Loyalty with a twist: shoppers spend and save at the same time
Loyalty programs reward shoppers for giving repeat business to the same merchant, but BondRewards Inc. has come up with a different twist on points redemption: U.S. savings bonds. Though other redemption options are also available, CEO Brian Anderson says the bonds constitute about 97% of redemptions so far through the program, which launched in 2000 and now includes approximately 150 merchants.
Participating merchants kick in a percentage of the ticket on qualifying purchases into participating consumers` accounts. To date, cardholding shoppers have redeemed about $2 million BondDollars through the program, called USBonds4U.
USBonds4U operates in store, catalog and Internet channels. “Where we see the greatest opportunity is the online channel, and right now that is receiving about 90% of our resources and efforts,” he adds. Cardholders can access and manage accounts online. They can opt in to receive notification when they are close to a redemption threshold, and based on behavior patterns and predictive modeling, they’ll receive offers that can put them over that threshold.
Cardholders get to accumulate cash toward savings bonds, while the merchant’s percentage is actually a customer acquisition cost. Anderson says that the merchant’s contribution, in the range of 1% to 23% of the purchase price on qualifying items with an average of about 7%, is offset by cardholders’ tendency to spend more under the program. For some merchants, the BondRewards program has generated as much as 19% in incremental purchases from cardholders, he says.
One participating merchant, 1-800-Flowers.com, saw a bigger incremental increase from the program than from other affiliate and partner programs in which it participated, so it increased its contribution level from 8% to 12% earlier this year. Since 2000, the program has increased purchases among program cardholders by 5% to 7% each quarter across the 150 merchants, Anderson says.
The program is an example of so-called coalition marketing, in which non-competing providers of merchandise and services come together to target a mutual database of prospects and customers with efforts that reward them with a common currency. S & H Green Stamps, of the ‘50s and ‘60s, which let grocery shoppers accumulate stamps for purchase and then redeem them for merchandise, was essentially a marketing coalition, says Anderson.
With merchants such as Target and Macy’s both participating in the program, there is some degree of competitive overlap. BondRewards will seek to negotiate this by offering merchants different levels of participation, with preferred merchants, for example, securing different benefits in relation to category or product exclusivity. “But that doesn’t exclude others from the network,” Anderson says.
Anderson differentiates BondRewards’ program from similar loyalty programs that gear points toward long-term savings. UPromise, for example, also contributes a percentage of each qualifying purchase from a participating manufacturer toward a savings account, but it’s specifically focused on paying for education. “We’re not specifically focused on education,” says Anderson, though a U.S. savings bond has most of the same tax benefits a 529 account does. “The bond is a liquid securities device,” he says. “You can spend it however you choose to.”
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