LocalBonus helps small businesses band together to offer loyalty programs

Consumers receive incentive points for frequenting registered local restaurants, retailers or merchants.

If you are a small-business owner, chances are you have heard about the "cash mob" concept. It's when customers organize to shop local businesses on certain days to help out local merchants.

Internet company LocalBonus operates under a similar model when it comes to customer loyalty programs. The idea is that LocalBonus consumers will receive loyalty or reward incentives for shopping small retailers, restaurants and other merchants in their local community.

"We bring them new customers, repeat customers and higher dollars per visit without requiring them to do any discounting," said Derek Webster, founder and CEO for Local Bonus.

LocalBonus works because it is tied to a certain credit card, rather than a particular business. So, anytime some shops at a linked small business, he or she receives credit for that activity. The fee that the business pays for this sort of referral depends on the business model and margin structure of the merchant, Webster said. Consumers can receive as much as 10 percent cash back for their loyalty points.

LocalBonus has created a promotional offer called the WolfPack that encourages cash mob activity. If more than five LocalBonus members shop in a business on a given day, everyone receives double points.

Right now, LocalBonus is available on a very limited basis, only in five cities including Denver, Portland, Sacramento, Seattle and New York City. There were about 800 small businesses on board when I interviewed the LocalBonus team in early June. Those geographic boundaries aren't hard and fast, by the way. The businesses associated with the Seattle community stretch almost down into Portland, Oregon, Webster said.

The system works with any Visa, MasterCard or America Express card account and the site uses bank-grade security to protect its participants, Webster said. "We deliberately ask for a minimum of information," he said.

Right now, about half the small businesses involved in LocalBonus are bars and restaurants, but the mix also includes flower stores, wine stores and chocolate shops.