By Rich Creyer/ Local Trade Partners, Northwest Arkansas

How effective are ‘Go Local’ programs?

There are several non-profit organizations and for profit businesses promoting the virtues and economics of buying locally. One of the most recognized is the 3/50 Project. They’ve gained much momentum espousing the impact we can have on the local economy when we spend our dollars local.

Until now, there hasn’t been much of a way of measuring the effectiveness of these ‘Go Local’ campaigns.  It’s a complicated, economic maneuver.

To measure shifts in purchasing behavior from non-local to local business you need a control group participating in an organized “Buy Local” program, with measurable parameters, a measurable money supply, and local-only sales figures.  The control group must also be large enough to offer statistically significant figures, which allows the results to be extrapolated into the general population. 

Northwest Arkansas now has such a group: 275 local businesses participating in a business-to-business “alternative currency” program. 

Billed as Local Trade Partners, this group of business owners and their families are using a type of currency only accepted by other participating local businesses. This makes the control group 100% local. The money supply available to these businesses, along with the total sum of their transactions, creates this tool of measurement.  As an economist, I find creating this index and actually measuring the shift in purchase behaviors to be exciting. I think it will be relevant to all of us local business owners. And, to my knowledge it hasn’t been done before.

This is a simple index.  It can be tracked monthly. It can be measured. It is controlled. It can monitor the impact of local-only currency.  As the group grows, the data will become even more statistically relevant. 

Here’s how the index is created: The total money supply available per participant is divided into the total sum of Local Trade Partner Sales.

The end result:  The new “Northwest Arkansas Local Purchase Index”  

The index will be self-averaging because as the number of members continues to grow  so will the participants’ money supply.  We also know that purchases are mutually exclusive – they cannot be both local and non-local. Therefore, the more frequent the “local currency” use the higher the index. A purchase made with the local currency cannot be made with a non-local business. Non-local businesses are excluded from the program.

While seemingly simple, the index is extremely profound. The higher the index the higher the number of B-to-B purchases shifted to locally owned businesses.

Look to this column as we gather data and report the index monthly, and its impact in preserving the local independent business community. 

August 2010 Index - .538 

Rich Creyer, has a degree in Economics and has worked with big box companies like IBM and AIG. He is currently the Trade Broker for Local Trade Partners, in Fayetteville, a concern that works to build preserve and protect local business and the local economy using “local currency.”  Email Rich at rich@localtradepartners.com.