The New Way Brands Compete for Customers: Offering Up Their Stock

September 26, 2018

By Michael Teich

Brands are testing out a new strategy that would reward shoppers with free company stock in exchange for loyalty ー and a new start-up is helping them do it.

"It represents an entirely new mechanism of reward. If you think about all of the different types of rewards and incentives we have out there, you've got points, and you've got miles, and you got gift cards and cash back. There really hasn't been anything new in the past 20 or 30 years," Bumped founder and CEO David Nelsen said.

Bumped, a fintech app that tracks spending with certain participating publicly traded companies, gives customers a percentage of their purchases back in fractional shares of stock. If a shopper buys a handbag from Michael Kors ($KORS), for example, he or she will receive a marginal piece of company stock, instead of traditional points.

Nelsen said the incentive of stock ownership is more powerful than points, largely because it creates an affinity for the consumer.

"With cash back, you're really representing a reward that's not going to bring the consumer in. And if the consumer even does come back in, they're going to come in with the expectation of more discounts and a lesser price, which you don't want to be the case with a reward," he said.

Bumped hopes to pave the way for more consumers to gain access to the stock market ー after all, 50 percent of Americans currently don't participate in it, said Nelsen.

"That's part of the social mission. How can we give folks that think the stock market is for the elite, think the stock market isn't for them, a chance to participate?" Nelsen said.

Bumped, which launched in April, raised $14.7 million in a Series A funding in July. The app is currently in beta testing.

For full interview click here.