Startup LocalMaven says it’s making things easier for businesses that want to use plain old cash to encourage word-of-mouth referrals.
Founder and CEO Arnon Rosan comes from the events business, where he said he was frustrated that there was no good way to track or reward friendly referrals. For example, he said he might recommend a tent company to a friend, but he’d have no idea whether the recommendation went anywhere unless he asked about it later. And while the referral could lead to significant revenue for the service provider, the only reward he might get is being taken out to dinner.
Not that LocalMaven is only trying to serve event businesses and, uh, tent companies. Rosan said he’s looking for a broader category of “mavens,” who are basically trusted experts. Mavens can include everyone from hotel concierges (he described a concierge as “the ultimate example of a maven”) to the friends you’re always bugging for recommendations.
LocalMaven has created an online marketplace where businesses can connect with those experts, offering them a commission in exchange for promoting discounts and other deals. Every time a maven recommends a deal to a friend, colleague, or random person they met on the street, they use a unique promotional code, so it’s easy to track which recommendations actually lead to a sale — and then to pay the maven for each sale.
Referral fees aren’t a new idea, Rosan acknowledged, but the goal is to make the process as convenient as possible. So if you’re having a serendipitous moment where you’re talking to a friend/colleague/random person, and they mention that they need a caterer/plumber/tent company, then you think, “Holy crap, I know exactly the right company for you to call,” you can just bring up LocalMaven on your smartphone, look up current promotions, and give them a referral code on the spot.
Rosan said businesses will have a lot of control over their promotions, for example by setting the commission rates that they’re willing to pay and determining how exclusive a deal can be. (And in the future, LocalMaven will allow businesses to offer discounts instead of cash commissions.) He also pointed out that people can sign up as more than one type of user — yes, they might join as a maven, but they might also have a business they want to promote, or they might want to redeem deals themselves.
As for whether this could lead to spammy behavior where mavens just indiscriminately share deal after deal in the off chance that someone will bite, Rosan said that users will be able to rate both the business and the referrer, which discourage that kind of behavior.
The company, which is officially launching today, says it has raised $1.4 million in seed funding from undisclosed investors.