I’m Christopher Mitchell, director of our broadband network and the more impetuous Mitchell and this is the Building Local Power podcast from the Institute for Local Self-Reliance. Today, we’re talking to Katrina Scotto di Carlo, co-founder of Supportland and Placemaker. Welcome to the show.

Then there’s all these weird, ancillary studies that are interesting, like the overall health of everyone in the community is better. There’s all these interesting studies that have come out of it. A lot of people buy local and eat local for different reasons. Some people are real economy nerds and they buy local because so much more money stays local. Then there’s other folks, I’m also a person that shops local and eats local just because I like diversity and I don’t like everything looking like a strip mall. There’s sort of personal reasons everyone has, but you can kind of pick and choose from this huge menu of rad reasons to support local.

Once we realized that, we said, “Okay, is there anyway to make tools for local businesses that could compete on the scale?” That’s how we came up with the idea that was originally Supportland and now is Placemaker. It’s a bit of a community loyalty play, which doesn’t really exist outside of us, I believe. It’s really about keeping folks eating and shopping local. We use sort of a similar set of tools as the big guys, frankly.

We’re talking about loyalty. We have a rewards program, where there’s these points that flow between businesses and customers. It’s universal throughout the community. You can earn points, which we call merits, at any independent business participating and you can redeem those for rewards at any independent business participating. It really makes the customer feel like the local economy is now this cohesive experience, whether they’re dining out or picking up a new dress. It’s all sort of this one kind of tribe of businesses that they’re supporting and they’re getting rewarded for.

Now the way that we kind of work with other communities is also really interesting because we have to do it without venture-backed money. How we work with other communities is we have a local business association or Think Local campaign that we partner with and then they actually gain most of the revenue from the program. We just facilitate a license of the technology, but it’s really run locally wherever it goes. Most of the money stays local, which again, is really outside of a venture model.

Normal technology and American scaling business is about extracting wealth as you scale. When we scaled to another community, it looks really different than when a venture-backed company scales to another community. A traditional business, American business scale model is that a business is scaled to a new community simply to extract as much wealth as possible from that community. That’s what scale means. That’s why people do it.

For us, it took us years to figure out how to flip that paradigm and how to make it that when we scaled, we actually created wealth for the communities we scaled to. That’s how we’ve arrived on the business model we have. We work really closely with the local business associations and Think Local First campaigns to make sure that when our technology is used and licensed by them, it’s increasing lots for the organization as well as their whole local economy. That’s been a really big chunk of our journey because it turns out business doesn’t really work this way, which is not what I realized when we started. Thankfully there’s so many amazing local economy leaders out there. I’ve been really fortunate to know them and be mentored by them. That kind of community within the local economy space has been what really carried us through for the last decade. Our journey’s been really interesting, but we’re still on it.

The reason it’s not that way is because it’s fractured because we’re all working independently in our tiny little silos, our four walls, our one door. That’s the problem. It’s a weird pain point. It’s a strange point, but when you really dissect it down, you’re like, “The problem is we’re isolated.” We have all this potential and all this energy that can be harnessed if we just networked ourselves. People are really excited to participate. Portland is over a hundred thousand users. It gets all these people rah-rah-rah excited to join and that’s what we need. Starting with rewards is really handy for getting everyone participating.

Now that, when we get that networking effect of all these small businesses collaborating, it’s really the sky’s the limit. I’m talking internet of things and crazy artificial intelligence, machine learning. There’s so many radical technologies out there that independent businesses are just totally cut off from. I know that the mom-and-pop business owners sitting in their business is like, “I don’t need that. I’ve got Facebook and Twitter.” That’s okay for now, but the information age is moving so fast that I’m concerned that they’re going to be left in the dust if we don’t pick it up a little bit on the innovation side.

The way Placemaker works is it’s actually a transaction of the business. It’s not like one of these programs where you just show a discount card or something like that. It’s much more sort of involved for the customer and business owner. One example of how we have businesses collaborating is that we had a toy store and a coffee shop that had a lot of market crossover, which we can tell from the data. What we did was when a customer walked into the toy store and they picked out some toys and then they went to the counter and they bought something and they would use their Placemaker account, so that they earn their points, then the clerk would say, “Hey. I just put a cookie on your Placemaker account for this bakery down the street.” It gives the customer this sort of warm, fuzzy feeling and it gives the store, the toy store has now increased the value of that exchange with that customer.

They didn’t have to do it through discounting their inventory or any of these kind of conventional ways. They did it through a collaboration. The customer now has this sort of digital token for a cookie on their Placemaker account. The neat thing is if they forget it’s there, we have their contact, so we kind of, the system automatically emails them two weeks later. The deal is that that cookie eventually expires out of what we call their Placemaker wallet, but that positive brand association between these two dissimilar businesses that collaborated to give them a warm fuzzy vibe, that’s the magical part.

What we found when we ran these collaborations is that the metric to watch was not how many customers then redeemed for the cookie. That was not a good metric because sometimes it would be zero customers [failing 00:15:09] to redeem for the cookie. What the radical thing was is we can follow the data over time. We can see that, okay, that group of customers, they didn’t go into the bakery and get the cookie within the two week period before the cookie expired because it was never about the cookie. It was about that warm, fuzzy vibe. What we did find is that they do make it in eventually. That’s what’s fascinating is the amount of numbers of people that one little exchange that gives them the warm fuzzies, the amount of retention, that that business gets an uplift in retention, but also the business they’re sending them to gets this uplift in new customers. Since we have the data, we can show, “Oh, it’s exactly these 27 customers and they made it into your bakery within the next six months.” It’s really fascinating for us.

Right now, the running kind of number is that if a person in our system engages with one engaged business on Placemaker, then they’ll go to nine other businesses, on average. Once a customer steps into the space and they start to get that vibe, like, “Okay, this is community shopping.” Then it does kind of explore out from there and it does seem to be working.

I found it so interesting people’s reactions to that was so strong. It made this clear idea that local businesses, sure they compete, they’re part of a market economy, they sometimes compete with one another, but at root, they’re all part of a community and that there’s this network and set of connections. There’s something that’s really a much deeper thing that a business is saying about what it means to be locally owned and how they’re different from big corporations when they do that.

For us, the neat thing is the system is built for this sort of fulfillment. When they won the gift card, it’s automatically loaded on their Placemaker account and then when they go into the dog and cat shop, it shows up automatically over there. For us, these kinds of collaborations are really simple. That’s why we built it, but it’s sort of mind blowing for the end customer because they’re not used to independent businesses being this sophisticated and acting almost like one marketing entity.

Yeah. That’s like for us, that was a big milestone for our business, when we discovered how to do it in a way that actually works with our ethics and our values as a company. It’s really difficult and there was no company ahead of us to look at. Social enterprise is a really [inaudible 00:20:18] space. Without those examples ahead of us, it was a really huge pain in the butt and it still is. My hope is that this becomes more normal and this is just how people have this option to do business, but right now it’s really not fun. It requires a lot more work, rather than just being capitalists about it.

I’m open to maybe there’s going to be some interesting revolution in the venture capital space that where we would be able to keep our social mission intact, but as it is currently, we just haven’t seen that. Not to be pessimistic, but our favorite company, the one social enterprise that is sort of ahead of us and we used to meet with them regularly was Etsy. When they went for their IPO, we kind of drooled over their filing at the SEC. It was so beautiful and so [inaudible 00:22:57] and amazing. To see what happened to Etsy after their IPO has been really discouraging in our state. We haven’t yet discovered that sort of happy medium between bidding the poor social entrepreneurs and the really well-funded venture capital company with no social mission.

We’ve been really lucky. We do have investment, but it’s all impact investors and angels that get it, so we’re very, very fortunate, but that was a lot of work in itself. We have the product development, enough capital to move to other communities. We’ve got customers there working it. My hope is that we can just build the sustainable business model from here. A part of me wants to be a bigger part of the solution because I do see investment and venture capital and all of this as a problem right now. That doesn’t sit well with me because that’s how 99.99% of American business, at least, runs. For me, I’m open to sort of innovating on some new angle or maybe there’s a venture capitalist that has this intriguing, new idea or there’s a cooperative model that does that. For me, the future is really wide open in that aspect because I want to be a bigger part of that solution as well.

Because it was all in my head and I was able to implement some of these things in Portland, Oregon, it wasn’t really as beneficial as I wanted it to be. The project I’m working on actually today is using Placemaker not just as the technology tool that helps Main Street businesses, but also as a community of learning where we kind of intake all the amazing work at the Institute of Local Self Reliance and local vesting and Michael Shuman’s books and everything and all of the people we meet at conferences and anything we hear that’s juicy that we can kind of [stead 00:27:22] out links for people or reports or blueprints for how to do this in your community. I’m kind of gathering all that up and building a bit of a community of learning off of Placemaker for that purpose. It’s been so helpful for my work in Portland, Oregon, but I’m like, “This isn’t scalable if it’s just coming in my ears and into my brain and I’m doing it. I should be trying to reflect some of this knowledge out that I’ve gained through all the people I’ve met.”

That’s the current project is kind of bouncing it back and figuring out how we can be more helpful in the space for promoting your guys’ work and just all the … Everybody’s such hard workers in our space. It’s like the more people that can be shining lights on that hard work, the better.

With that, I do want to encourage people to engage on our Facebook page, one of those great Silicon Valley companies. We are at facebook.com/localselfreliance and it would great to continue the conversation there, in terms of what local businesses you love, how to get them to join the Placemaker program, any exciting stories about, that you’ve had engaging with Placemaker or local businesses. Bring it all there and let’s talk about it.

Thanks, everyone, for listening.

Thanks to Dysfunction Al for the music, licensed through Creative Commons. The song is Funk Interlude. I’m Lisa Gonzalez for the Institute for Local Self Reliance. Thanks again for listening to episode 20 of the Building Local Power podcast.