Marketers Ally With Upromise to Boost College Savings
The Upromise partner lineup -- unveiled at a press conference yesterday -- includes General Motors, Coca-Cola, America Online, Borders, ExxonMobil, McDonald's, AT&T, Toys 'R' Us, CVS/pharmacy, Staples, Starwood Hotels, Coldwell Banker, Century 21, Countrywide Home Loans, ERA and 70 online retailers.
Consumers who register at upromise.com will gain rebates for buying from companies that contribute to Upromise.
"Each company covers an important but different part of our lives," said Michael Bronner, founder/CEO of Upromise, Brookline, MA.
The site went live yesterday. Consumers can enroll free at upromise.com and enter credit card and loyalty card details to open a college savings account.
When consumers buy using their credit card or loyalty card, the scanner will transmit transaction data automatically to Upromise. A portion of their spending with Upromise partners will then be deposited into the user's account for any child the consumer chooses.
Upromise will encourage members to sign up online for a federally tax-deferred 529 college savings plan managed by Fidelity Investments and Salomon Smith Barney. The lack of such a plan will prevent the consumer from earning interest on the contributions.
Rebates will vary by company.
For instance, CVS will contribute up to 4 percent of purchases made at 4,100 company stores via its ExtraCare loyalty card. Citibank will chip in 1 percent for transactions made on enrolled Citi credit cards. Users of AT&T's residential services will get a 4 percent deposit.
ExxonMobil will contribute a penny per gallon of gas bought at 16,000 Exxon and Mobil stations. General Motors will give $150 for new vehicles bought from any of its 7,000-plus dealers. Buyers from Toys 'R' Us will get a 2 percent deposit.
America Online promises a $50 contribution to every Upromise member who registers for the AOL service or refers family or friends to sign up. Coca-Cola will give 3 percent of purchases for Coca-Cola classic, Diet Coke and Sprite buys. Starwood will turn Starpoints into college contributions.
Shopping online has even more incentives. Spiegel.com, eddiebauer.com, llbean.com, brooksbrothers.com and landsend.com are among 70 remote sellers that will contribute up to 12 percent on purchases made by clicking through upromise.com.
Upromise members also can check the status of their savings online.
"This company couldn't have happened before the Internet because it is the fundamental technology and service platform that is allowing us to deliver this service to our customers," said Jeff Bussgang, president and chief operating officer at Upromise.
"Basically what we're doing is using the Internet for what it's truly good for, which is a low-cost transaction and information vehicle," Bussgang said.
Laura Ries, president of focusing consultants Ries & Ries, Roswell, GA, agreed that while Upromise was an interesting idea, it will face a tough time convincing consumers to sign up for yet another loyalty program in that growing population.
"The problem of any loyalty program is how much you have to spend in order to reap rewards," Ries said. "College is expensive and for the program to work consumers need to sign up and actively participate for 15 years, at least. That is a long time to wait for the benefits."
Ted Lawrence Rubin, CEO of The Rubin Organization, a Rosalyn Heights, NY, corporate and business consultancy for Internet companies, thought it old wine in new bottle.
"This is nothing more than a new player in the loyalty marketing arena, repackaging a concept that has already failed to be profitable on numerous occasions," Rubin said. "Please refer to Stockback, Shop4Cash.com and Spree.com."
"The ability to accumulate any meaningful amount of savings for a college education is unlikely," he added. "The percentage rebates are not substantial with regard to most purchases, and the ones of higher value are capped, as in the $150 from GM for the purchase of an automobile."
Such fears haven't fazed Upromise partners. Harry Pearce, vice chairman of GM, already has the ideal Upromise user in mind.
"Imagine a General Motors car driving into an ExxonMobil station and then head off into a McDonald's for a burger," Pearce said. "Then go to a Citibank ATM to withdraw money."
Commenting on the revenue model, Bronner said, "Upromise makes its money through administrative fees" charged to its contributing partner companies. He would not specify the exact cut, but he said each company has a different deal with Upromise.
Upromise aims to get more partners in the retail, grocery and travel categories in the coming months. Most of the marketers that have already signed up are live with their rebate programs, while some will be integrated this summer or fall.
Others, like McDonald's, face a unique problem: Burgers mostly are bought with cash, leaving no credit trail for Upromise to track.
"We'll be announcing in the summer specifically how the program works" for McDonald's customers, said Alan Feldman, the restaurant chain's president for U.S. operations.
Notwithstanding their initial participation, the issue of commitment from marketers still is the 800lb gorilla in the room.
"I can't see how buying a burger at McDonald's and having a couple of cents donated to a college fund would end up being a powerful program for the burger giant," Ries said. "Most companies are under enough cost pressure and long term if it weren't successful, I can see companies dropping out like flies."
Upromise claims shopping this way by parents and two other family members should result in savings of more than $20,000 over 15 years.
While Upromise will run its own print and radio advertising campaign to publicize its service, its partner companies have pledged support through mailers, bill inserts, circulars and in-store displays at 60,000 stores nationwide.
But these rebates come at a cost for the companies. Marketing and advertising expenses will be trimmed or juggled.
"Contributing 4 percent is an expense for us, but it'll reduce other marketing expenditures," admitted Howard McNally, president of AT&T's consumer division.
GM's Pearce added, "What we're literally doing here is taking billions of dollars in marketing and advertising and reallocating it. We won't be increasing costs for customers."