By the year 2016, it could cost between $100,000 and $250,000 to put one child through four years of college, yet most parents aren't prepared to save anywhere near that kind of money. But now, families are getting help from their local supermarkets -- and favorite brands.
The Coca-Cola Co., Kellogg Co., Procter & Gamble Co., Georgia-Pacific Corp. and ConAgra Foods are among the consumer packaged goods manufacturers helping consumers save for their children's and grandchildren's education via their regular supermarket shopping trips.
It's all part of micro-investing, or the process of investing small amounts of money in a systematic way. New technologies and the advent of tax-free college savings plans have led to the creation of services that have turned manufacturers into financial partners of sorts.
With the help of college savings networks like Upromise and BabyMint, along with other savings programs, like NestEggz, CPG manufacturers are offering cash back when consumers buy certain brands at the supermarkets, and also at select drug and mass merchandise stores. The money can then be deposited into college savings accounts -- like the 529 college plan, in which earnings grow tax-deferred and can be withdrawn free from federal income tax if used for qualified college expenses -- or other types of accounts, like the Coverdell Education Savings Account.
Coca-Cola is participating because "it's the right thing to do for today's youth and their parents," said Bronwyn Morgan, manager, entertainment partners and strategic alliances, Coca-Cola, Atlanta.
"College costs are increasing at a rate that's not commensurate with how the economy is performing," Morgan told Brand Marketing.
Coca-Cola began working with Upromise, Brookline, Mass., on a test basis in February 2001, and was among the manufacturers who participated in the May 2002 launch of Upromise's grocery service. Coke contributes 3% every time a member purchases any Coca-Cola product, including Coca-Cola Classic, Dasani water, Sprite and Nestea. Brands from Coke's Minute-Maid unit are also included.
The partnership enables Coca-Cola to build meaningful relationships with consumers by rewarding them for their loyalty, said Morgan. While coupons and other promotional tools are also at its disposal, Coca-Cola favors the Customer Relationship Management capabilities that Upromise provides, Morgan told Brand Marketing.
"It's not just a one-time event; it's a long-term relationship, which is something we're looking for and we think so are our retailers," said Morgan.
Upromise helps families to invest their savings in 529 college savings accounts managed by Salomon Smith Barney or Fidelity Investments. While Upromise also offers rewards for consumers who shop in other industries, its three-month-old grocery service has been the biggest boost to its business, said Jim Doyle, company spokesman. The service currently features about 14 consumer packaged goods companies, representing 2,400 items.
To participate in the Upromise Grocery service, members register their grocery loyalty cards, or credit/debit cards at www.upromise.com. Enrollment is free, and there are no coupons to collect or receipts to keep. When families use their registered card as they normally do, manufacturers automatically contribute 3% to 5% of the purchase price of participating products into their Upromise account.
"We're a bit like the employer match in a 401k plan," said Doyle.
All grocery contributions are made in addition to other store specials and manufacturers' coupons. The service is available at more than 15,000 supermarkets and CVS/pharmacy stores. Members can track their contributions through purchase summaries posted online in their Upromise account.
Along with Coke, manufactures participating in Upromise include Procter & Gamble, Kellogg Co., Keebler Co., Welch's, Snyder's of Hanover and Garelick Farms. Kellogg kicks back 3% to consumers who buy select cereals, including All Bran, Apple Jacks, Cocoa Krispies and Corn Flakes. It also is featuring Keebler snack foods, including E.L. Fudge Sandwich cookies, Famous Amos and Fudge Shoppe cookies.
The Battle Creek, Mich., manufacturer got involved in the program because the main participants of Upromise -- families with children -- are a key segment for Kellogg, according to Jenny Enochson, company spokeswoman.
Kellogg is confident the consumer awareness and loyalty created through the program will have a halo effect on Kellogg brands.
"The core concept of creating a loyalty program around a great cause -- sending kids to college -- is both good business and a corporate responsibility," Enochson said. Enochson stressed that a college degree has never been more important. (The lifetime gap in earning potential between a high school graduate and a four-year college graduate exceeds $1 million, according to the College Board, Washington.) But paying for one gets tougher every year.
"Parents are taking second jobs, working overtime and mortgaging their retirements, but students still graduate with twice the debt they did 10 years ago," she said, adding that 83% of parents believe college costs are "getting out of reach," yet just half have saved $1,000 or less for college.
Along with Upromise, other savings programs have emerged to encourage consumers to begin and continue saving. Atlanta-based BabyMint uses coupon technology licensed from NestEggz -- a service of the Nuvisio Corp., New York, which develops Internet-based technology solutions for the promotion and advertising of consumer products. BabyMint offers coupons for participating manufacturer brands on its Web site, www.babymint.com.
Last month, a handful of manufacturers participated, including ConAgra, Omaha, Neb.; Georgia-Pacific, Atlanta; and Annie's Homegrown, Wakefield, Mass. Twenty-three coupons were available, for a total of $14 in savings. ConAgra's coupons included 40 cents off various Healthy Choice products and 25 cents off several of its Hebrew National selections; Georgia-Pacific, 25 cents off Sparkle paper towels; and Annie's, 25 cents off various products.
Once consumers register (for free) at the BabyMint site, they can download coupons and take them to more than 125,000 stores around the nation that accept coupons, including Kroger, Safeway, Wal-Mart, Target, Walgreens, CVS, Albertsons and Food Lion.
When the coupons are redeemed, the member gets 10 cents per coupon at the register. The full amount of the coupon, up to $3, is then deposited directly into the 529 account of the member's choice; linked to any other financial vehicle (like a mutual fund or money market account); sent directly to the member's home, or directed to another BabyMint member's account.
The same coupons offered on the NestEggz Web site, www.nesteggz.com, are offered on babymint.com, though BabyMint says it also has its own manufacturer participants in the pipeline. NestEggz operates similarly to BabyMint, only the coupon value is deposited into a savings account rather than a college plan, that pays 7.5% interest. Users can withdraw their cash at any time.
Several months ago, ConAgra's Hebrew National brand launched a test with NestEggz, which means its coupons are also offered via BabyMint. The company decided on NestEggz because it liked the idea of helping its consumers prepare for the future.
"This is something different in the world of couponing," said Anna Lancman, product manager, Hebrew National, Jericho, N.Y. "It helps build relationships."
Hebrew National's target market is upscale households consisting of moms with kids, and an average household income of $70,000-plus. Since upscale households are high Internet users, it decided to give e-coupons a try.
Hebrew National has used other types of coupons, including freestanding inserts, which are less costly than e-coupons. But the company found that such methods often miss its target market.
"We're testing all sorts of promotional vehicles to get closer to our target," she said, noting that the company is pleased that its coupons are also being offered on BabyMint.com.
Annie's Homegrown, Wakefield, Mass., a marketer of all-natural and organic macaroni-and-cheese products, also made its foray into online couponing via NestEggz. In March 2002, it kicked off a several-monthlong test, promoting about 20 different products. Although it had the option of using other e-coupon services, it liked the idea of having the coupon value deposited into a savings account.
"Most consumers feel better about using a coupon that will help them in the future," said Lori Almeida, marketing manager, Annie's. "It's more appealing than a random coupon."
Redemption rates for Annie's NestEggz coupons are higher than those for regular coupons, according to Almeida. She declined to elaborate. As a result, Annie's is now considering joining additional micro-investing programs, including Upromise.
Whether they use Upromise, BabyMint or any other micro-investing service, manufacturers are aiming to capture the loyalty of parents with children. "New" families (one or more children in household, all under age 6) account for 5.2% of all U.S. households and 5.8% of all-outlet CPG dollars spent, while "maturing" families (one or more children in household, not all under 6 or over 12) account for 20.3% of all U.S. households and 24.4% of all-outlet CPG dollars spent, according to market research firm ACNielsen, Schaumburg, Ill.
Upromise and BabyMint are using various promotional tools to get the attention of these consumers. Upromise, for instance, uses ads in store circulars, in-store radio and shelf-talkers that sport the Upromise logo and "Save For College" message.
Morgan said Coca-Cola has commitment from about 14,000 stores (representing 25 different chains) to do promotional activity between now and the end of the year. This will include in-store signage, in-ad promotional announcements, displays and, in some instances, in-store radio. In some stores, there will be on-site enrollment at tables set up in stores.
Coke has even produced an informational brochure that will be distributed in-store. "Coca-Cola and Upromise Help You Save for College," the brochure reads, in part. "It's Easy. It's Free. It's their Future."
The cover includes pictures of college students adjacent to a mother kissing her young daughter goodbye as she prepares to go to elementary school. "Save for something precious," the copy reads.
Coca-Cola's involvement with Upromise is aimed at following through on the Coca-Cola Youth Partnership; Coke has developed programs aimed at inspiring and empowering "young people to realize their true potential and pursue their dreams."
Its participation is also intended to strengthen its relationship with its retail customers. "By building brand loyalty to our brands, retailers can build loyalty to their brand as a retailer," Morgan said.
The beverage giant is leveraging its partnership with Upromise to target some of its most loyal customers. To sign up, consumers must give information including their name, address and e-mail. While Upromise does not sell or give out this information, it lets manufacturers participate in marketing tactics like e-newsletters that Upromise distributes to members who have opted-in. In June, Coke participated in the newsletter by announcing its new Vanilla Coke brand.
"We used the newsletter to encourage consumers to try Vanilla Coke and earn points for doing so," said Morgan.
Morgan said the program has a lot of potential, saying Coke will have the ability to link its contributions to special events, such as those timed to back-to-school, graduation or the holiday season.
"This will allow us to build brand loyalty over time," Morgan said.
Snyder's of Hanover is counting on the same. The Hanover, Pa., salty-snack company has made a strong commitment to micro-investing via a "long-term" partnership with Upromise, according to Laura Kuykendall, the firm's marketing manager. It's giving back 3% to consumers who purchase its Snyder's-brand potato chips, tortilla chips and pretzels, along with its EatSmart brand.
It's already using the Upromise logo on its Web site and in print-ad materials, and plans to phase in the logo on select packaging beginning in the fall.
"This is a unique marketing proposition," Kuykendall said. "It's a way to market our products while doing something good for our customers at the same time."
Snyder's got involved during a test of Upromise's grocery service last year. It has remained part of the service for a number of reasons. For one, it likes the idea of being the exclusive salty-snack brand on the Upromise Web site, and also being in the same company as big-name brands, like Kellogg. At the same time, it has benefited from the cause-marketing aspect to the program.
Already, customers have written to the company telling them they appreciate the effort, according to Kuykendall.
"They tell us they recognize what a huge commitment this is," she said.
Snyder's plans to take the partnership to "the next level" through account-specific promotions. Like Coca-Cola, it also wants to promote its brands via the Upromise e-newsletter. She said the e-mail is a valuable marketing tool because, since members have opted-in to receive the mailing, there's high probability they will read it.
"This is definitely on the cutting edge of one-to-one marketing," Kuykendall stressed.
Indeed, the direct-marketing aspect to the micro-investing programs is key for manufacturers. Upromise said it has 2 million members overall. Within one month of its May 2002 grocery launch, it said it registered more than 1 million grocery cards. BabyMint said its consumer base is "up in the six figures," and projects to hit 1 million members by the end of the year.
Consumers are embracing the programs, in part, due to growing fears about how they will afford college for their children. According to estimates, funding a child's education is either the primary or secondary concern of the adult population, right behind retirement.
At the same time, because of an abundance of merchant and manufacturer partners in key categories, the programs don't require a drastic change in shopping habits, said Whitney Dow, director of educational savings research, Financial Research Corp., Boston, a financial services research and consulting firm.
"It's an attractive time in the marketplace for our program," added Pete Davis, BabyMint's founder and chief executive officer.
Before founding BabyMint, Davis was special project manager for the Pampers and Luvs brand at Procter & Gamble Co., Cincinnati. While at P&G, Davis designed loyalty programs for several of P&G's retail customers, including Winn-Dixie Stores, Jacksonville, Fla. In this capacity, Davis got to know parents as consumers. What he learned was that parents are retailers' most prized consumers, spending about 27% more on groceries than other consumers.
By helping these consumers prepare for the future, CPG manufacturers can position themselves as goodwill companies -- which can go a long way toward building loyalty, he said. While manufacturers must make an investment to do so, they promote on a "pay-for-performance" basis.
"Compared to traditional marketing, like print or television advertising, here [manufacturers] are paying toward people who are making a purchase. It's a guaranteed sale," Davis said.
How much can consumers save through micro-investing programs? According to BabyMint, between $10,000 and $50,000, depending on how far in advance they join, how much they participate, and to which 529 plan (or other investment vehicle) they direct their rebates. A family that started saving for a newborn child today, and saved an average of $68 dollars a month (the current average payout for members with a BabyMint credit card) for the next 18 years until their child entered college would accumulate $32,645 for college (if they earned an average return of 8% annually), BabyMint said.
But the vast majority of consumers are not going to save anything significant, according to Gavin Little-Gill, senior analyst, TowerGroup, New York, a research and advisory firm specializing in the impact and direction of technology within the financial services industry. The most substantial contributions to a 529 plan will inevitably come out of consumers' pockets, he said.
Still, when it comes to college savings, every penny counts, Little-Gill stressed. Plus, programs like BabyMint and Upromise serve as a catalyst to open a plan, keep it active and contribute more often, he added.
Along with Upromise, BabyMint and NestEggz, other companies are also attempting to join the micro-investing trend. Among them, BondRewards, Seattle, currently offers a consumer loyalty program via online retailers. It plans to launch an off-line grocery consumer loyalty program nationally next year, offering U.S. Savings Bonds as rewards. The bonds can be used for education, retirement, vacation or other purposes.