Magna Cum Loyalty
If you want to strike a chord with Americans with young children, bring up the topic of college tuition costs.
Upromise did just that and is now in its third year of channeling rebates into college-saving accounts with its loyalty marketing service. Its membership roster has grown to 3.5 million members who earn dollars by making purchases in 16,000 participating grocery and drug stores on more than 5,000 items. Thousands of companies participate — including 140 national partners — from small neighborhood restaurants to mega brands like Coca-Cola, Procter & Gamble, McDonald’s and Whirlpool.
The service began in April 2001 with at least a dozen big-brand partners and has been growing ever since despite some turnover among major partners. Last year it launched its grocery business with 12 consumer packaged goods partners, now up to 30, including Tide, Tylenol, Kleenex, Huggies and Scott Towels. Within a month of the launch it had registered the shopper cards of more than 1 million grocery customers.
More big-ticket items have since been added, such as insurance, mortgages, real estate and major appliances. For example, Whirlpool joined as a partner last April. “We try to help people become more productive in their everyday lives,” says Ericka Wietecha, brand manager of Whirlpool Fabric Care. “Appliances help with more routine chores, and to help contribute to college education makes life easier in the future.”
Whirlpool, like all partners, pays a fee to participate in the service, handles the rebates and commits to a marketing schedule. It launched an integrated approach to getting the word out.
In one co-branded effort, Whirlpool and Tide held a contest with a $20,000 scholarship prize to be deposited into the winner’s Upromise account. A two-page ad promoting the contest ran in US Youth Soccer magazine reaching 1.5 million households. In May, a Tide FSI went out to 54 million households.
Whirlpool is developing a P-O-P strategy to incorporate the Upromise logo at retail. During manufacturing, a flyer is inserted into every major appliance, to alert consumers of the service when the product is delivered.
Finding ways to measure the effectiveness of the service is a metric partners spend lots of time strategizing. Whirlpool requires that members register their new products online to collect the rebate and are asked to complete a survey about the level of importance Upromise played in their purchase. “If they weren’t aware of Upromise by the time they registered their product, they should be,” Wietecha says.
Paper Mate became a Upromise brand last May, signing on as the exclusive partner in the writing instrument category and offering members a 3% rebate on purchases. Paper Mate kicked off its marketing program this summer with a big back-to-school push focusing on teachers and moms. The promotion incents teachers to add Paper Mate products to the must-have list kids need this fall with a prize of $50 in free school supplies. Ads ran this summer in publications read by teachers and a direct mail piece was targeted to teachers nationwide.
The service is also promoted on more than 10,000 in-store displays, mentioned in Paper Mate’s print advertising, on its back-to-school packaging and at a prominent place on its Web site. “We’re going to learn this year, of all the things we’re doing, what works best,” says Barry Calpino, VP-general manager of Paper Mate.
To measure its success, teachers are required to submit their lists, incremental volume is monitored during retail promotions and ongoing surveys are scrutinized to determine the awareness of Upromise.
Coca-Cola is going into its third year with Upromise, bringing its entire portfolio of Coca-Cola and Minute Maid Co. brands to Upromise retailers. In one of its recent promotions, it helped celebrate CVS’s 40th anniversary by offering 40% off all Coca-Cola products at the drug stores, says Bronwyn Morgan, senior manager entertainment and strategic alliances at Coca-Cola.
McDonald’s puts the Upromise logo on its french fries baskets and bags and promotes the service on trayliners using the theme “Take a bite out of college costs.” And Exxon uses lots of P-O-S and pump toppers, and has published an advertorial about the importance of saving for college in The Washington Post and The New York Times.
Footing the bill
The Upromise business plan is built on the premise that many families are daunted by the prospect of saving enough money for their children’s college education. Average college costs for 2002-2003 were about $73,000 for a four-year private school (up 5.8%) and $16,300 for a four-year public college (up 9.6%), according to the College Board. And the costs are only going up.
The service is aimed at a large primary target: 35 million American homes that have parents with young children, Internet access and the ambition to send those children to college. A secondary target includes grandparents, aunts, uncles and other family members and friends who may contribute to a pooled college savings plan for one or more children.
“I sit here and wonder why hasn’t everybody joined, but then you have to say it’s a brand new idea,” says George Bell, president and CEO of Upromise.
To participate in the service, members register a credit, debit or grocery loyalty card and collect rebates in their Upromise account when they buy products and services from participating companies. Members can also earn 1% on all purchases made with the Upromise MasterCard issued through Citibank.
“We’re making it painless for people to get started,” says Needham, MA-based Upromise spokesperson Jim Doyle.
The money can be used in several ways. It can be invested in a 529 account, a tax-deferred college investment plan to save for college tuition; pooled in a 529 account by participating friends and family members or used to pay off student loans. The funds are federally insured and the money can be withdrawn at any time.
As does any startup, Upromise faced plenty of challenges and has suffered some setbacks. Earlier this year, the company lost one of its eight cornerstone partners Toy ‘R’ Us (the other seven have renewed their contracts). Other partners have dropped off as well, including Borders Books and The Sports Authority. The privately held company declined to discuss specifics about its revenue.
Raising brand awareness is high on the company’s to-do list — fulfilled largely by the marketing commitments of partners — but it hasn’t come without its missteps. In the early stages of the McDonald’s partnership, the Big Mac maker added the Upromise logo to its drink cups, which created lots of exposure but lots of confusion too.
“People didn’t know what it was,” Bell says. “It was too early to be able to do that. It wasn’t as recognizable as the Nike swoosh, so we had to backtrack and take the chance to explain the service.”
McDonald’s then offered up its tray liners, which provided more space to expand on the service.
The company says it is building evidence, quantifiable and anecdotal, that Upromise is gaining ground as a recognizable brand. Bell chalks it up to the basic premise of the Upromise promise.
“I had not appreciated when I came to work for the company, the level of anxiety and crisis that families feel about paying for college,” he says. “The hope of getting the child to college on the one hand and the sense hopelessness of trying to finance it on the other hand.”
Annoyance Equals Attrition
The good news is that there are lots of consumers who participate in loyalty rewards programs. The bad news? Four out of 10 have dropped out of at least one program due to a number of frustrations. Almost half (49%) of American adults have participated in some form of loyalty or rewards program, according to a poll conducted by Maritz Research, Inc. But roadblocks have users checking out and looking elsewhere. However, when they find a program they like it’s good for business. Some 80% of respondents do more business with companies as a direct result of the programs. The Martiz poll cited the following reasons why Americans dropped out of a rewards program: 46% didn’t like paying a fee; 41% didn’t feel they were being rewarded properly; 32% had trouble redeeming points; 24% reported that the rules kept changing.
Some 74% who did drop out of a program indicated that they subsequently bought less from the company that offered it. The most popular rewards programs are credit cards (29%), airlines (24%), retail store (13%), hotel (13%), restaurant (12%), online retailer (6%), automobile (5%) and cellular phone (4%). Participants offered a number of reasons why they participate: discounts (60%), cash-back (53%), free merchandise (42%), free travel (41%), special benefits or upgrades (33%), special members only offers (28%) and gift certificates (28%).
The Maritz Poll is a national consumer opinion survey conducted periodically by Maritz Research. The survey was conducted online April 7-9, 2003, and questioned 1,205 adults nationwide. The survey focused on attitudes and issues related to brand loyalty.
