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Business

Upromise making major push into grocery stores

| Tuesday, May 7, 2002

BROOKLINE, Mass. (AP) — Donna Colandreo doesn't shop the way she used to.

She's careful to buy gas at Exxon Mobil and long-distance service from AT&T to earn rebates — which add up to college savings — through a business called Upromise.

She calls the Upromise rebates "Ally points," in honor of her 18-month-old daughter Alyssa, who will be heading to college in the fall of 2018, when a four-year education is expected to cost $240,000.

"That's a good motivator," said Colandreo, of Bow, N.H. "I don't want to have to come up with $240,000 all at once."

Since Upromise began about two years ago, more than a million people have started saving pocket change for college when they buy long-distance phone service, automobiles, life insurance and fast-food cheeseburgers, the company said.

Now, the Brookline-based company plans a major expansion into an area where customers shop more frequently: grocery stores.

Upromise will announce partnerships this week with 15,000 grocery stores in 50 states, including those operated by Kroger, Safeway, Ahold and Albertson's, as well as CVS drug stores.

The initiative gives Upromise more frequent exposure to customers and a simpler mechanism for bringing packaged-goods companies such as Coca-Cola and Kellogg's into its fold.

"One of the things that became clear we needed to do was to make it easy, make it ubiquitous," Upromise chief executive George Bell said in an interview. "That immediately points to groceries."

In most cases, Upromise will be folded into existing loyalty card programs. Generally, the stores themselves won't offer rebates, but their cards will track purchases from Upromise partners such as Huggies diapers and Keebler's cookies. Those companies will return between 3 percent and 5 percent into Upromise accounts.

Users can withdraw that money for anything, but Upromise urges them to funnel it into a college savings account, which as of Jan. 1 can grow and be withdrawn for higher education tax free. The Upromise site helps users set up their 529 accounts.

Loyalty programs have a long history in marketing, from the old S&H Green Stamps to airline frequent flyer miles. The brands give customers a reason to pick their product over a competitor. Upromise gets a sliver of the rebate for itself.

Celeste Clark, a senior vice president at Battle Creek, Mich.-based Kellogg USA, said there's "absolutely no downside" to the program.

"Research indicates that more and more consumers are making purchasing decisions based on what various companies do to support causes that are important to them," she said.

Upromise acknowledges that even for an extended family of busy grocery shoppers, $240,000 in rebates is out of reach. But Upromise insists it can help make a dent.

A typical family's yearly grocery shopping could produce annual rebates of about $75, the company estimated, which at 8 percent interest in a 529 account would total about $2,000 in 15 years.

Throw in some rebates from Upromise's big-ticket partners — half a percent on a home purchase, a few percent on a car from General Motors — plus 15 years' worth of gas, and the company says $13,000 to $20,000 is not unreasonable for an average family of four.

"It's no major lifestyle change," said Colandreo, who is getting friends and relatives to open accounts to save for Alyssa.

Upromise won't reveal how much has been generated, saying initial figures look artificially small and don't reflect big-ticket items that aren't frequently purchased. Colandreo said her account holds about $85 after eight months. She's generally pleased despite a few problems with merchants who wouldn't credit her for a purchase.

Some remain skeptical. Babson College marketing professor Kathleen Seiders, who teaches Upromise as a case study, wondered how much customers can save, since grocery items such as meat and produce aren't included.

Seiders also cautioned that the Internet era has been full of ideas, such as online grocery ordering, that were great for customers but didn't work as a business.

Upromise, whose initial supporters included venture capitalist John Doerr and former presidential candidate Bill Bradley, won't discuss its finances, except to say it has recently increased employment 30 percent to 170. Bell claims it's growing faster than frequent flyer miles did in their infancy.

"I'm not sure you could go any faster if you wanted to do a world-class job."

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