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Customer Loyalty in Market Volatility

“How viable are stock rewards in volatile markets?” a timely question that the Bumped team has received over the past few weeks, since the stock market began experiencing turbulence at the end of February 2020. As a company that operates both a brokerage firm (Bumped Financial) and a loyalty platform, Bumped is in a unique position to understand — and share perspective on — the shifting trends in consumer behavior.

We tackled those questions (and much more) in a webinar in early April titled “Loyalty and Rewards in Volatile Markets.” Our Customer Solutions team, Ashley Goode and Drew Howell, dove deep into the data surrounding recent consumer behavior, and interviewed Melinda de Bruyne (Bumped Financial’s Chief Compliance Officer), who offered insights about what the current market could mean for Bumped partners and users.

First, a bit about us. Bumped empowers banks, brands and businesses to reward their customers with fractional shares of stock. We work with both public and private companies, and can reward in fractional shares of both individual equities and ETFs. Bumped Financial buy shares on the open market, fractionalizes them and allocates them into customers’ brokerage accounts. Through our platform or integrated into existing programs, Bumped provides the technology to develop 1:1 authentic relationships with customers, grounded in a synergistic dynamic that gives back.

Reward in Stock, Regardless of Volatility

Since launching in late 2018, we’ve seen that stock rewards can be a compelling and exciting new loyalty mechanism. Amongst our users surveyed, over 50 percent have said they shop less with competitors because of receiving stock rewards and over 30 percent report they’ve paid more for something because they are receiving stock rewards. However, as traditional patterns of daily life and spending have been upended since the end of February, there have been some dramatic changes in consumer behaviors, as reflected in each of our own lives in one way or another. Bumped users are no different. The same spikes in spend and transactions that have defined the economy lately, panic buying and so forth, have been reflected in our own participants’ behaviors.

However, Bumped users have not been fleeing the market and selling their positions. What we’ve found, despite the volatile conditions, is that stock rewards remain considerably sticky – even when general consumption is down. Since the start of market uncertainty in about mid-February, our historical stock selling rate of about 1.4-1.6 percent has held steady. Bumped users are not selling at higher rates, but rather holding onto their fractional shares, indicating that stock rewards are a “sticky” loyalty currency, even during unstable times.

In our webinar, we were joined by Melinda De Bruyne, Bumped Financial’s Chief Compliance Officer, to discuss in great detail what economic and market changes may mean for users. She pointed out while market fluctuations can feel uncomfortable, principles of investing point toward dispassionate, consistent investing as the best long-term strategy for most investors.

According to De Bruyne, “when investing for the long term, fluctuations can be expected. However, dispassionate investors shouldn’t respond to these fluctuations by exiting the market. Rather, the best approaches call for steady, consistent investing.”

De Bruyne pointed out that the wonderful thing about stock rewards, is that stock is issued as a reward when a customer completes a transaction or other one-time rewardable behavior, automatically, through continuous and automatic purchases of stock that are not tied to market timing. Bumped clients gain a unique opportunity to turn their spending into experiencing the market in good times and bad.

The Impact of Stock Rewards as a Loyalty Currency

As we mentioned, users’ spending behavior is changing. Current volatility is resulting in some categories experiencing accelerating growth while others are decelerating. Across both accelerating and decelerating categories, we’re still seeing loyalty prevail though. For the webinar, we highlighted two categories in particular: meal kits and drug stores. Since February 25th, meal kit companies have overall seen a 214 percent jump in spending behaviors amongst our users. However, a meal kit brand rewarding in stock has seen a 342 percent increase in spend during that same period, growing above competitors in an accelerating category.

Conversely, for drug stores, the category has decreased about 16 percent. Within this, drug store brands rewarding in stock have only seen spending shrink about 8 percent. Brands not rewarding in stock have seen their individual spending decrease over 16 percent. Stock is insulating the rewarding brand over its competitors by 8 percent. In a market like this, that matters.

We see that when a customer selects a brand to be rewarded with stock rewards from on our platform, they are even more likely to spend with that brand than with others in the same category, even in times like these. Conversely, if a category is shrinking and customers are shopping less frequently and spending less overall, customers are still spending more at their rewarded brand than other brands in the same category. This is what a great loyalty program does - accelerate growth in the good times, and help maintain stickiness with customers when things get unpredictable.

Let’s Keep the Conversation Going

Organizations have a unique opportunity right now given this economic climate. Those that are willing to innovate and differentiate their loyalty programs from the rest have the potential to stand out for consumers as well as emerge from this volatile downturn with a stronger business and more loyal customers. Consumers will remember which brands gave back to them during the hard times. That alone has the potential to create authentically engaged and motivated relationships even beyond the current landscape.

If you missed our webinar, watch the webinar replay anytime on Zoom here. Once registration is complete, you’ll have instant access to the webinar.

Want to chat further? Reach out to us at [email protected]. We can navigate these unprecedented times together, and would love to hear your thoughts!

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© 2020 Bumped Inc. All rights reserved. Use the following links to access Bumped Financial LLC's Privacy Policy, Terms of Use, Customer Agreement, and other Legal Disclosures.

The Bumped app and website are operated by Bumped, Inc. Brokerage services are provided by Bumped Financial LLC, member FINRA ↗/SIPC ↗. More about Bumped Financial LLC on FINRA’s FINRA BrokerCheck website ↗

Investing in securities involves risk, including possible loss of principal: Not FDIC Insured • No Bank Guarantee • May Lose Value. Past performance is not a guarantee of future results. Nothing on this site should be construed as an offer to purchase or sell securities.

Any market, economic and / or performance data shown is for hypothetical and illustrative purposes only. Data does not represent actual results.  Participation is only for investors who understand and agree to the risks inherent in their Bumped Accounts. Only qualifying purchases made according to the terms and conditions are eligible for stock rewards. Bumped does not charge brokerage fees. Bumped reserves the right to restrict or revoke any and all offers at any time.

Investors receive shares of ETFs as rewards. Investors should consider their investment objectives, risks, carefully before investing. This and other information are found in the fund prospectus. Please read the prospectus carefully before you choose to invest.

Rewards are accrued for investment after qualifying purchases, but may be reversed if the qualifying transaction is later reversed. Bumped does not assume the risk of market movements for returned items or disqualified transactions. 

Bumped Inc., its subsidiaries, agents, and employees expressly disclaim any responsibility for and do not maintain, control, recommend, or endorse third-party sites, organizations, products, or services, and make no representation as to the completeness, suitability, or quality thereof.

A few notes on fractional shares: they’re typically not transferable between brokerage firms. If you want to transfer your Bumped account, you may have to sell your fractional shares first. Fractional shares can’t be put into certificate form or physically mailed, nor do they have voting rights.