As an observer of the business landscape, one ongoing fascination is to find new case studies and business models where digital technologies are being harnessed in new ways.
Successful examples often combine several megatrends and then use technology to scale up the idea. This approach enables sustainable demand-driven growth without the risk of significant upfront capital investment.
On a personal level, I am involved in a small startup business that seeks to tap into one of the megatrends of the moment: the rise of the hyperlocal. From writing about and studying other business models, my partners and I have sought to take success elements from different startups and adapt them in our way.
In the inner-city suburb of Surry Hills, our quarterly neighborhood magazine called Urban Village has relied on a traditional publishing model. A quarterly print edition was physically distributed to homes and businesses. The print stories were posted on a website with fresher content added more regularly.
As anyone involved in publishing knows, this model has become a hard slog. Many advertisers only want digital advertising; or, they want advertorial content because display advertising has changed. Many advertising agencies simply do not have a budget for print advertising anymore.
So what is a magazine to do to survive? At Urban Village, the response has been to move into the area of loyalty, leveraging the magazine’s credibility with local readers — its primary asset — in a community scheme that drives business to local merchants, with the magazine as the platform for marketing and promotion.
This year, Urban Village was planning to roll out the solution from award-winning Australian startup OpenSparkz, which offers card reading technology.
To be a member of the scheme, a consumer simply has to register a preferred payment card. When they purchase from a participating merchant, everything happens in the background as the payment is processed. After the purchase, they receive a notification of the reward, and the funds are rebated back into their account.
The model was for the magazine to take a clip of every transaction and an ongoing charge to merchants. In return, Urban Village would promote the scheme through its media assets and also through social media.
Advertisers could choose a package that included print advertising at a discounted rate in the loyalty scheme. The Urban Village journalists and content makers would create articles, videos, and still photography about the business, which would be used on Urban Village platforms and be available for the merchants to use themselves.
So Urban Village becomes not just a magazine, but a content production house and marketing agency for local merchants who would not ordinarily create their own to the same standard. In return for this material, all merchants have to do is join the loyalty scheme. At the same time, pages of the magazine are devoted to a catalog of offers from participating merchants.
Urban Village had planned to roll this out for its scheme called Local Rewards, but then the COVID-19 lockdowns hit, and it was put on hold. Instead, it moved in a different direction and got a minimum viable product into the market: an old-style gift card which people could load up with a value up to AUD 1,000.
Soon after launch, the limitations of this became apparent. When customers loaded AUD 10 onto several hundred cards and gave them away at community markets with the slogan of “having a beer or a coffee on us,” and when that value was spent, then all people had to do was show their card at a participating merchant to get their reward.
The idea was to get cards into the hands of people and get them using the scheme. They also used signups and QR codes to create a growing database, creating opportunities for future engagement.
Three months in, and signs are positive with the gift card. People are showing their cards at merchants and are getting rewards, and the scheme is bringing in consumers from outside of the Surry Hills district who also find the rewards attractive.
The problem with the gift card is friction. Sometimes, merchants rely on casual workers who don’t know how to use the point-of-sale machines to discount. Not every retail worker knows about the scheme, even in the merchant businesses which participate.
It is why the company is moving to a trial of OpenSparkz over Christmas and New Year, the first community-based trial of the technology in Australia.
Not only is the technology frictionless, meaning the reward can happen in the background without any additional action from the consumer or the retailer, but OpenSparkz has improved on and developed their offering with a new app that can tailor offers, work off geolocation and heighten the level of engagement.
It’s early days yet and, from writing about this kind of thing for many years now, I’m acutely aware that many startups fail, so we are prepared for that. The upside is that we have not invested in capital equipment or infrastructure and have a technology partner committed to success.
We feel confident that a combination of hyperlocal with new digital technology can create a much better customer experience and a win-win for both consumers and merchants.
At the same time, if successful, we hope to find a new model to inject some life into the old publishing model and make our magazine sustainable and profitable. If that happens, we might just take Local Rewards national.
Image credit: iStockphoto/SACheckley