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Educating Michael

Michael Bronner made a fortune as the founder of a hot direct-marketing company. His new company helps Americans of more modest means save the small fortune required to pay for their children's college tuition. Here's what Bronner has learned so far.

For 18 years in the United States Senate and 2 more on the presidential campaign trail, Bill Bradley searched for a way to keep college education within the reach of most Americans. After 5 minutes with Michael Bronner, Bradley was convinced that the economics of financing higher education would never be the same.

Bronner made a killing in the marketing business as the cofounder and CEO of Bronner Slosberg Humphrey, a wildly successful direct-marketing firm. Now the 42-year-old college dropout found himself seated in his office across from Bradley, who had come to Boston to hear about Bronner's new venture, Upromise Inc. Bronner had figured out a way to enlist some of America's largest corporations to help families pay for college. The idea was stunning in its simplicity: Every time a Upromise member buys something from a participating company, that business contributes part of the purchase price into the member's tax-deferred college-savings account.

It was so American: Spend money to save money. When an AT&T customer enrolled in the program racks up $10 in residential long-distance charges, for example, the phone company contributes 40 cents to the customer's Upromise college-savings account. ExxonMobil donates a penny for every gallon of gas. Coca-Cola passes along 3 cents for every dollar spent on its soft drinks. Citibank pitches in a dollar for every $100 purchased with a Citi credit card. General Motors adds $150 on a new vehicle purchased or leased through GM's dealers. And so on, through the ranks of America's largest companies — McDonald's, AOL, Toys "R" Us, Borders, Century 21, Staples, Starwood Hotels — 100 companies so far, and 7,000 restaurants.

And the beauty of it was, Bronner's program didn't require participating companies to tap new sources of capital. They simply reallocated a fraction of their vast marketing budgets to support Upromise's loyalty program. "I've been working with companies for 18 years, helping them spend billions of dollars in marketing money for one purpose — to improve customer economics, to acquire customers at a lower rate, to keep customers who are more profitable," Bronner says. "If I could just get a small percentage of those billions to go into college-savings accounts, we could begin to change the economics of paying for college."

Bradley was impressed. He joined Upromise's board of directors and began spreading the word. "In 10 years," Bradley told his new colleagues, "we won't remember a day when there wasn't Upromise." Other luminaries saw the same potential and soon joined Bradley on Upromise's advisory board, which reads like a who's who in business and education. Among others, there's Kim Clark, dean of the Harvard Business School; Amos B. Hostetter, the former chairman and CEO of Continental Cablevision Inc. (now AT&T Broadband); George Fisher, chairman of Eastman Kodak Co.; David Rockefeller, of Rockefeller & Co. Inc.; Madeline Kunin, former governor of Vermont and former deputy secretary of education; and venture capitalist John Doerr, of Kleiner Perkins Caufield & Byers, which has invested in Upromise.

"The biggest and best transforming ventures have been simple ideas with simple strategies," says Doerr, "which have then exploded in scale to reach millions or tens of millions of customers. Upromise has that kind of potential."

The Mission Is the Company

Upromise is an unusual hybrid — a for-profit venture with a nonprofit mission. Bronner believes that his outfit could grow fast and go public based on the fees companies pay to Upromise to generate business for them. Not that success is guaranteed. He is still chairman emeritus (and owns 12%) of his original firm, which was renamed Digitas Inc. before its IPO in March 2000 — and which has fallen on hard times lately along with other marketing companies. But the promise of an eventual IPO by Upromise attracted $90 million in startup capital that the company needed to build credibility with big partner companies and that helped attract quality executive talent like George Bell, who stepped down as the CEO of Excite@Home in April and joined Upromise as CEO in June.

Bronner has pledged a majority of his stock in Upromise to a nonprofit foundation, with the goal of turning that nest egg into equity worth hundreds of millions of dollars for scholarships. "If I were really good, between my own previous business success and going out and hawking people, I could get maybe $100 million in scholarship money," says Bronner. "With Upromise, I can generate tens of billions of dollars of new college funding, and I can empower people to get on the road to saving."

The payoff of Bronner's approach is a business with a unique motivation to succeed. "The company is out there driving the mission in a very singular way," says CEO George Bell, "and the mission is the same thing we need to succeed. The mission is the company. I haven't seen alignment like this before at any company I've been in."

To Solve a Problem, Be a Catalyst

Like all successful entrepreneurs, Bronner has almost boundless faith in his dreams. But even in his most optimistic projections, Bronner knew that Upromise wouldn't come close to covering four years of tuition, which runs about $100,000 for two children at a public university and about $225,000 or more for private college. So he followed his imagination to a more immediate objective, one that has the slightly subversive quality of a fertile marketing mind. The real goal of Upromise isn't to fund college education. It's to act as a catalyst for action — to get more people saving sooner.

"I want to put people in motion, because the biggest problem in the college-savings crisis is inertia," Bronner says. "Americans are not culturally ingrained to save. But to get something for nothing, to seek a deal, to be scared as hell that 'I'm missing out' — that behavior is culturally ingrained in us. With Upromise, all I've got to do to begin taking advantage is open a college-savings account, and if I don't, I'm stupid because I'm missing this money."

Bronner had worked this seam before. He helped launch American Express's Membership Rewards program, which allowed card holders to convert points for their purchases into airline tickets, a first when it was introduced in the 1980s. Later, he advised AT&T on its Winback campaign, the opening salvo in the battle for long-distance customers that used cash rebates as ammunition. Tunneling around in the psyche of the American consumer had given him a profound regard for the power of such programs. "Think about this," says Bronner. "About 40 million people have an American Airlines AAdvantage frequent-flier account, and the numbers for United, Delta, and US Airways are all pretty close. But how many have a college-savings account? A little more than 1 million. What does that tell you? It tells you that this country gets the idea of something for nothing."

It also tells you — haven't we heard this before? — that Americans are a nation of short-term thinkers. And yet, with the right incentives, even the home of the brave can demonstrate a bit of foresight. Bronner appreciated how the clarity of a well-defined objective made 401(k) plans accessible and popular, and gave people a way to begin thinking ahead. He recognized how the same deal-seeking impulse was pushing people to save money for retirement. "401(k) plans really took off because employers say, 'We're gonna match savings' and people say, 'Whoa, that's real money, and I'm missing out if I don't take it.' "

Simple Is Smart

There was something else about 401(k) plans that appealed to Bronner — how easy it was to contribute to them. People sign up through their workplace and never handle the money that flows into their accounts through automatic payroll deductions. Ease of use, Bronner believed, was the key that would unlock a mass market of millions of consumers, and he made simplicity the number-one design principle of Upromise.

Three years ago, Bronner could not have built a network secure enough or reliable enough to support Upromise. But the Web, and more important, the infrastructure of loyalty-purchasing programs, gave Upromise the tools to knit together a complex savings network that's nearly transparent to consumers. Members log onto Upromise's secure Web site, and register their credit cards and phone numbers. When they buy something at a participating business, Upromise automatically tracks the amount, calculates the contribution, and sweeps it into their college-savings accounts. Starting in September, big grocery chains like A&P and Shaw's will link their checkout scanners to the Upromise network, so members can begin collecting contributions ranging from 3% to 5% on 700 different items.

Simplicity meant more than a clean user interface that doesn't require members to change their buying habits. The offer itself, the value proposition of Upromise, had to be simple enough that consumers could grasp it immediately. "And it's got to be fair," Bronner says, "because if there's a catch, people will sniff it out." Bronner negotiated — and renegotiated, in some cases — to ensure that Upromise members would not be slotted into AT&T's full-price long-distance plans, for example, or get charged a $25 annual fee for Citibank's credit card. "We don't want anyone to question, 'Are they getting the better of me?' "

Bigger Is Better

Upromise wouldn't contain nearly as much potential — as a business, as a college-savings scheme — if the list of companies willing to contribute were limited to one or two marquee names and a bunch of nonentities. The power of Upromise lies in the idea, but Bronner understood that to be taken seriously by consumers and their families, he had to have an all-star team of committed backers from America's corporate elite. What's more, his team had to be in uniform before Upromise announced that it was ready to play. If the big names stayed on the sidelines, waiting to see if Bronner could build momentum before signing on, consumers would dismiss Upromise as bush league, and the company would founder before it even took the field.

To win over household names like McDonald's, GM, and Citibank, Bronner knew it wouldn't be enough to appeal to corporate conscience. He would need to articulate a powerful business rationale to get them involved. Bronner's marketing instincts gave rise to a crucial insight: He would tap the language and the logic of competitive advantage to draw the support of A-list companies, a big-business corollary to appealing to the something-for-nothing, deal-seeking behavior of consumers.

"The bottom line is that marketing investments are becoming less and less effective," says Bronner. "It's harder to build loyalty. TV is becoming more expensive and more cluttered. And companies can't spend any more on marketing; they're all spending less — especially big consumer-products players."

As he knocked on the doors of C. Michael Armstrong, chairman and CEO of AT&T Harry Pearce, former vice chairman of GM; and Sandy Weill, chairman and CEO of Citicorp — doors that swung open thanks to his well-connected advisory board — Bronner carried four PowerPoint slides and a simple message: Upromise would give industry leaders an exclusive way to get closer to the lives of their customers.

"If I'm saving for my child's college education by doing business with AT&T or Citibank, and I have my family all enrolled and saving in Upromise, who will break out of that loop?" Bronner asks. "I have to think hard when WorldCom calls up and offers me $25, because suddenly, that money I spend every month on long distance is not going toward my grandkid's college-savings account. I may be conditioned to take the deal, but I can see now the long-term benefit of that relationship with a company."

Bronner knew how desperate companies were to build those kinds of deep relationships with their customers. The loyalty programs he had helped to design tried to dent the surface of customers' lives. And yet, Bronner realized, for all the billions of dollars spent to engender loyalty, it didn't run deep. Receiving a ticket for frequent-flier miles or getting cash back on credit-card purchases remains an exercise in narrow self-interest.

What Bronner offered companies instead was a chance to have customers view them as partners in an important life goal. It was masterful positioning, in part because there are few alternatives. "This could be the most powerful way ever for companies to be relevant to their customers' lives," he says, "and to align their interests with those of their customers' families. It could change the nature of my relationship with AT&T, for instance, at an emotional level, so the company becomes part of my life."

To be sure, not everyone will welcome having GM or McDonald's pull up a chair at the dining-room table. Bronner has secured the involvement of about 100 companies that sell products and services so diverse and so intertwined with the buying habits of modern Americans that it would require a concerted effort to go through a day without transacting business with at least one of the participating companies. For some, Upromise will raise the specter of an intrusion into family life by sharp-edged corporations that already dominate the public landscape.

But for millions of others, Bronner believes, getting companies you already do business with to chip in for college will be a no-brainer. "There's a huge amount of guilt among families who haven't been saving," he says. "We can insert ourselves and say, 'Okay, we understand why you feel guilty. We don't want to make you feel bad. Spend wisely, spend with companies that help you save, and open up a college-savings account. We'll make it easy for you.' "

Paul C. Judge (pjudge@fastcompany.com) is a Fast Company senior editor. Contact Michael Bronner by email (mbronner@upromise.com).

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