Jackpot Rewards: An Online “Economic Engine for the Common Good”

The idea of sponsoring a weekly $1 million sweepstakes isn’t exactly high-tech. Neither is the idea of giving consumers cash rewards for their purchases, or the concept of committing a portion of your company’s profits to kids’ charities. But mash these things together—and put the whole thing on the Internet, where viral marketing and other network effects can really kick in—and you’ve got an intriguing Web 2.0 business plan that just might end up generating a lot of money for children’s health and education.

That’s the hope at Jackpot Rewards, a Newton, MA-based startup launching today with backing from some of the region’s most notable business leaders and philanthropists, including former Fidelity Magellan fund manager Peter Lynch and Hill Holliday founder Jack Connors. The basic pitch to users is simple: In return for a $3-per-week membership fee, users get quarterly checks amounting to 12 percent of their purchases at more than 550 participating online retailers, such as Best Buy, Barnes & Noble, GAP, Land’s End, Nike, Overstock.com, and Target. As an enticement to join, members also get to pick Lotto-style numbers that are entered into a thrice-weekly drawing for a progressive jackpot worth $100 million to $150 million. If at least two of their six numbers come up in a Monday, Wednesday, or Friday drawing, members are also entered into a Sunday drawing where someone is guaranteed to win $1 million—a prize paid out in the form of an annuity financed by the aforementioned membership fees.

Those are the mechanics, anyway. If a Visa or a Publishers Clearinghouse came out with a similar cash-back/sweepstakes program, the world would probably yawn. But Jackpot Rewards has an intriguing backstory that may increase both its appeal to consumers and its chances of success. Frankly, it’s one of those sounds-to-good-to-be-true tales that activated all of my skeptical journalistic instincts when I first heard about the program—but after getting the whole story last week from CEO Jim Miller, a former telecom entrepreneur with a history of raising scholarship money for at-risk inner-city youth, I’ve adopted an attitude of watchful optimism.

It all centers around two facts: One, that Jackpot Rewards will donate half of its after-tax profits to children’s charities, and two, that everything about the company, from the structure of the rewards program to the rules of its sweepstakes, is designed to maximize the amount the company is able to give away. In that sense, Jackpot Rewards is part of a corporate-philanthropy and social-entrepreneurship movement that goes back decades. But few social entrepreneurs in history have hatched schemes as high-stakes or as brazenly consumer-oriented as the Jackpot Rewards program, which has been four years in the making.

“What we were looking for was a way to create an economic engine for the common good,” says Miller. “So we asked ourselves, what is something that can create a massive network effect that will drive large numbers of consumers to participate? Well, you will find that over 50 percent of consumers participate in some kind of rewards program, whether it’s a cash-back card like the Discover card or one of the frequent-flier-miles credit cards that a lot of people carry. And sweepstakes are considered one of the most effective … Next Page »

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Wade Roush is a contributing editor at Xconomy. Follow @wroush

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