Newton, MA-based customer-rewards startup Jackpot Rewards says it will still hold a $1 million prize drawing every week. But as we reported yesterday, the company no longer promises that it will actually give the money away—removing one of the major incentives to join the company’s cash-back rewards program and making some existing members angry enough to cancel their memberships.
Jackpot Rewards didn’t return our calls inquiring about the change until after our story went to press yesterday. But later we were able to reach CEO Jim Miller, who says that the company is scaling back its jackpots mainly in order to spend more money subsidizing the product discounts it provides through its “Deal of the Day” offers. According to Miller, customers have been telling the company that they value these discounts more than they value the chance to win $1 million every week.
To be fair, the company’s earlier scheme was almost too good to be true, offering much better odds of winning than most other million-dollar sweepstakes. All members had to do to clinch the million-dollar prize was match two of the six balls in a thrice-weekly lotto-style drawing, then be the lucky person selected from all of the those qualifying—a group that included only 464 people in the company’s first drawing and 1,726 by its third.
Winning is now far more difficult. Under the new rules, people who qualify in the thrice-weekly drawings are assigned a number between 0 and 249,999, and win only if their number comes up in a random drawing. The company promises that during weeks when nobody wins—the likely outcome the vast majority of the time—it will hand out a $1,000 prize.
My conversation with Miller started out focusing on the reasons for the company’s change of heart—which is seemingly a major one, given that the company’s marketing message centers not just on giving away part of its own profits, but on encouraging people to “dream big” about the things they could do (including donating to charity) if they won a big jackpot. But after covering that—as you’ll see from the following transcript—we moved on to a discussion about the real value of the cash-back rewards Jackpot Rewards members can earn.
Xconomy: A former member of Jackpot Rewards sent us a copy of the customer newsletter from last week in which you announced that you are doing away with the guarantee that someone will win a $1 million prize every week. Can you please explain the thinking behind that decision?
Jim Miller: We wanted to stick with [offering] the best odds anywhere in the industry. Looking at us compared to other sweepstakes in the space, we are still doing that. We think that in that regard, the value proposition is still there. We are still leading in that category. And we are going to be implementing more prizes at various levels.
But what we’ve already found in the feedback from our customers is that the place where they really feel like we are spreading the wealth around is the “Deal of the Day” that we offer to customers. You can see that with [deals like] the trip to the Masters’ Tournament for 75 percent off, or exclusive tickets to sold-out events like Bruce Springsteen and Seinfeld. We are really responding to what we’re seeing as what motivates our customers.
X: The weekly $1 million prize was one of the company’s key marketing messages when you launched in February. In fact, in our interview, you told me that it was one of the things that differentiated you from other companies like Publishers Clearinghouse, which in your words would spend six months talking about giving away a million dollars before they actually gave it away—whereas, you said, Jackpot Rewards was going to go out and actually give away a million dollars, every week. This seems like a big change to that message.
JM: We see it as keeping the commitment to having the best odds. If you look at [Publishers Clearinghouse] as a comparison, it’s one that we still think is a welcome comparison, because their odds are 1 in 699 million. You’re talking about very good odds, with what we think is a very good value proposition, but also enabling us to provide increasingly attractive deals of the day to our customers— spreading the wealth and having people experience that in multiple ways.
X: Are you saying that the money you save by paying out less often on the million-dollar jackpots is going to be shifted over to providing more discounts?
JM: We’re shifting our priorities, and we’ll be implementing in the next few weeks things that we think our customers will find even more attractive. We’ve found that they are engaging with the site in ways that probably even exceeded our expectations on the shopping side. We think it’s good to enable people to save, especially as we head into what by all accounts looks like a recession. This enables us to have a little broader latitude to provide even better deals elsewhere on the site. And the third leg of the stool is the giving side. I think [members] will see in the coming months that we’re doing interesting stuff there, and that we’re remaining as committed as ever.
X: When I asked you in February whether Jackpot Rewards would have enough money to fund the weekly $1 million jackpots, you said that even if you were not able to recruit members as quickly as you predicted, you would still
