Update: MemberWorks to Invest $50 MillionIn Internet Offerings

Share this article:
MemberWorks Inc., the Stamford, CT, membership club and affinity marketer, last week said it will invest more than $50 million during the next six quarters in an effort to shift much of its membership-club business to the Internet. Although the company will use the proceeds from the recent sale of one of its business units to fund much of the investment, MemberWorks said it expected the spending, along with investments in technology, to have a negative impact on its earnings for the next six quarters.


The company's stock, which more than doubled during the month of February, slid quickly on the news, losing about 30 percent of its value. The stock was still up considerably for the year, however, trading at around $59 per share at mid-day on Friday compared with about $30 per share at the start of the year. Before the announcement of the Internet investment, the price reached a 52-week high of more than $86.


The company expects that the switch to an online system of club management will be more profitable in the long run, however.


"Their goal is to do less telemarketing and direct mail because it's a higher-margin business when you do it online," said Glenn Wiener, an investor relations spokesman at MemberWorks.


MemberWorks traditionally markets shopping clubs and other services to affinity groups like credit card customers for a monthly or yearly fee. These clubs and services are marketed through telemarketing or direct mail, and they also involve a lot of ongoing mail communication with customers after the programs are sold.


The company hopes not only to reduce its reliance on these more costly communications media, but also to expand its reach more easily through an increased presence on the Web.


"As they bring people online, that is going to create more revenue streams for them," said Wiener. "There are different venues that are going to create opportunities for them as opposed to going out and trying to attack the consumer."


In the company's most recent fiscal quarter, it reported that about 40 percent of its revenues came from telemarketing, about 30 percent through its MemberLinks outsourced club program, 20 percent through direct mail and about 10 percent through the Internet.


The move to increase its presence online comes as rivals like Cendant and Damark also are eyeing the Internet for potential cost savings. Cendant has started shifting some of its direct marketing operations onto the Internet, and Damark hopes to begin accelerating the transfer of its membership clubs to the Web as it sheds its catalog-marketing operations, according to Bob Evans, an analyst at Craig Hallum Group, Minneapolis.


"Damark historically has not been as active in developing its Internet membership business, primarily because of the poor performance of its catalog business," said Evans. "Going forward they will be better able to take advantage of this."


Memberworks already has been actively recruiting Web-based partners to complement its roster of offline affinity companies. Included among its recent marketing partners are CDNow, MyPoints, PlanetRx and Big Star Entertainment.


The company's exploration of more Internet partnerships is part of a broader shift in strategy that the company presented to investors at a conference last week. Other components of the strategy include expanding Memberworks' business model into more overseas countries. The company already has operations in Canada, the United Kingdom, the Netherlands and Belgium.


As part of its more aggressive foray into online activity, MemberWorks also said it will launch new Web businesses in "areas of high consumer demand," including health, finance and personal information.


Earlier last month the company agreed to merge its ConsumerInfo.com Web site with eNeighborhoods to form a new company, iPlace.com, that will allow consumers to access their personal credit information and also allow them to investigate home valuations. n
Share this article:
You must be a registered member of Direct Marketing News to post a comment.

Sign up to our newsletters

Follow us on Twitter @dmnews

Latest Jobs:

More in Opinions

App of the Week: Snap

App of the Week: Snap

Receiving money for purchasing items is a Snap.

App of the Week: Life Organizer

App of the Week: Life Organizer

Life Organizer aims to help users be as productive as possible.

Marketing GloBALLization

Marketing GloBALLization

The Yankees aren't the only team searching for talent overseas.