Stockback.com is expected to announce today that the Securities and Exchange Commission has given the company the go-ahead for its consumer stock ownership program.
Assuming it gets the OK, the site will be able to allow consumers to earn cash rewards that will be invested in a group mutual fund. This new offering signifies a recent shift in loyalty models, said Jupiter Communications, New York.
Stockback allows consumers to earn up to 20 percent cash back when they make purchases at any of Stockback's 85 merchant partners, including Buy.com, Dell Computer Corp. and Lands' End. The money will be invested in the Stockback Fund, which will be managed by Merrill Lynch.
The site has been waiting for approval for more than six months. Since the company's May 8 launch, consumers have been earning cash back for their purchases. However, they have not been able to invest the money as the site's model suggests.
“The SEC wanted to make sure we were a credible, viable company that took managing a consumer’s money seriously. It's been a long road,” said Kathy Reilly, chief marketing officer at Stockback, New York.
The hope is that this new loyalty model will present a value proposition that others are lacking.
“We're providing them with an award that can actually accumulate in value,” Reilly said. “Frequent flyer programs are becoming less popular. There's a decrease in usage, increase in blackout dates and they've upped the mileage needed for certain legs of trips.”
This type of program may prove to be refreshing to consumers and businesses alike, according to Melissa Shore, senior analyst at Jupiter Communications.
“In this day and age of loyalty programs, there are so many 'me too' types of programs,” she said. “Companies are looking for new opportunities. To be interesting for the consumer, it's not just about travel redemption anymore. Our research shows that the online consumers only have a finite number of loyalty relationships. So you really have to have a new 'wow' factor to differentiate yourself and be compelling to consumers.”
Shore said this model is part of a new wave of loyalty companies that are looking to reward consumers in unique ways. She pointed to UPromise as a company with a similar vision. UPromise offers consumers the opportunity to earn cash that can be placed in a tax-deferred savings account earmarked for financing a college education.
Since these two companies are cut from the same loyalty cloth, they will share the same problems.
“There will be an education factor since they are both first in the space,” Shore said. “You have to educate consumers as to what you can do and let them know that it's legal and worthwhile.”
Marketing will play a big part in this process. Reaching younger, early adopters is part of Stockback's plan, as it will have information about the site distributed this fall in 700,000 back-to-school bags from Varsity Group Inc. “Younger people will see it as a compelling way to jump-start their savings and they are already comfortable buying online,” Reilly said.
Stockback will launch an integrated marketing campaign next month. Few details were available, except for the company’s choice of TBWA/Chiat/Day as its agency of record. UPromise also is planning an aggressive marketing campaign that will accompany its fall launch.