A patent-pending rewards program is just one of the reasons H&R Block thinks it can become a year-round business. Its plan may provide happy returns for marketing partners, too.
Robbie Wilson hit a new career high when he treated friends to lunch last month.
Wilson picked up the tab with one of the first cards from H&R Block’s new Refund Rewards program. The company expects to mail a few million of the debit cards to taxpayers this spring, each loaded with a tax refund. As Block’s vp of business development, Wilson was helping test the cards to see how Block’s retail partners will handle them.
“I’ve seen my new products on the shelf before and felt incredible pride,” says the packaged goods veteran. “But that day was a new watermark for me. It’s amazing to think we’ve created something that will be used as currency in the marketplace.”
Block launches Refund Rewards this spring with 10 major partners. Consumers who join the program get their tax refund on a debit card that qualifies for discounts and special offers from the likes of Sears, General Motors, RadioShack, and US Airways. “This is our answer to the challenge of taking a $1,000 refund and making it worth $1,200 or $1,500,” says chief marketing officer David Byers.
The program is built on a simple notion: Consumers splurge with their tax returns. Why not pool the $20 billion in refunds processed through Block annually and give marketing partners a crack at that audience?
“We have the brand, the critical mass, and the clout in the marketplace to aggregate those refunds and negotiate for our customers,” says Wilson. “This treats customers as a single buying force.”
INTERNAL REVENUE
Refund Rewards is Block’s first new product as the Kansas City, MO, company looks to expand beyond tax services. A $100 million campaign broke in January to reposition the 45-year-old chain with broader financial services. It’s the culmination of a year’s worth of overhaul under president Mark Ernst, an American Express veteran who took charge early last year. Block has great brand recognition, but consumers only care about it four months out of the year. Executives figure they can parlay their intimate knowledge of 20 million customers’ finances into other services like mortgages and investment advice.
Block used its December ’99 purchase of Olde Financial Corp. as a springboard into new services. The company opened 94 H&R Block Financial Centers this year after five pilot centers did extremely well in `99. Olde and the pilot centers “put us on the map in financial services,” says Byers, who became Block’s first chief marketing officer in June. Add Olde’s infrastructure to Block’s brand name and installed customer base and the “cost per sale and acquisition of new customers is incredibly attractive. Clients have asked for [added services] in the past, and we haven’t had the tools to provide it.” Revenues topped $1.6 billion last year; Byers won’t project 2000 revenues.
Block’s marketing spending is more than triple the $30 million it spent on ads in ’98, per Competitive Media Reporting, New York City. Promotion gets a bigger percentage of the marketing budget this year, largely to introduce Refund Rewards.
“This is not a promotion. It’s a new product Block is promoting,” says Amy Wotruba, account director at Wunderman Cato Johnson, Chicago, which has prepared Block’s promotions for the last five years. The program’s introduction is timed to tax season to be “a tangible example of Block’s new products,” she says. Block applied for a patent for the program, which likely will add more partners in the future.
Block phones past customers a few weeks before the date they brought in their tax work the previous year. Those calls, plus direct mail and in-store signs – as well as TV, print, and outdoor ads – tout Refund Rewards. Customers who file returns electronically qualify for the debit-card refund, which arrives by mail within 14 days accompanied by a welcome kit outlining special offers. GM gives a $500 discount to cardholders who spend $500 or more on a new vehicle; Sears, Fingerhut, Champs, US Airways, and Northwest Airlines give discounts of 10 percent to 20 percent. Cardholders get a monthly summary of transactions until the card is used up.
Block is mulling how to handle future mailings, reviewing privacy and regulatory issues to learn how to use information gathered during tax preparations in follow-up marketing. The company will analyze cardholder spending patterns to shape future offers. “It’s a great way [for partners] to build customer loyalty – especially if consumers are waffling on how they’ll spend their refund,” Wotruba says.
Block will use Refund Rewards to woo new customers as well as its 20 million current clients. The company considered a coupon book, but opted for the greater impact the cards would make. Cards bring consumer spending onto a common platform, Byers says, and they’re as easy for retailers to process as credit cards or coupons. Block made the cards as flexible as possible: Household Finance issues them, and partner MasterCard lends its logo to assure they’ll be valid anywhere MasterCard is accepted.
JOINT RETURNS
Block drew up a wish list of partners and began pitching them last June.
“We thought about who our customers would want, rather than just assembling the biggest number of partners,” Wilson says. Block went through some – dare we say it? – taxing preparations to customize presentations and get non-disclosure agreements from candidates before pitching them the idea. It approached partners “very quietly,” aiming for 10 to 12 in travel, auto, and retail for year one.
“We did research on how clients spend their refunds – vacations, appliances, cars, and such – so we looked for partners specifically to deliver against those needs,” Byers says. “We approached them on sheer volume opportunity of the market: We can deliver a whole lot of clients with a whole lot of money to be spent. The numbers are mind-boggling.”
Partners agree to promote Refund Rewards (Sears has signage in stores; GM dealers cross-promote with local Block offices) and let Block use their brands in its marketing materials. Numerous details had to be negotiated after Block signed contracts because of the program’s tight timeline.
Sears had no problem with the schedule, since Block is handling all in-store marketing. The quick turn-around kept GM from doing a major marketing push, but the first year is mostly a trial run anyway. “This is a chance to be associated with Block, to learn as much as we can, and give dealers and regional managers more tools in the second year,” says Eric Siano, GM’s field marketing manager.
Household Finance, which also handles the GM Card, introduced Block to the car maker, and it was GM Card’s staff that cut the deal before handing it to GM’s Enterprise Customer Management unit to fold into direct marketing. Refund Rewards “fits quite nicely into the [customer relationship management] we do,” Siano says.
T&E DEDUCTIONS
For travel, Block approached a handful of cruise lines, which recommended travel wholesaler National Leisure Group to rep airline, hotel, and car rental brands. The Boston company handles private-label travel services for credit card companies and retailers including Filene’s and BJ’s Wholesale Club. Its work for Block introduces a Refund Rewards Vacations brand name that has a dedicated toll-free line for cardholders. “We get additional business and they get one-stop shopping for vacations and all the leading cruise lines,” says director of marketing John Walsh.
Fingerhut, Minneapolis, joined Refund Rewards to find customers with long-term value. The direct-mail retailer created a special catalog for cardholders, who get a 10-percent discount when they pay with their refund money. “We are always looking for new ways to locate new customers, and H&R Block was looking for ways to offer more benefits to their customers,” says Fingerhut senior analyst Geoffrey Seper.
“Coming off the holidays, sometimes it’s difficult in the spring to get new [consumer] names in the door. The H&R Block program fit our schedule very well. We were given plenty of time to create a catalog and set up the necessary tracking to determine just how well this program does for Fingerhut.” The catalog company may even use the Refund Rewards program as the model for future partnerships, Seper says.
The program wasn’t always such an easy sell. Some partner candidates said no to Block because they’d already locked in other plans. Others “were frightened of the notion of something this big,” Wilson says.
Wilson and Byers credit Chicago-based ad agency Young & Rubicam and WCJ (Y&R’s promotion sister) with helping research, structure, and position the full campaign to consumers. WCJ acted as liaison with Refund Rewards partners, stationing an account supervisor in Block’s Kansas City headquarters for two months last fall. The agency will now look to integrate more short-term promotions for Block’s new services and add long-term partnerships to Refund Rewards and other services.
Block created the job of chief marketing officer to juggle marketing for new business units (including customer relationship management), then hired Byers from ad agency FCB, San Francisco. Adding marketing staffers has been tricky, says Byers, who worked at Del Monte before his agency stint. “It’s been tough to bring in the right talent quickly enough to achieve this growth spurt.”
Getting Refund Rewards and the rest of Block’s blitz in place has taken its toll. “This last year has been Mr. Toad’s Wild Ride,” says Wilson. “We all have a lot more gray hair and a little less of it.”
Smart money says Block will see a healthy return on that hirsute investment.
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