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STRATEGY

New Program Rewards Customers for Shopping at Small Retailers

The program, which began in Boston, is an attempt to give small businesses an edge over big-box stores.
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The City of Boston and a group of philanthropic entrepreneurs are teaming up to help small businesses and the local economy by introducing a new kind of customer-loyalty program.

Created by Odwalla founder Greg Steltenpohl, Exchange.com founder Sridhar Rao, and Visa founder Dee Hock, the Interra Project offers a new type of loyalty-incentive payment card to encourage and track local spending.

Every time customers use the card, a percentage of their transactions is returned to them as a cash rebate, a percentage is donated to a community-based non-profit of their choice, and a percentage is fed back into the program.

The program targets small businesses that cannot afford the same customer-loyalty programs as large companies. Historically, incentive cards have only been cost effective for big corporations because of the necessary technology and infrastructure. The Interra Project seeks to change that through power in numbers.

Steltenpohl, who is the chairman of Interra, sees the program as a way to shift the flow of money toward places where it does the most good.

"It's a consumer-aggregation tool that helps the small-business sector and the local economy," Steltenpohl said. Interra estimates that 45 percent of every dollar spent locally is re-circulated in the community, compared to only 13 percent of money spent at national big-box retailers.

The card is free to consumers, and the program is free to join for businesses that are committed to increasing environmental sustainability, community giving, and a living wage for their employees.

"Boston is considered the leader in how seriously they've taken the program," Steltenpohl said. Although Boston is the first city to fully adopt the program, Portland, Seattle, and San Francisco are also working on designs to implement the program.

Steltenpohl started the Odwalla juice company in 1980, sold it to Coca-Cola (NYSE:KO)  in 2001, and co-founded another juice company in 2004 called Adina For Life. Based in San Francisco, Adina focuses on organic ingredients, fair-trade practices, and developing a customer base at the community level.

"I'm very familiar with building things from the ground up, and I've learned how big you can actually grow something if you start at the neighborhood level," said Steltenpohl, who has started selling Adina juices one store at a time.

"Always coming in the back door of local businesses, we hear a lot of the gripes of the small-business person," Steltenpohl said, adding that many of them struggle to compete with larger players.

"Small businesses can't afford these kinds of sophisticated systems unless we amortize them over a whole national network," Steltenpohl said of the Interra program. "This takes all the costs out of implementing it."

Initially, the technology will be donated to participating businesses. Within six years, Steltenpohl expects the cards to redirect over $10 billion worth of purchases every year. At that rate, the program would be able to finance itself and donations to non-profits would reach $200 million a year.

Last updated: Dec 18, 2006




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