fastflyer
Apr 20, 01, 11:40 am
Just saw this rather long article (could only post the text, not the link), with a quote from Randy in the text.
-----
By William C. Symonds
Business Week - 04/23/2001
Saving money to send their children to college is a big worry for most American
families. And for good reason. While the tab for four years of college has
ballooned to $50,000, on average, for public universities--and $110,000 for
private ones--half of the nation's parents say they have salted away $1,000 or
less. With college costs outpacing inflation, within a few years, "40% of the
kids who want to go to college won't be able to, simply because of lack of
money", warns former New Jersey Governor Thomas H. Kean, now president of
Drew University.
Now a new company wants to help parents save more. On Apr. 24, Upromise
Inc., a Brookline (Mass.) startup, will launch an ambitious nationwide scheme
that's a twist on the ubiquitous airline frequent-flier program. In this case,
parents who buy from Upromise's network of companies--from General Motors
Corp. to local restaurants--will get rebates ranging from less than 1% to 10%
of their purchases. The money will be deposited directly into a tax-deferred
college savings account set up for the buyer's child. What's more, anyone can
sign up for a child's account, so parents can recruit grandparents or friends to
help turn their purchases into contributions. Parents will be able to track the
account on Upromise's Web site.
The company, which is privately held, will profit by collecting administrative
fees from participating companies on each transaction. Upromise will also
receive payments from the financial firms that will manage the savings
accounts, including Fidelity and Salomon Smith Barney. "It's the most
innovative idea I've ever seen", says former Senator Bill Bradley (D-N.J.) who
has joined Upromise's board, along with Kean, Harvard University Business
School Dean Kim Clark, and David Rockefeller Jr.
What gives Upromise instant credibility is its blue-chip roster of participants. In
addition to GM, the company has signed up AT&T, CVS, and Citibank, plus more
than a dozen others to be unveiled on launch day. They have been joined by
many smaller companies, from Brooks Brothers and landsend.com to some 7,000
restaurants. The idea has also captivated Wall Street: At a time when venture
capital has slowed to a trickle, Upromise has raised $90 million from venture
firms. "It's a unique idea that will attract many millions of customers", says Bill
Ford, general partner at investor General Atlantic Partners, which helped fund
E-trade and Priceline.com. and was a lead investor in Upromise. JUST
PEANUTS? It's no sure thing, of course. Parents may become disillusioned if the
promise doesn't live up to the hype. A family earning $60,000 a year--the
median income for households with children--would accumulate just $6,000
over 15 years by spending with participating merchants, according to
Upromise's calculations. The company argues that savings could reach
$24,000--but only if the family also bought a house through real estate agents
affiliated with Upromise and got family members to chip in.
In addition, parents may get more bang for their buck from frequent-flier
programs. Most of Upromise's rebates are less than the 5% to 9% fliers receive
when they use an airline frequent-flier credit card. As a result, "I don't think it
will be an overwhelming success", warns Randy Petersen, editor of InsideFlyer
magazine, which tracks the frequent-flier industry.
Still, if it works, Upromise could become the biggest innovation in loyalty
marketing since American Airlines Inc. invented frequent-flier miles in 1981.
Upromise is trying to make a profit out of what amounts to a grand social
experiment. Its purchase plan is intended to lure parents into doing what
economists have been recommending for years--saving more. Paying with an
air-miles credit card may add up to a better deal, but Upromise wants to win
parents over to the idea that a little less short-term gratification is worth
swapping for their child's education.
Upromise is the brainchild of Michael Bronner, a whiz-kid who built a company
called Digitas into a leader in loyalty marketing by coming up with innovative
programs for clients such as AT&T. In 1999, after selling most of his stake to
private investors for more than $100 million, Bronner, now 42, began looking for
a way to help kids pay for college. The issue had been an obsession ever since
he was forced to drop out of Boston University when his money dried up. After
coming up with the Upromise concept, Bronner used his gold-plated Rolodex to
take it directly to Citigroup Chairman Sanford I Weill, AT&T Chairman C. Michael
Armstrong, and GM Vice-Chairman Harry Pearce, among others. "MIRACLE".
Bronner persuaded them that Upromise could promote a socially worthy cause
while building customer loyalty. For example, once customers see 4% of their
AT&T long-distance spending going into their college accounts, "they won't
change their carrier just to save a few pennies", enthuses Howard McNally,
co-president of AT&T Consumer, which will be the only long-distance carrier to
offer Upromise. If parents can stay hooked for 10 or 15 years, until their kids
graduate from college, adds Richard G. Barlow, CEO of Frequency Marketing
Inc., a consulting firm, "it will be a marketing miracle".
The key target for Upromise will be the 37 million families with children under
18. Lance and Kelly Walker of Potomac Falls, Va., have a 1-year-old daughter
named Anna. Lance, 26, earns $65,000 as a business analyst, while Kelly stays
home with Anna. Because there's not much discretionary income left after they
pay the bills, the couple leapt at the chance to try out a pilot program
Upromise started last winter. "This is a pretty slick way to start saving for
college", says Lance, who says they plan to switch to AT&T and to a Citibank
credit card. Citi will pay a 1% rebate on everything the Walker's charge, in
addition to any rebates from participating companies.
Of course, making college affordable to average Americans will require greater
efforts to restrain the growth in college costs, as well as more scholarship
money, argues Kean. Still, in a country in which the average family with
children has just $12,900 in financial assets, Upromise just might help make
saving look as easy as spending.
From Plastic To Sheepskin
Starting on Apr. 24, Upromise will offer parents a chance to save for children's
college costs each time they spend money at companies in its network--such
as AT&T, Citibank, and GM. Here's how the program operates: Each company
sends a portion of the funds you spend to your Upromise account. For
example, AT&T has agreed to pay 4% of any outlays, so if you spend $50 a
month, say, on long-distance service, your Upromise account will get $24 a
year.
Once every quarter, Upromise deposits the money into your child's so-called
529 account, part of a new tax-deferred college-saving system that most
states have set up. The accounts are managed by firms such as Fidelity and
Salomon Smith Barney.
Friends and relatives can sign up, too, so that their spending benefits your
child's college-tuition fund. You can also add directly to the funds in your
account--in much the same way you would to a regular savings account.
-----
By William C. Symonds
Business Week - 04/23/2001
Saving money to send their children to college is a big worry for most American
families. And for good reason. While the tab for four years of college has
ballooned to $50,000, on average, for public universities--and $110,000 for
private ones--half of the nation's parents say they have salted away $1,000 or
less. With college costs outpacing inflation, within a few years, "40% of the
kids who want to go to college won't be able to, simply because of lack of
money", warns former New Jersey Governor Thomas H. Kean, now president of
Drew University.
Now a new company wants to help parents save more. On Apr. 24, Upromise
Inc., a Brookline (Mass.) startup, will launch an ambitious nationwide scheme
that's a twist on the ubiquitous airline frequent-flier program. In this case,
parents who buy from Upromise's network of companies--from General Motors
Corp. to local restaurants--will get rebates ranging from less than 1% to 10%
of their purchases. The money will be deposited directly into a tax-deferred
college savings account set up for the buyer's child. What's more, anyone can
sign up for a child's account, so parents can recruit grandparents or friends to
help turn their purchases into contributions. Parents will be able to track the
account on Upromise's Web site.
The company, which is privately held, will profit by collecting administrative
fees from participating companies on each transaction. Upromise will also
receive payments from the financial firms that will manage the savings
accounts, including Fidelity and Salomon Smith Barney. "It's the most
innovative idea I've ever seen", says former Senator Bill Bradley (D-N.J.) who
has joined Upromise's board, along with Kean, Harvard University Business
School Dean Kim Clark, and David Rockefeller Jr.
What gives Upromise instant credibility is its blue-chip roster of participants. In
addition to GM, the company has signed up AT&T, CVS, and Citibank, plus more
than a dozen others to be unveiled on launch day. They have been joined by
many smaller companies, from Brooks Brothers and landsend.com to some 7,000
restaurants. The idea has also captivated Wall Street: At a time when venture
capital has slowed to a trickle, Upromise has raised $90 million from venture
firms. "It's a unique idea that will attract many millions of customers", says Bill
Ford, general partner at investor General Atlantic Partners, which helped fund
E-trade and Priceline.com. and was a lead investor in Upromise. JUST
PEANUTS? It's no sure thing, of course. Parents may become disillusioned if the
promise doesn't live up to the hype. A family earning $60,000 a year--the
median income for households with children--would accumulate just $6,000
over 15 years by spending with participating merchants, according to
Upromise's calculations. The company argues that savings could reach
$24,000--but only if the family also bought a house through real estate agents
affiliated with Upromise and got family members to chip in.
In addition, parents may get more bang for their buck from frequent-flier
programs. Most of Upromise's rebates are less than the 5% to 9% fliers receive
when they use an airline frequent-flier credit card. As a result, "I don't think it
will be an overwhelming success", warns Randy Petersen, editor of InsideFlyer
magazine, which tracks the frequent-flier industry.
Still, if it works, Upromise could become the biggest innovation in loyalty
marketing since American Airlines Inc. invented frequent-flier miles in 1981.
Upromise is trying to make a profit out of what amounts to a grand social
experiment. Its purchase plan is intended to lure parents into doing what
economists have been recommending for years--saving more. Paying with an
air-miles credit card may add up to a better deal, but Upromise wants to win
parents over to the idea that a little less short-term gratification is worth
swapping for their child's education.
Upromise is the brainchild of Michael Bronner, a whiz-kid who built a company
called Digitas into a leader in loyalty marketing by coming up with innovative
programs for clients such as AT&T. In 1999, after selling most of his stake to
private investors for more than $100 million, Bronner, now 42, began looking for
a way to help kids pay for college. The issue had been an obsession ever since
he was forced to drop out of Boston University when his money dried up. After
coming up with the Upromise concept, Bronner used his gold-plated Rolodex to
take it directly to Citigroup Chairman Sanford I Weill, AT&T Chairman C. Michael
Armstrong, and GM Vice-Chairman Harry Pearce, among others. "MIRACLE".
Bronner persuaded them that Upromise could promote a socially worthy cause
while building customer loyalty. For example, once customers see 4% of their
AT&T long-distance spending going into their college accounts, "they won't
change their carrier just to save a few pennies", enthuses Howard McNally,
co-president of AT&T Consumer, which will be the only long-distance carrier to
offer Upromise. If parents can stay hooked for 10 or 15 years, until their kids
graduate from college, adds Richard G. Barlow, CEO of Frequency Marketing
Inc., a consulting firm, "it will be a marketing miracle".
The key target for Upromise will be the 37 million families with children under
18. Lance and Kelly Walker of Potomac Falls, Va., have a 1-year-old daughter
named Anna. Lance, 26, earns $65,000 as a business analyst, while Kelly stays
home with Anna. Because there's not much discretionary income left after they
pay the bills, the couple leapt at the chance to try out a pilot program
Upromise started last winter. "This is a pretty slick way to start saving for
college", says Lance, who says they plan to switch to AT&T and to a Citibank
credit card. Citi will pay a 1% rebate on everything the Walker's charge, in
addition to any rebates from participating companies.
Of course, making college affordable to average Americans will require greater
efforts to restrain the growth in college costs, as well as more scholarship
money, argues Kean. Still, in a country in which the average family with
children has just $12,900 in financial assets, Upromise just might help make
saving look as easy as spending.
From Plastic To Sheepskin
Starting on Apr. 24, Upromise will offer parents a chance to save for children's
college costs each time they spend money at companies in its network--such
as AT&T, Citibank, and GM. Here's how the program operates: Each company
sends a portion of the funds you spend to your Upromise account. For
example, AT&T has agreed to pay 4% of any outlays, so if you spend $50 a
month, say, on long-distance service, your Upromise account will get $24 a
year.
Once every quarter, Upromise deposits the money into your child's so-called
529 account, part of a new tax-deferred college-saving system that most
states have set up. The accounts are managed by firms such as Fidelity and
Salomon Smith Barney.
Friends and relatives can sign up, too, so that their spending benefits your
child's college-tuition fund. You can also add directly to the funds in your
account--in much the same way you would to a regular savings account.