to shop a brand that has a loyalty program.

These types of discount programs tend to be especially popular for small businesses that don’t have the margin in their business to afford more expensive marketing campaigns via television, radio or print ads. Credit card-linking means there are no startup costs for businesses that don’t have a loyalty program. And businesses that choose to switch to this system won’t lose their members or data collected over the years, Harris says.

Locally owned businesses don’t have to compete with larger chains either. Franchises or franchisees aren’t allowed to join LoLo, even if they originated in a LoLocation. The app does admit online retailers, with the caveat that they must have a unique concept that is locally owned and operated.

The only fee for vendors is five percent of any purchase made or gift certificate bought—businesses only pay when customers shop there.

“The handling fee is one that we feel is sustainable and accommodates the margins of a small business,” says Harris, expanding that a business can opt out at any time.

Harris admits that LoLo’s biggest challenge has been signing up merchants that already have an established card or loyalty program. But strong usage so far has helped. Over 9,000 users have signed up to use LoLo, and they’ve spent more than $1.6 million at LoLocations.

Expansion to new cities, as well as the enterprise gift platform are LoLo’s bet on a bright future. Gifts, for example, encourage regular use of the app by business people—they can send their clients gifts through email that can be redeemed at LoLo merchants, even if the recipient isn’t a LoLo user. Eventually, LoLo will enable this feature via the app.

LoLo hires a local in each city. In Durham, that’s Cody Reszel. Since late last year, he’s been busy building relationships with local restaurants and retailers and spreading the word about LoLo.

“The reception has been good amongst consumers for our Durham and Chapel Hill launches,” Reszel says. “We’re excited to see what new merchants we can partner with in the future in these areas.”