Incentives
by
Chaelynne M. Wolak
wolakcha@scsi.nova.edu
A paper submitted in fulfillment of the requirements
for DISS 790 - Assignment Seven
School of Computer and Information Sciences
Nova Southeastern University
July 31, 1999
Abstract
Want to get something for nothing? Some say it is not possible today, but think again. In cyberspace, anything can happen. Yes, it is a great time to an online consumer. Electronic commerce (EC) is at the forefront of changing the way consumers purchase items. In fact, to get them to try it, many EC companies have signed up with incentive/reward programs. This research paper details the top-eight incentive programs that are online today.
Electronic commerce is in one word about "shopping." Some may agree and others may disagree. However, the idea is to create a transaction whether it is business to business (B2B) or consumer to business (C2B).
The effectiveness of a web site used to be measured by the number of "hits." Today, though it is measured by purchases (Masterson, 1999). Online shopping has been growing at a staggering rate. In 1998, 10 percent of North American households were expected to make online purchases according to Forrester Research (Branscum, 1998). Now, the focus of the Internet community is about customers "sticking" around versus "acquiring" them (Beck, 1999).
Many customers love to get something for nothing. In a NFO Interactive survey of 1,905 online consumers, 53 percent would gladly increase the amount they spent in transactions at a specific web site as long as loyalty points or incentives were offered. Forty-seven percent of these same individuals would regularly visit the web site if they received loyalty points or incentives (Steinberg, 1999).
In this same survey, more than 50 percent would gladly provide personal information in return for a reward/incentive. Online consumers prefer the following:
· Products or gifts: 28 percent
· Airline miles: 18 percent
· Gift certificates to retailers: 16 percent
· Electronic cash: 14 percent (Steinberg, 1999)
This new marketing strategy for EC web sites is about the "gimme" factor. Online consumers want EC businesses to make it worth their while to shop. The reward/incentive programs are the most powerful tool EC businesses can use today to drive customer retention and develop customer loyalty. This tool is especially effective with consumers under the age of 35 (Steinberg, 1999).
Just as offline companies are looking to create life-long customers, online EC businesses desire the same. This model of online rewards/incentives is the same as the traditional marketing model. It is used to create changes in how consumers' spend over a long period. The number of shoppers who look for incentives when they decide to buy online is the same expectation they have when shopping at traditional retailers (Beck, 1999).
Today, many EC businesses turn to outside companies for loyalty/incentive programs. This is because they offer more rewards and have a large customer base (Beck, 1999). This research paper details the top-eight incentive programs online today. These eight appeared in the TopTenLinks.com best Internet incentive programs. They are CyberGold, AllAdvantage.com, Beenz.com, MyPoints, ebates.com, Netcentives, FreeRide Media, and Klickback.
CyberGold
Consumers are paid for just doing it. Whether it is downloading new software, viewing a new web site, or just buying flowers, they are able to get cyber money back. CyberGold is strictly a cash incentive program that even specializes in micro-payments.
Who They Are
CyberGold employs approximately 60 people. They are located in Berkeley, Dallas, Los Angeles, and New York. Major investors of the company include Intel, Alta Partners, VantagePoint Venture Partners, and Alafi Capital. As of March 1999, there were nearly 1.5 million members (Vogel, 1999).
CyberGold is an Earn & Spend Community. Money is earned by trying new services or buying products from such companies as Disney, AT&T, or even placing a bid on DealDeal. Once incentive money is earned, then all the consumer has to do is click and spend. This Earn & Spend Community is the first true Internet-based economy (Welcome to CyberGold, 1999).
Consumer Profile
When CyberGold reached its million-member milestone, it ran a One Million Member Sweepstakes. Lani Goldberg of Baltimore, Maryland was the lucky millionth member who received $500 in her account. She is just one of many who come from a range of places. Listed below are the CyberGold member demographics (Hutchinson & Wong, 1998):
· Majority have income between $50 to $75 thousand
· 68 percent are between the ages of 26 and 50
· 75 percent have used a credit card online
· 71 percent work full time
· 54 percent are male, 46 percent are female
· Approximately 50 percent own their homes
· 96 percent access the Internet everyday
Benefits to EC
Businesses
There are many advantages to EC businesses, which have CyberGold as their incentive program. First, CyberGold creates a new publishing and distribution model. Independent authors or artists of low volume or low cost content can bring their works to the market in a non-capital intensive way. Traditional publishers of books, music, or software require a capital-intensive model where only a few selected authors or artists are selected. Even works that are already being sold can benefit from this new channel of distribution (CyberGold Launches World's…, 1999).
Another benefit is increased revenue for small ticket transactions (micropayments). Small payments are not very cost effective via the web. Credit card providers charge a relatively high fee for processing such transactions. For example, it may cost 20 to 25 percent on a $3 to $5 transactions. When cost of content delivery, EC hosting, sales, marketing and customer support are coupled with the processing cost then profit is essentially eliminated. CyberGold does not rely on the fee-ridden credit card system. Instead, they have a proprietary micro-transaction processor called CyberGold MP that runs on almost any web server. It is like a debit account (Guglielmo, 1999).
Lastly, CyberGold makes the transaction easy so consumers are more likely to spend especially when it comes to impulse buying. Consumers have an account where they just click and spend. If they do not have enough money, then CyberGold allows members to "load" their accounts by using their credit card (i.e. Visa). EC businesses benefit from the consumer's feeling that its "free" money earned in the CyberGold incentive environment (Welcome to CyberGold, 1999).
Benefits to Consumers
Consumers get more of what they want when they shop online - additional cash. A CyberGold dollar is equivalent to one United States dollar. The CyberGold money can be credited to a Visa card, transferred to a bank account, or even donated to a charity.
Lastly, CyberGold enables consumers to make purchases anonymously and confidently. They have a strong encryption methodology and are registered with TRUSTe charter. This means that all information is kept private and confidential (Welcome to CyberGold, 1999).
Earning &
Spending Example
At the CyberGold website, http://www.cybergold.com, under the earn tab there are numerous ways a consumer can earn CyberGold dollars. For example, the DoubleDay Book Club rewards $10 when a consumer signs up for membership. E*Trade rewards $50 when an individual opens an account with $1,000. The Disney store gives five percent back on purchases.
After earning this cash, the most important decision to make is what to purchase. Currently there are six vendors where CyberGold dollars can be redeemed. They are MultiMediaMart, CDworld, Epitonic, Musicosm.com, BuyCollegeStuff.com, Lasertrax.com, and Public Spirit. At MultiMediaMart, a person can obtain research literature. For example, $14.95 will get information about "Attorney Fee Disputes: What To Do When Your Lawyer Charges Too Much."
AllAdvantage.com
Friends and family are welcomed for this incentive. All a person has to do is surf the web using the Viewbar. AllAdvantage.com will credit the person's account for fifty cents an hour. Refer a friend and earn an additional ten cents per hour for the friend whom is surfing. If the friend refers another individual, that same person earns another five cents the extended referral is surfing. There is no limit to the number of referrals a person could be paid (Get Paid to Surf…, 1999).
This multi-level earning incentive is only valid for up to four levels and a total of 40 hours per month. This equates to $20 per month. Not only does a person get cash but also exclusive offers, member-only rebates, and discounts. There are even cash discounts that are tailored to an individual's needs (Get Paid to Surf…, 1999).
Who They Are
AllAdvantage.com was founded in February 1999 and is privately held. They are located in Hayward, California. AllAdvantage.com developed the new advertising model called Directed Advertising. AllAdvantage.com acts as an agent, a communicator, and a protector for Internet users. This means allowing marketers to reach the right person with the right message at a time when they are receptive to marketing messages. All of this is done without compromising the privacy of the Internet user (Jorgensen, 1999).
AllAdvantage.com does this with their proprietary technology called Viewbar. Viewbar is the communication device where Internet users are paid to watch advertisements. "AllAdvantage.com leverages the power of a large group to provide benefits for its members, while allowing each individual member to maintain control of their Internet experience" (Moran & Bae, 1999, March 30).
Benefits to EC
Businesses
In one sentence, access to a large Internet community base. Currently, AllAdvantage.com is 1.8 million members strong (Moran & Bae, 1999, July 7). In addition, marketers can precisely target advertisements to those Internet users who want them.
Benefits to Consumers
AllAdvantage.com offers four major benefits to the Internet user. They are discount shopping, free email hosting, privacy filtering, and opt-in email lists. Beginning in summer 1999, members will save five to 25 percent in discounts on all shopping at many of the web's leading retailers such as eToys, Music Boulevard, and barnesandnoble.com (Future Benefits and Services, 1999).
AllAdvantage.com also offers its members free email addresses. In addition, they act as the member's privacy screen where personal information is protected. Lastly, if members want to earn additional cash, members will be paid for voluntary opt-in mail lists and other forms of targeted marketing (Future Benefits and Services, 1999).
Earning &
Spending Example
AllAdvantage.com is starting the incentive program this July 1999. Thus, in order to experience extra cash, discounts, and exclusive offers, a person will just have to sign up and surf. Since April 1999, they have been accepting member registrations.
Beenz.com
It is all about increasing the amount in the Bank of Beenz. The Bank of Beenz even sends its members regular bank statements. Beenz is "electronic money" which is very similar to loyalty points offered by supermarkets and petrol stations (Roberts, 1999).
The idea is for Internet users to earn these beenz by spending time surfing, filling in questionnaires, and of course buying items. Once the member has some beenz in their account, he/she can spend them on promotional or discount items.
Who They Are
Charles Cohen is the founder of The Beenz Company. Beenz.com was developed because Charles was frustrated with the inadequacies of online marketing (The Beenz Company: Launch of the…, 1999). Beenz.com came online in March 1999. They are a British Company where the headquarters is located in New York and offices in London and San Francisco. Their technology partners include Oracle Corporation, Sun Microsystems, and Exodus (Beenz: Beenz means business…, 1999).
Since its launch, over 150 web sites have issued more than 100 million beenz (Beenz: Beenz means business…, 1999). Beenz are a radical alternative to money. In fact, Beenz.com hopes it will become the new currency for the Internet economy.
Beenz are electronic credits that are easily earned by shopping or surfing online (The Beenz Company: Launch of the…, 1999). Beenz is easy to use since it requires no plug-ins or software downloads. In fact, all an Internet user needs to do is enter their email address, which appears in a pop-up Java window.
Beenz.com feels this new electronic currency creates a very flexible trading platform for EC. In fact, they claim it avoids the pitfalls of real money such as security, exchange rates, and clearance issues. Therefore, this currency is much cheaper than real money (The Beenz Company: Launch of the…, 1999).
Benefits to EC
Businesses
Beenz.com offers many benefits to EC businesses. First, the beenz is a global currency. As stated before, businesses can easily deal with international customers since it is a universal form of exchange. Second is easy integration. There is no server access necessary and it is easy to setup and manage online. Lastly, it is the ultimate marketing innovation since it will build traffic instantly, make the EC site "sticky" (increase revisits), and accelerate spending decisions (Tradecenter, 1999).
Benefits to Consumers
Besides providing an Internet community, there are associated benefits for the Internet user. They are privacy and ease of use. The Internet user does not have to install any plug-in or special software (Tradecenter, 1999). He/She can continue to use their current browser of choice. All he/she needs to do is click on one of those beenz icons.
Beenz also offers privacy. Upon the Internet user entering his/her email address, that information is sent directly to Beenz.com. Information is not sent to the web site that is giving the beenz (Getting started with beenz, 1999).
Earning & Spending Example
At the web site, there are many channels to select from to earn or spend beenz. Currently there are 190 web sites. In the channels box under the "Home & Garden," an Internet user can earn beenz from three sites. If he/she clicks on Prisco, who sells beautiful lamps from Sweden, he/she automatically receives 25 beenz for just visiting. Additional beenz can be earned by placing an order. For every dollar spent, there is one beenz.
To spend these hard-earned beenz, try visiting Atom Split in the "Music & Movies" channel. This web site posts information and allows downloading of songs of an independent rock band from Atlanta call Atomsplit. For just 750 beenz, an Internet user can receive Atomsplit's first CD.
MyPoints
Reward points by email are the name of game with this incentive program. Read email and get points. Go to a web site or even purchase something and earn even more points. Provide personal information and receive another 125 points. After earning points, maybe a Carnival cruise is just the reward a member may be looking for.
Who They Are
MyPoints.com, Inc. was founded in 1996 as Intellipost Corporation. MyPoints is a leading provider of Internet direct marketing and loyalty programs. They are located in San Francisco, California. The company has a mix of venture and strategic backing. The company's venture backers include: Henry Kravis, George Roberts and other partners of the investment firm of Kohlberg Kravis Roberts & Co. (KKR); Applewood Associates; Labrador Ventures; Technology Crossover Ventures and several others. Strategic backers include: Experian; PRIMEDIA Inc.; Dai Nippon Printing Co., Ltd.; and Brierley & Partners (MyPoints.com unveils integrated…, 1999).
The incentive program rewards members by reading, responding to offers, or completing surveys via the web site www.mypoints.com or by email through MyPoints BonusMail email advertising. For example with BonusMail, a member will receive 10 points for reading the email, even if the offer is declined. However, if the offer is taken advantage of, a member could earn 110 points.
Consumer Profile
MyPoints has roughly 2.5 million members. The profiles of these members are the following (Company overview, 1999):
· Median age is approximately 30 plus
· 80 percent are college educated or better
· Median household income of $55 thousand
· More than 70 percent have shopped online
Benefits to EC
Business
MyPoints.com offers EC businesses an array of benefits including better targeting, better communication, and detailed response profiles. MyPoints.com targets members since it is based off their personal information. Generally, banner advertisements depend on demographics, geography, or general interests to target consumers (MyPoints BonusMail email…, 1999).
Communication is enhanced since email can provide a reserved space so EC businesses can detail more information. In addition, this method creates an environment where only the consumer sees this information requiring his/her full attention (MyPoints BonusMail email…, 1999). There are no other advertisements to distract them.
MyPoints.com provides EC businesses with detailed response profiles. Information such as who received the offer, who clicked through, and who purchased are just some of the aggregate reports. All the accounting and reporting is automatic. Meaning there is no software to install on servers, no files to transfer, and no customer service headaches from late or missing awards (MyPoints BonusMail email…, 1999).
The best way to show how MyPoints benefits EC businesses is by example. Newsweek, a major national magazine, wanted 1,000 new subscribers. Therefore, they signed up with MyPoints BonusMail program. Newsweek received a response rate of 1.5 percent. This was a 50 percent increase over its previous direct mailing campaigns (Start spreading the news…, 1999).
Benefits to Consumers
MyPoints BonusMail is a 100 percent opt-in marketing program (MyPoints BonusMail email…, 1999). This means the consumer is given the choice to receive advertisements. It is not pushed or unsolicited. Therefore, the consumer has final say. It is much less intrusive than other advertising models such as banners.
Best of all, numerous rewards from brand-name merchants. There are literally thousands of rewards from such companies as Target, Carnival, Sprint, Hilton Honors, and many others. Spending the reward can be done online or offline such as getting a Target gift certificate and going to the local Target store.
Earning &
Spending Example
Besides earning points via email, a member can also earn points via their web site. For example, a member can earn 50 points for joining the Montley FOOL. This is a personal financial site where a member can learn or chat about investing - even foolishly. In addition, a member can earn another 10 points for just visiting the Ubid.com web site.
Spending requires a little more research. There is just so much that can be done with those points. For example, 185,500 points will get a member an "elite award certificate" from Carnival cruises. This is a seven-day cruise for two anywhere Carnival goes. If this is just too extravagant, 700 points will get a member a $5 gift certificate from Barnes and Noble.
Ebates.com
If points do not enthrall the savvy Internet user, how about actual cash? Ebates is about rebates. Shop online and a certain percentage of the purchase will be reimbursed to the member. The rebates can be as high as 25 percent!
Who They Are
Ebates.com claim to frame is the ultimate EC shopping portal. They are headquartered in Menlo Park, California. Two former Deputy District Attorneys found Ebates.com in 1998. They are Paul Wasserman and Alessandro Isolani. Venture capital firm of Foundation Capital backs them. Ebates.com came online in May 1999 (Company info, 1999).
The mission of Ebates.com is to provide their members with as many online stores as possible from one central location. Ebates.com uses the collective buying power of its members to pass commission payments they receive from online merchants' back to their members in the form of rebates. In essence, all sales commissions that Ebate.com receives from the affiliate online merchant are given back to their members. In addition, Ebates.com does not dictate which online stores the member shops. If there is a store not in the Ebates.com merchant network, they will do all they can to add them (Company info, 1999).
Benefits to EC
Businesses
The biggest advantage EC businesses gain is these members are ready to shop. Credit cards are out and in hand. In addition, many of Ebates.com's participating merchants can lower their customer acquisition costs substantially by being in one central shopping portal location (Ebates.com shows shoppers…, 1999).
Benefits to Consumers
In one word - cash. There are no points, no beenz, and no cybercash, but there is real money. This is like the Discover Card of the web (Ebates.com shows shoppers…, 1999). The more the member spends the higher the rebate. Nothing like getting paid to shop.
Becoming a member is easy. Just choose a username and password and then start shopping. However, to earn the rebates, members must use their ebates.com email addresses. Rebates are paid quarterly - July, October, January, and April (FAQ's, 1999).
Earning &
Spending Example
Well, in order to earn, a member has to spend. This is an all-in-one transaction. If members think they have limited merchants to shop from, then think again. There are over 88 online businesses participating and they include some big brand names such as Amazon.com, PlanetRx, and Value America (Stores, 1999).
Here are some examples of the potential earning power of shopping online. Amazon.com gives rebates of five percent. EToys, PlanetRx, Sparks.com, and Aidelis Sausages all give rebates of 25 percent. If electronics is what a member is looking for, try Beyond.com who gives five percent or Dell computers with one percent rebates. For those members who enjoy golf, try The Golf Warehouse for a 12 percent rebate.
If this does not get members clicking and spending, for a limited time ebates.com is offering an additional five percent cash back through July 1999. It is their "Catch the Wave" promotion (Ebates.com announces hot summer…, 1999). Therefore, gear up for this hot summer special and do not forget the credit card!
Netcentives
If frequent travel is a member's lifestyle, then ClickRewards is for him/her. ClickRewards is a loyalty program designed to reward consumers with frequent flyer miles on all major United States airlines. The currency is a ClickMile. For every one ClickMile equals one frequent flyer mile (ClickRewards, 1999).
Who They Are
Netcentives was founded in 1996 and launched ClickRewards Shopping Network in March 1998. They are headquartered in San Francisco, California. At its core is the Secure Reward Architecture. Their business objective is to be the leading provider of loyalty, direct marketing and promotion products designed to drive EC (American express…, 1999)
Consumer Profile
Today there are 57 million frequent flyer members in the United States. Eighteen million of those are online and approximately one million of them are ClickReward members. Members are upscale and technological savvy. They are three times as likely to purchase online versus other Internet users (ClickRewards, 1999).
Benefits to EC Businesses
Netcentives offers EC businesses three key advantages. ClickRewards targets a specific group of online Internet users. Their members have money to be spending online. In essence, they are high-income buyers (ClickRewards, 1999).
Results can be easily measured. EC businesses have access to these results 24 hours a day, seven days a week. In addition, Netcentives provides performance measures against the EC business' original objectives (ClickRewards, 1999).