Stock up on Loyalty. Give stocks, get brand champions for your business today
Retail stock trading is booming. Use the momentum to launch a new type of loyalty program. Offer stocks in your company to customers and watch them become your biggest brand advocates.
A few years ago, I realized I was surviving by eating their Burritos as a vegetarian in Florida and bought Chipotle shares. Soon after that, I would proudly invite my friends over to lunch at my restaurant. We would frequently discuss how much I ate there, and I would often tell my friends how well my Chipotle shares were doing. I ate more Mexican food during these years than anything else!
This idea of stocking up on loyalty struck me when I was looking at my recent spending patterns. I seem to spend more with companies I’ve invested in, like Amazon, and Google. Which is also inversely true, I tend to invest in companies I admire and use. I started suspecting that companies should use this technique to keep customers loyal. Then the research confirmed my suspicion.
Giving away company stocks to customers has staggeringly positive effects. It causes people to spend more with you, and talk more about you. A flywheel effect like no other.
Jaakko Aspara, a Finnish researcher published his findings after interviewing 293 owners of three company’s stocks in the Journal of Consumer Marketing. His analysis showed that for a large proportion of people, becoming a stockowner of a company increases his/her personal purchases of the company’s products.
Researchers from Columbia Business School, looked at transactions on Bumped, a new kind of loyalty platform that rewards users with stocks from the brands and stores they buy from. They showed that customers bumped up their spend up to 40% on the brands whose stocks they selected to receive.
Domino’s Pizza 🍕 , T-Mobile, have both run marketing campaigns where they gave away chunks of stocks to those customers that got them the highest referrals. The engagement was viral, and it didn’t hurt that each of these companies consequently saw great stock performance in the period following these campaigns.
This makes sense. Psychological studies show people’s desire to be part of a tribe, for the status and perks that are conferred by belonging to a tribe. And there is no more status than belonging to a tribe of Owners. - Prateek Jain
Why is this a good idea now?
With the recent boom in retail investing, people of all ages are easily investing in stocks. Once upon a time, a stock distribution would require painstaking amounts of paperwork and shares could only be given as individual units. Earlier, a company like Amazon, with each share worth over $3000, would have to do a stock giveaway and only choose a few big winners. But with the rise of fractional stock trades in every large brokerage app, the give-away can be as big as you want or as small as a dollar, you can experiment to get it right.
Further, it is a lot easier to open a brokerage account and facilitate stock transactions across different platforms via APIs. So, a company like Uber, could launch a stock give-away program. And ask all the winners to simply connect any of their stock trading accounts to the Uber App to receive the shares. There are APIs to most major platforms - Robinhood, e-Trade, Schwab, etc. and you could get a consumer to download one of these apps if they didn’t have it. Heck, a platform like Robinhood already gives away free stock for download referrals as a customer acquisition tactic, Uber could co-market with them.
Should every public company use their shares to market themselves this way?
No. Different marketing strategies are applied to different types of brands. This strategy applies to Consumer Brands that benefit from network effects and who offer services with low-switching costs. In today’s on-demand economy, consumers have lots of choice straight through their smart phones. So, conventional competitive advantages - like a closer store location, or newspaper coupons don’t work.
As a Product Manager at Twilio, an enterprise software platform, I often think of customer retention and ideas on how to enhance customer affinity towards our brand. And I want to acknowledge that B2B/ Enterprise companies will benefit less from this approach. That’s because purchase decisions at a company are centralized within IT organizations and procurement departments. Individual brand champions have a real but diluted influence in such cases.
Consider riding with Uber vs Lyft (or Ola if you’re in India)
Both have apps. Given a choice between using Uber or Lyft or Ola, a consumer can just check the prices and wait-times on their phone. Then she can book the cheaper ride, because ride-sharing services are pretty much the same. This phenomenon, is called a low-switching cost - where a customer doesn’t incur much cost between choosing one option or the other.
A way to get her to choose Lyft over Uber consistently is some loyalty program or subscription that makes her prefer one of these brands over another. Now most traditional loyalty programs require offering points and discounts to get consumers to engage.
Stocking up on loyalty means forming a symbiotic bond between your customer by making her your investor. It changes the relationship from a customer who will always try to get the best price from a business, to an owner, who will champion and support the business to make their investment grow. - Prateek Jain
If a person owns Lyft stocks, they may choose to ride with Lyft even if they knew that sometimes it cost them more to use Lyft than Uber. This is the psychology of “ownership”, consumers think that by using Uber more, the value of Uber will grow, and want to support growing the value of “their company”.
The same phenomenon of low-switching costs applies to airlines, grocery delivery apps, food delivery apps, hotel booking sites, etc. Each of these companies can benefit from trying to build a symbiotic relation with their customers with a stock based program.
Investor enthusiasm is a new currency
In 2016, eCommerce start-up Jet.com had a brilliant pre-launch plan—hit the ground running by recruiting 350,000 people to join before the jet.com website even went live. The company achieved this by launching the “Jet Insiders” program, a referral contest offering 200,000 shares of Jet.com stock to those who referred the most people to sign-up. They gamified it, and included a leaderboard listing every Insider who was eligible for the contest, ranked by the number of referrals they’d generated. At the end of the competition, the top ‘recruiter’, an insurance agent in Pennsylvania ended up with 100,000 stocks. These were worth $20,000,000 when Walmart bought jet.com the following year for $3 Billion. Jet.com, successfully Stocked up on Loyalty.
Imagine a company like Instacart, or Dunzo, that will IPO in the future. They will want to create the kind of retail investor enthusiasm that can hype up any Stonks. Traditionally, the Instacart CEO would do a huge roadshow with all the institutional investors pre-IPO, and have to get Morgan Stanley to commit to buying and selling a bunch of shares. Now, they can go public via a SPAC, or a direct listing, or who knows, even a Crypto-coin. Fundamentally, they need to drive enthusiasm from a large investor base. Companies can now drum up a retail investor base by Stocking up on Loyalty, even before shares start trading publicly, in fact, even before the business is launched.
More than money and numbers
No amount of marketing and loyalty campaigns will compensate for a bad company, products, or customer experience. But your owners will be willing to forgive you for small issues and feel the urge to offer constructive feedback instead of a withering app-store review if they feel like your success is their success.
When I sold those shares of Chipotle and my lunches consisting of those Burrito Bowls immediately dropped. Chipotle eventually launched a loyalty program with points, and promos, but I never felt the same sense of ownership and pride at eating there as when I was a shareholder. I never championed Chipotle’s chips the same way.
Jaakko Aspara confirmed this with his research. He found that owning a stock of a company causes people to engage in other brand-supporting behaviors, such as positive word-of-mouth. Which basically means that your customers become your brand advocates and lift up your stock price by lifting up your business.
There’s nothing more symbiotic than a customer who champions your brand as if she were its owner - Prateek Jain
In summary, giving away company stock to customers has staggeringly positive effects:
It causes people to spend more with you compared to your competitor.
This creates symbiotic customers. Stock owners talk more about you, thus becoming brand champions. They also forgive you more easily, offering feedback instead of writing a withering review, because they believe your success is their success.
This works best for consumer brands that offer services with low switching costs, like airlines, fast-food, hotel bookings, ride sharing, toothpaste, etc.
The technique also works for pre-IPO companies with no public stocks.
The time has never been better to try this now because of the boom in retail investing and fractional shares.
Which company do you think could use this idea?
Maybe Tesla? People are already wild about Tesla as a brand, and investors are wild about Tesla as a stock. What if Tesla gave away one unit of stock for each person who purchased a Model 3. Would that be an even more viral campaign than them accepting Bitcoin (and then stopping)?
I’d love to hear about which companies you think could use this idea and Stock up on Loyalty!
I’m an international Indian, writing about what it is like to build a life, and technology abroad. This post related to my work as a Product Manager in Silicon Valley, at Twilio, a public company going through hyper-growth.
The last one, was a vivid portrayal about being home in India, where Covid is getting terrifying and the country feels trapped.
Each post is Honest. Maybe too honest. If you care for this kind of candor…