In a boom economy, Quantum
Loyalty Systems' growth would be spectacular.
In a recession, it's nothing short
of magical.
Quantum Loyalty is the Incline
Village-based provider of customer loyalty
programs, including its most popular
program called Hollywood Movie Magic.
Ever buy a product packaged with a
coupon for a free movie? That's Quantum
Loyalty's move rewards program at work.
The program has been used by the
likes of McDonald's, Gillette,
Kmart,Nabisco and other big-brand
companies in an effort to build customer
loyalty, especially in the fickle world of
commodity consumer products.
In the process, it's built big business
for Quantum Loyalty, which in the last
five years has grown revenue 1,587 percent
landing the company on the
120th spot on Inc. magazine's 2002 Inc.
500 listing of the fastest growing privately-
held companies.
How has the company posted such
fantastic growth in the midst of hard
times?
"Loyalty programs become more popular
when budgets are squeezed," said
David Driscoll, senior vice president.
"More and more companies have to show
return on investment on their marketing
programs. Our programs can quantify
results and measure it in terms of cost."
Here's how Quantum Loyalty's programs
work: A company launching a new
product in a competitive market is looking
for some edge. Enter Quantum
Loyalty. The company prints movie
coupons with the client's logo that are
shipped with each new product. The
coupons can be redeemed at any movie
theater in the country. The theater in
turn deposits it in the bank as if it was a
check and Quantum Loyalty pays the
theater the full purchase price of the ticket.
Quantum Loyalty then reports back
the results of the program to the client.
"The cost of the program varies with
the redemption rate and how well the
sales do," said Driscoll. "The success is
tied to the cost."
And what if a program is too successful?
The coupons are redeemed for the
full price of a ticket, but they are often
used to promote products that cost less
than the average movie admission.
"We offer over redemption insurance,"
said Driscoll. That puts a cap on the
price of the program regardless of total
redemptions.
Quantum Loyalty has formed what
Driscoll calls an acceptance network
among the theater chains. "Theater
chains are regionally focused," he said.
"No large chain has significant coverage
all over, and studios and brands want full
coverage for a national campaign."
The company also has established
relationships with all the major motion
picture studios. A loyalty program campaign
can be based on a coupon good for
any movie or on a tie-in to a specific
movie. The company's latest deal, for
example, is with headset maker
Plantronics Inc., which is including a
mail-in voucher for the new James Bond
installment, "Die Another Day," in its
M130-series mobile headset packages
until the end of the year.
In a case such as that, Quantum
Loyalty works with the studio producing
the film to obtain the licensing needed to
do the product tie-in to that movie.
Some movies are more sought after than
others, though. Quantum Loyalty tried to
cut a deal for long-time customer Kraft
Foods, for example, to promote its products
with the hugely-popular Harry
Potter movies but the studio,Warner
Bros., decided to license the franchise
exclusively to Coca-Cola, said Driscoll.
Quantum Loyalty also has programs
for what it calls retail rewards which uses
debit or stored credit cards from
American Express, Visa or Master Card
as the incentive. And a travel program in
which customers receive coupons good
for two free airfares to one of 28 possible
destinations. The programs stipulate the
hotel in which the travelers stay; they pay
the full room price and Quantum Loyalty
receives a deep discount from the hotel.
That in turn subsidizes the price of the
free airline tickets, which ends up costing
Quantum Loyalty, and its clients, $20 or
less for each ticket. The company also
offers custom loyalty programs.
Quantum Loyalty, founded in 1988
but not active until 1996,
moved to Nevada from New
Jersey three years ago. "We deal
with the motion picture industry
in Hollywood a lot, and
Reno to Los Angeles is like a
shuttle," said Driscoll. "I think
we also liked the tax laws and
Lake Tahoe was attractive to
Ron (Randolph Wall, the company's
founder and owner).
"But Quantum Loyalty is
run more like a virtual company.
Company President
Stephen Drees - who created
the most successful branded
Master Card, the General
Motors card - works out of Cincinnati.
Driscoll is based in the Washington,
D.C. area. Two full-time employees in
Los Angeles work with the motion picture
studios. The largest contingent,
though, consists of about 20 people in
Incline Village at the company's headquarters.
