UPromise Gives Loyalty the Old College Try
While most loyalty marketing companies have hitched their bandwagon to points redeemable for prizes, UPromise believes a more substantial reward will create longer-lasting relationships with consumers.
While the offer seems noble enough, using cash as a reward presents obstacles.
Through the company's program, consumers who buy online and offline can receive rebates that go directly into a tax-deferred savings account.
"What's so unique about this is that it merges a pressing corporate need, loyalty and customer economics, with a pressing consumer stay-awake issue -- sending their kids to college," said Jeff Bussgang, president of UPromise, Boston. "People aren't earning points toward a toaster. They're earning toward something that's a passion to them: their kids and their kids' education."
To sign up, consumers register their information at UPromise and select where they want the funds to go. They can check at the site for how much money they have accrued. In addition, they can earn by shopping with vendors at the site or by typing in their identification information at participating merchant sites.
Offline, the company plans to tie in with credit card companies, long-distance carriers, grocery chains and automobile manufacturers.
Using cash as a motivation has proved problematic for loyalty programs, according to Richard Barlow, CEO of Frequency Marketing Inc., Cincinnati.
"Historically, frequency programs that depend on dollar denominations are weak programs. Consumers have a hard time sustaining their commitment when the incremental earning falls into pennies instead of dollars," he said. "They think it's a great idea. Except after two or three months of watching little piles of pennies pile up, they may want to return to their frequent-flyer program. That's what they're competing with. Frequent-flyer miles have high perceived value and are hard to monetize."
It is difficult to create the "aspirational element of loyalty with cash as the sole incentive," said Steve Markowitz, CEO of MyPoints.com, San Francisco. "Cash is a basic reward that is 100 percent transparent."
Markowitz, whose company recently acquired the cash-based loyalty provider Cybergold, added, "Points and cash appeal to a different psychographic. Whether the cash-collecting demographic is large enough" to support a program by itself remains to be seen, he said.
UPromise would not reveal how much consumers would earn or with which companies it is partnering. The details will be announced in the fall when it officially rolls out its program.
Frequency Marketing has a concept blueprint for an education-based awards program as well. However, Barlow said, "I haven't pulled the trigger on it."
UPromise has an aggressive marketing and advertising campaign in the works for the fall. However, Bussgang said the nature of the offer would probably help it to spread virally. "The moms of America are going to be talking about this program," he said. "They will become our salespeople." The company has chosen McCann-Erickson WorldGroup Inc. as its agency of record.
UPromise is setting up a nonprofit organization called the UPromise Education Foundation. It will donate half of its equity to the organization. Partner companies also are planning to do the same.
The company's goal is to help families generate $50 billion in college savings in its first five years.
One of the company's founders is direct marketing veteran Michael Bronner, founder and chairman emeritus of Digitas, formerly known as Bronnercom.
UPromise has raised $35 million in its first round from General Atlantic Partners, Kleiner Perkins Caufield & Byers, Greylock, Charles River Ventures and General Catalyst.