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Redeeming Qualities

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The setting: A February night at New York's Studio 54, the legendary 1970s disco den and now home to the racy Broadway show "Cabaret." More than 500 people have gathered for the coming-out party of S&H Greenpoints, the new rewards program from The Sperry & Hutchinson Company, the firm that started a national licking frenzy back in 1896 with sheets of Green Stamps. The company may be 104 years old, but the party is anything but geriatric. Crowds hover around computer monitors to check out the Greenpoints Web site as bartenders pour the drink of the night - the Greenpoints martini (yes, it's green). Still, there remains one sign that S&H hasn't broken completely from its past: The twentysomething DJ spins hits from the '50s and '60s, the heyday of Green Stamps.

The party, with its mix of old and new, illustrates the challenge facing S&H: How can the company build on its past success and convince consumers that it's still relevant in today's digital world? It certainly faces more competition than when grocery stores and gas stations dispensed ribbons of Green Stamps to customers. Now there are loyalty programs online and off, rewarding consumers for flyingon a certain airline, buying from a particular e-tailer, and dining at a specific restaurant. In the online arena, Forrester Research predicts that e-commerce players will shell out $6 billion a year on incentives and promotions by 2002. The stakes are big offline, too: The Incentive Federation estimates that companies give away $4.2 billion each year in consumer premiums. S&H wants a piece of both of those pies. Besides inking deals with more than 100 e-commerce merchants who will give away Greenpoints, it's also pushing the program aggressively offline with co-branded frequent-sho! pper clubs and a credit card. Th e goal: to let consumers earn Greenpoints for almost anything they do, from filling their gas tank to shopping on the Web. "We like to think of it as `u-commerce,'" says S&H president Rod Parker. "It's all about unity."

The evolution of Green Stamps into Greenpoints didn't happen overnight. In fact, S&H was a shell of a company when a group of investors acquired it in early 1999. Only a few retailers still offered Green Stamps, but the investors believed the S&H brand could click again with consumers. A bit of unscientific research confirmed their hunch. "Call it man-on-the-street research," says Rich Gurin, CEO of S&H. "We went out and asked 50 people if they had ever heard of S&H. Everyone remembered it."

Further research supported those initial findings. With the help of Dorr Research in Boston, S&H fielded a national study last summer to determine who knew what about the company. Researchers interviewed 400 adults, all with kids under 19 and who used the Internet for purposes other than business or e-mail. Half of the participants also made purchases online. The results were encouraging: One out of two adults aged 30 and over knew exactly what S&H was (beyond just an abbreviation for shipping and handling). They talked fondly about sitting around the kitchen table when they were kids, pasting Green Stamps into redemption books. The under-30 crowd, not surprisingly, didn't share those warm feelings. "We might as well be the man on Mars," says Arthur Sweetser, senior vice president of marketing.

Those young Web-savvy consumers are critical for loyalty programs. According to a study of online shoppers by Internet research firm Cyber Dialogue, 30 percent of 18-to-29-year-olds agree or strongly agree that they shop more at sites that offer frequent shopper rewards or incentives. That's higher than any other age group. Overall, Cyber Dialogue estimates that roughly 16 percent of online shoppers participate in a Web-based rewards program. Not everyone who belongs to a loyalty program actively uses it, however, says Qaalfa Dibeehi, senior analyst at Cyber Dialogue. Wealthy households are prime examples. Online consumers earning $75,000 or more have the highest membership rates in loyalty programs of any income group (26 percent), but only 25 percent say that incentives get them to return to a particular Web site. By comparison, 41 percent of those making $40,000 to $75,000 say frequent-shopper rewards drive their return business.

Why do some consumers skip the chance to rack up points and freebies? Focus groups gave a few clues to S&H, Gurin says. "People were angry over the complexity of many of these programs," he says. "They felt like they have too many cards, too many programs. They really wanted simplicity." And reliability, the participants added. What good was a rewards program if it folded in a year? They also told S&H that they wanted to be rewarded for stuff they do every day, like going to the grocery store.

S&H listened, and is working with regional grocery chains around the country to bring Greenpoints to the checkout lane. So far, it's developed co-branded frequent-shopper programs with chains such as New York-based Foodtown, Red Front Super Market in Virginia, and J&J Food Centers in Pontiac, Michigan. J&J introduced Greenpoints a year ago; today, the program boasts 6,000 members, or roughly 45 percent of all J&J customers. Those members, says Jerry Yurgo, president of J&J, account for 70 percent of the company's business. J&J's two stores have dished out 50 million Greenpoints so far and, more important, customers are redeeming their points there too (one recent special: a dozen eggs for nine cents and 300 Greenpoints). That's good news for Yurgo who pays S&H for each point he issues and receives credit for each one he redeems. Yurgo knows he's sitting on a wealth of data about his best customers, and he hopes to start mining the database soon to tailor promotions to them.

Indeed, S&H Greenpoints collects lots of demographic information about members. When consumers join online, they must provide their e-mail address and ZIP code. Pretty slim requirements, but S&H dangles an extra 1,000 Greenpoints to members who "personalize" their accounts. Among the required fields to earn those points: name, gender, education, work experience, and household size. Members earn 10 Greenpoints for each dollar they spend at S&H's affiliated merchants (Dell, Borders Books, and JCPenney are among the partners) and can redeem them for more than 1,000 items, including jewelry, sports equipment, and electronics. However, don't expect bargains - a portable CD player, for example, requires 37,200 points or the equivalent of $3,720. S&H makes a profit based on how it sets the points on merchandise.

Not everyone is convinced that programs like Greenpoints really help retain customers today. The "save and redeem" pitch that propelled the success of S&H Green Stamps just doesn't work anymore, contends Erich Joachimsthaler, CEO of The Brand Leadership Company in New York City. "I have at least five frequent-flyer cards," he says. "Loyalty programs simply don't create much loyalty."

Instead, Joachimsthaler adds, S&H needs to leverage the emotional connections consumers have with its brand. Years ago, Green Stamps was part of many Americans' daily lives - people collected the paper stamps, pressed them into books, and went to the S&H store to redeem them. Somehow, Greenpoints has to replicate that interactive experience - a difficult proposition in a world where points are just a mouse click away and there's no licking required.

For now, the trusted S&H name continues to drive interest in the new program. Just a few weeks after Greenpoints' coming-out party, S&H conducted a nationwide brand awareness study. Aided awareness ranged from 50 percent to 75 percent across various markets, outscoring established rewards programs from companies like American Airlines and Netcentives. Only time will tell if S&H can become a household name again.

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