New data has revealed that once a Target shopper becomes a shareholder, they increase their monthly spend by 41 percent.
According to a two-year pilot study, consumers that were offered fractional shares of stock for their spending with Target shopped there an average 43 percent more often after becoming shareholders of the brand and spent around $186.13 on a monthly basis over the course of a year.
“It’s hard to imagine that a more powerful relationship can be created between Target and their customers than we’ve seen here,” said David Nelsen, Founder and CEO of Bumped, a FinTech app that offers brokerage account for its users and rewards them with stocks from the brands and stores they first select and then buy from.
“The lift in spend is all the proof you need to see that stock rewards fundamentally change how a consumer relates to a store that truly becomes their own.”
Bumped conducted a two-year pilot and rewarded over 13,000 U.S. consumers in fractional stock rewards when they spent money at more than 80 brands. Users could choose their favorite brand in each category and then receive stock rewards in the brand.
“Our study is the first to show a very clean, causal link between stock ownership and consumption,” said Michaela Pagel, the Roderick H. Cushman Associate Professor of Business at Columbia Business School, who conducted their own independent study on the matter.
“It’s not only that loyalty matters in people’s investment decisions, but we show one step further that loyalty actually affects consumption of the very brands people are investing in.”
In the study, The Effect of Stock Ownership on Individual Spending and Loyalty, Pagel and co-authors Texas A&M University Professor Paolina C. Medina and Columbia Business School Finance Ph.D. candidate Vrinda Mittal used survey findings and data on transfers to brokerage accounts from Bumped to ultimately conclude that familiarity and loyalty were key drivers to stockholders’ buying decisions.
Through Bumped’s stock grant program, users were offered $5 or $10 stock grants for companies such as Red Robin, Taco Bell, McDonald’s, ExxonMobil, Chevron and Yum! Brands. Researchers found that when users are granted a certain company’s stock, their weekly spending shopping with those brands increased by 100 percent.
“People buy brands they care about and we find that there’s a direct link between spending and stock holdings,” said Pagel.
To learn more visit www.gsb.columbia.edu.