Quantum Loyalty programs grow like magic

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.