Jewish World Review
http://www.jewishworldreview.com | (KRT) Consolidating small rebates to help finance large tuition bills is becoming an increasingly popular way to save for college.
And to make money for a savvy new generation of marketers.
In recent months, two computer-based rebate plans - Upromise and BabyMint - have been growing, spurred by word-of-mouth advertising and Internet links.
Both promote themselves as college saving plans, but the rebates do not have to be used for that purpose. The money also can be sent to members in a check to be spent or invested as they please.
BabyMint will periodically sweep the money accumulated into any 529 plan, Upromise into some. 529 plans provide tax benefits for college savings.
"This is very, very interesting," said Gene R. Laczniak, a professor of marketing at Marquette University. "This has got to be the new age versions of affinity marketing where I am the charity and it is all about me."
BabyMint and Upromise work out rebate deals with a number of retailers and then sign up customers to have the money automatically accumulate in accounts. The items included vary between the plans, but they cover everything from Cadillacs to corn flakes.
Both plans are Web based, with much of the work of collecting and accounting for the rebates done on line. Consumers can find all needed information about joining at BabyMint.com and Upromise.com.
In addition to rebates for purchases, both also offer credit cards that pay money back.
Traditional affinity marketing tries to sell a product by linking it to something else, usually a good cause, for example by making a donation to a charity for each sale.
Upromise and BabyMint "are trying to create a win-win situation," he said.
And succeeding, according to observers of the college financing scene.
"For the consumer, there really is no downside," said Whitney Dow, director of education savings research for the Financial Research Corp., Boston.
The trick for consumers is not to change spending habits to chase the rebates or to believe that they can totally finance college through having the rebates invested in a 529 plan.
"Programs like Upromise and BabyMint are wonderful ways for families to augment their college savings plans," said Sarah Henriksen, director of education planning for Strong Funds in Menomonee Falls, Wis.
Strong has a direct relationship with the Upromise organization - it manages some of the money put into a Upromise 529 plan set up with the state of Nevada. Strong also receives money for EdVest as the result of rebates collected by Upromise and BabyMint.
"You get free money for things you do every day," Henriksen continued. "They are good programs as long as you don't change your spending habits to take advantage of the rebates."
That, however, is exactly what the companies paying the rebates hope will happen.
"Upromise specifically is a good partner," said Terry Nelson, e-commerce marketing manager for Lands' End. Lands' End pays consumers a 3 percent rebate on purchases made through the Upromise Web site.
"It is a good source of new customers," Nelson said. "We are acquiring customers that are right in the sweet spot of the Lands' End customer type, young families."
For most retail companies today "there is a big emphasis about talking about having multiple channels to get your product out," said Marquette's Laczniak.
Upromise promotes itself as college savings organization with broad social goals, but to Lands' End, it is simply a marketing opportunity.
"This is an advertising expenditure," said Nelson. "It is held to the same financial targets as other advertising expenditures. It has to have a return on investment, it has to retain new customers."
Both BabyMint and Upromise are private companies owned by investors expecting to make money.
They do not release financial information. But the source of at least part of their income is clear.
"We primarily make our money from the merchants," said Bill Koleszar, chief marketing officer for BabyMint Inc. in Atlanta. "When Barnes & Noble pays a 4 percent rebate (to a customer), the reality is that they pay a 5 percent rebate, we take a small slice. It really is a dime a time."
According to Upromise spokesman Jim Doyle, "We are paid an administrative fee by our partners. If you buy a GM car you get $450. On top of that GM will pay us a fee."
In addition, Boston-area-based Upromise has started its own 529 plan, but "just because we have a 529 does not mean we are pushing people into it," said Doyle.
Both companies emphasize that they do not share specific information about the buying habits of their members without permission.
But both are accumulating large data bases about consumer habits. In the aggregate, the information provides opportunities to find valuable relationships between types of consumers by engaging in data mining, a statistical analysis technique, said Laczniak.
According to information on the BabyMint Web site:
"Aggregated demographic data on our member base, as a whole, may be provided to our partner merchants or our advertisers."
The Upromise site says, in part:
"We may also provide aggregated, non-personally identifiable information about our members and their future college students to third parties for audit, marketing and other purposes."
According to Laczniak, "The demographic segment that they seem to be promoting to (young families) is a very attractive segment from a marketing standpoint. The bottom line: it is a very fascinating new marketing experiment."
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