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Disrupting Loyalty: New Platform Rewards Consumers With Stock Ownership

There are about 328 million people in the U.S., so it might come as a surprise that these same people belong to 3.8 billion loyalty programs, an average of 14.8 per person. And it probably won’t come as a surprise that they only actively use about half of them at 6.7 per person.

One of the reasons for the high number of participants in loyalty programs and the relatively low usage rate is the rewards available. They’re either irrelevant, too hard to access or too hard to track for all but the most frugal shoppers. But what if that equation changed? What if instead of waiting all year to get that 20 percent discount at a preferred retailer, the shopper had a shot at owning stock in that retailer?

Like so many things in the digital-first economy circa 2020, what seemed to be improbable just a year ago is now a reality. A company called Bumped has created an innovative new loyalty platform that gives banks, brands and businesses the ability to reward customers in fractional shares of stock. It has not yet gone public with its partners, but after a time in beta, its consumer-facing app and brokerage-based platform will be the subject of a good deal of talk in the short-term as it rolls out enterprise partners from the world of retail and financial services to support its continued momentum.

Founder and CEO David Nelsen said his idea is part of what he calls the “ownership economy.”

“My goal is that in the same way the consumer understands ride sharing, they could potentially understand the stock market,” Nelsen said. “And if you think of a lot of the traditional brokerages that we have in the market, they’re all fighting for that same one consumer, but there’s four more consumers out there that are not actively engaged in the stock market. We have an opportunity to really create a lot of owners and shareholders in the U.S. market. If people can understand the stock market and realize how cool it feels to actually have a position in some of these companies, I think it’s great. It’s so good for people to have that understanding because it’s such a necessary part of preparing for their future.”

Not only are Nelsen and his team aiming to introduce more consumers to the stock market economy, they’re also trying to reshape the loyalty economy. Here’s how Bumped works. Suppose a general contractor does the bulk of his purchasing at the same home improvement retailer. The retailer belongs to the Bumped platform, as does the bank that issues the GC’s business card. Instead of enrolling in a points-based rewards program, that contractor can opt for the “ownership economy” and have his loyalty rewarded by owning fractions of the retailer’s stock shares. For example, maybe a month’s worth of the contractor’s business is valuable enough to earn one share of stock. The contractor can decided to redeem that stock through Bumped, which also serves as a brokerage, or he can hold on to the stock until his purchases gain more reward value.

According to Nelsen, the underlying stock rewards platform is very versatile, meaning the retailer can administer the loyalty program directly if it so chooses, co-create a program with Bumped, or plug and play into the company’s consumer app.

The arrangement works for the retailer because it provides a competitive advantage and provides a potentially more valuable reward than the points, products and experiences that comprise most loyalty programs. It works for the bank for similar reasons, but it also incentivizes the end user to use the card more and hence gain more stock credits. And it works for the contractor because it gives him a stake in the performance of the retailer. Bumped’s research, done for its app launch in October, shows that 89 percent of users who signed up for the app’s beta program prefer ownership over traditional rewards.

“I like the fact that, when you’re really buckling down trying to save and can’t really justify treating yourself to something — no matter what it is, however small, whether it is something like McDonalds or Starbucks — you can have that without feeling like you’re being irresponsible,” said one beta app user. “You’re doing it, but you know there’s something you’re getting out of it. And you can also enjoy it and don’t have to worry or apologize for treating yourself. And being kind to yourself. You always hear that it’s your fault for spending money on a $5 latte or whatever, but with Bumped you get something back: stock.”

Nelsen and his team have also measured and modeled what Customer Lifetime Value would look like for a customer set that owned stock, and it found that an owner has a 33% higher lifetime value than a “regular customer.”

“This is about building relationships between their brand and their consumer,” he said. “And we’ve spoken with a lot of brands during this pilot time, and they want to be able to put this out there. And so, you know, that’s where the enterprise side of our services is really the majority of what we do. We are an enterprise company that happens to have a consumer app, not the other way around. And therefore we’ve put an emphasis on creating some products that the brands can put out themselves that create shareholders.”

During the pilot program, across 85 brands on the Bumped pilot platform, on average a user who was rewarded in stock showed a 43 percent increase in monthly spend and a 1.5 increase in monthly visits. It’s data like this that Nelsen believes will sustain a platform for his concept of the ownership economy.

“To build a platform that really gives brands and banks the ability to quickly launch solutions like this in the market is extremely powerful,” he said. “And as an entrepreneur, you’ll always wish and hope to find ideas like this that can scale. Like I said, you know, you’ve got all those brokerages out there right now. And the irony is that a lot of them are tomorrow’s investors.”

And tomorrow’s loyalty program users as well. After coming out of a successful pilot in which it actually had to turn people away, Bumped is back in the market with its new consumer app, which launched Oct. 29. The entry is free, and users can pick up to four stocks to participate in.

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