Loyalty Goes to School

  It's official. Card marketing is going to kindergarten. Loyalty card programs have become so prevalent and successful for for-profit companies in influencing consumer behavior that not-for-profits and public-sector entities such as schools have begun to employ them.
  Schools are marshalling concepts refined in the card-marketing world to increase attendance and academic performance as well as encourage healthy eating habits among students in the United States and abroad. Kansas City, Mo., is using a Visa gift card to reward summer school students, for example.
  But the English were one of the first to take the latest loyalty concepts to school. Fidelity CRM Ltd. in the United Kingdom piloted its school loyalty/behavior improvement system at Isaac Newton School in Hull, England in September 2003. The school ranked among the 20 poorest schools in the U.K. based on attendance, behavior and academic achievement.
  After reviewing their behavior policies, the school's officials opted for a magnetic-stripe loyalty card aimed at changing student behavior. While Isaac Newton educates students ages 11 to 16, this year the program rolled out to one of its feeder schools in Hull, the Maybury primary school, for pupils ages 5 to 11.
  "The idea came from the concept of rewarding customers for spending more," says Paul Lowsley, managing director at Hull-based Fidelity CRM. "The fact the school actually 'pays' the pupils to attend each day seemed to have a lot going for it."
  Each student starts the week with 35 points that may not be spent until the end of the week. Rewards range from school cafeteria snacks for 105 to 140 points to sporting goods and tickets to televisions and mountain bikes for 4,000 or more points saved over years of earning. Every week, students have the opportunity to earn extra credits, maintain their balance or lose credits. Those who perform exceptionally receive extra credits. Those who do not comply with classroom expectations, fail to show up for school or have to serve in-school suspensions get demerits.
  Since the card first appeared at Isaac Newton, student suspensions have fallen by 25% and attendance levels have increased steadily from 87% toward the government standard of 92%, Lowsley reports. Meanwhile, general behavior has improved by 20%, according to school officials. While good behavior can be a fuzzy concept to measure, school officials say about one-fifth of the points credited to student accounts come through teacher recognition of impressive student work and behavior.
  Teachers contend that pupils are learning a valuable life lesson rather than treating the program like a game. Students often save their points for larger, luxury items, and forgo indulging in quicker gratification with smaller rewards. Participating students redeemed points for an award an average of five times in the inaugural school year, but many pupils are committed to a five-year savings plan.
  "We feared the novelty value might wear off, but it really hasn't," says Chris Mulqueen, assistant headteacher at Isaac Newton. "It has been by far the most popular innovation at the school."
  The innovation took little effort for Fidelity. "We simply applied the same techniques that we use for (private-sector) clients of our loyalty software," Lowsley says. The firm is in discussions with other schools and education authorities interested in launching loyalty programs.
  The government is spending a total of $7 million in grants for new ideas to combat truancy and raise academic standards. Isaac Newton receives $660,000 each year for three years to fund its loyalty card initiative. The school invested about $18,000 for card terminals, mag-stripe cards and the software that makes the program work.
  Risks
  Although school funding for the program will expire in two years, Isaac Newton and its vendor expect commercial sponsorship will fund its continuation.
  Lowsley sees loyalty cards as a good fit for other non-profits, too. "The system could equally be used in higher education, the prison service or indeed anywhere were people need incentives to perform," he says.
  David Raab, principal of Chappaqua, N.Y.-based marketing consultancy Raab Associates, wouldn't stop there. "I can imagine health insurers rewarding behavior likely to lower costs, such as exercise, weight loss or quitting smoking," he says. "Recycling programs might offer incentives for old PCs."
  He cautions that "there is a fine line, though, between encouraging desired behavior and trivializing its importance. Some people might find it rewards programs insulting for, say, church attendance."
  Loyalty cards aren't such a far cry from scholastic recognition programs that have rewarded many generations. "You got a gold star for having done your homework or doing the right things back when I was in school," says Peter Palmer, an independent loyalty consultant based in Toronto.
  The risk, however, in introducing private-sector marketing tools is that companies could be attracted to schools looking for new or future customers, according to some observers. If Isaac Newton School in Hull gets commercial sponsorship to continue its loyalty card program, advertising to students and parents may creep into the partnership, Palmer says.
  "It's the same thing as introducing TV in school," he says. "It will get you educational programming, but you're going to see a Pepsi ad here and another ad there."
  Indeed, many revenue-starved U.S. schools already are under fire for striking up exclusive sales agreements with soft-drink makers that provide much-needed revenues but make it easy for students to consume high-sugar, high-calorie beverages. And public television stations have transformed quick mentions of a program's corporate sponsor into mini-commercials.
  Despite those criticisms, innovations involving corporate sponsorships that include loyalty concepts are increasing, including a rewards program in suburban Boston grade schools dubbed "imove" aimed at combating the growing plague of childhood obesity. A pilot launched in January at the Lynnfield Middle School was rolled out to 25 schools this fall with a goal of 100 Massachusetts schools by the end of the 2004-2005 academic year. Imove tracks school lunch activity through punch cards the students present in the cafeteria line.
  Visa Card
  Students carry cards through the lunch line and receive two points for every healthful meal and one point for a healthy snack. Prizes include fitness-related merchandise ranging from water bottles, hats and T-shirts for 20 points up to armband radios and sports watches for 120 points and skateboards for 160 points.
  "We are using marketing techniques that processors of less healthy foods have been using for years," says Mike Scuderi, marketing director at Costa Fruit & Produce, the Boston-based initiator of imove. "We are fighting fire with fire and it's working."
  Food marketers often target children with messages aimed at spurring sales of sugary, high-fat convenience foods, so Scuderi thought fresh fruits and vegetables as well as granola, salads and chicken wraps deserved equal merchandising attention. In the Lynnfield trial, lunch participation increased 20%. Costa's brand was not promoted in school.
  Consultant Palmer says some companies have succeeded in running student loyalty programs without getting in young faces with overwhelming and invasive advertising. Campbell Soup Co., for instance, has long encouraged families to save labels from their cans to donate to schools for funds that buy new computers and sports equipment.
  A variation on that theme is a Visa-branded incentive card program from the Kansas City, Mo., School District. Many parents use the Visa gift cards distributed to summer school students with near-perfect attendance and average or above-average grades to buy required school uniforms, sneakers and other necessities. Full-day students receive $125 on their cards, and half-day students receive $100. The school district funds the cards out of state scholarships and summer school tuition.
  Every child in grades kindergarten through 12 who meets attendance and academic criteria receives a Simon Property Group cobranded Visa stored-value card, says Sugar Lee Lewis, director of admissions for the district's summer school program. More than 12,000 out of 14,500 qualified in 2004 alone, she says. Simon is a big mall operator, but the schools' cards are usable anywhere Visa is accepted. The cards are issued by Bank of America Corp.
  No Ads Allowed
  In devising the program, Lewis sought to get more children into summer classrooms. Before the card program began in 2002, many families would enroll their youngsters for supplemental education but not bring them to school. "We wanted to make sure we could get as many children in summer school as possible so they wouldn't lose learning time" they need to keep advancing through successive grade levels, Lewis says.
  The 8,000 enrollees in 2001 jumped to 14,000 in 2002 when cards good at Wal-Mart went to most children. Parents asked instead for cards they could use anywhere, which led to the use of the Simon cards.
  Lewis equates the Visa gift cards with scholarships to basketball players. "They give rewards everywhere," she says. "Kansas City is a lower economic district, not a real rich district. Our children can't afford to buy uniforms to get into the district."
  With the Visa cards, children get into the required outfits and puff with pride in themselves and their schools, she says. Additionally, they get academic enrichment through their summer classes, only enhancing their self-esteem, she says.
  "And everybody knows a Visa," she adds. "It's a card that's in everybody's home. Even the kids have come in contact with a Visa card."
  Not only do recipients recognize the value of a Visa card, but local merchants see the benefits, too. Lewis says the incentive card program has put between $1.5 million and $1.6 million back into the Kansas City economy. "I think we're the only school district in the country who can say we've put $1.5 million back into the community," she says. "Wal-Mart and Kmart and athletic shoe stores wouldn't get those sales without our card."
  Merchants happily accept the cards but keep their marketing efforts out of the school system, according to Lewis, who says she's received no calls from area stores requesting they be able to advertise to students and families about how and where to use their incentive cards. "If they do, we'll tell them that parents should have a choice as to where they spend the money," she says. "We won't allow advertising in school."
  Visa USA confirms that other schools nationwide use Visa stored-value cards as rewards to well-performing students but details weren't available.
  MasterCard International announced in early October that it has struck up a loyalty program with a technology provider to raise money for schools and non-profit organizations. The program, dubbed CommunityCash, allows cardholders to earn points when making everyday purchases with enrolled CommunityCash MasterCard cards. The accumulated points can be redeemed as cash rewards and directed to up to three nonprofits or schools of the cardholder's choice, according to MasterCard.
  The program uses the Nitech Administrative System processing platform from Santa Rosa, Calif.-based Nitech Corp. MasterCard says its financial-institution members can design their own programs around the CommunityCash system.
  In launching a program to raise money for schools, MasterCard is building on an idea popularized by Minneapolis-based retailer Target Corp., which for years has donated a portion of the charge volume on its proprietary and Visa cards to the schools of its cardholders' choice.
  According to consultant Palmer, schools can teach retailers and card marketers a thing or two about loyalty.
  "If anything, to apply loyalty at the school level without trying to control kids or be too commercial, you've got to get back to basics," he says, claiming that too many loyalty programs are overly concerned with expensive marketing and have excessively high redemption thresholds. He adds that if more schools adopt programs like the ones in Hull, England, or Massachusetts, "they may help retailers focus more on value, significance and benefit to consumers, which is what a lot of programs intended to do but got too caught up in marketing. A lot of retailers could stand to learn to think of the consumer again."