The Art of Turning $2 into $10

Have Faith

There is always a way. I don’t care how many times you fall down, or how little your bank account has in it. Challenges are only speed bumps along the way. If you are as good as you think you are, you will find a way to achieve results even when it seems impossible. Sometimes it is “all in your head,” or in other words, your perspective has more power than you may recognize:

In the fall of 2008 when the financial crisis hit, many of our largest clients collapsed. This caused our revenue to drop quickly. In addition to our revenue getting decimated, our gift card retailers cut off our credit. This one-two punch of lost revenue and dried-up credit left us with a cash crunch virtually overnight. A good amount of our cash went to the rewards individuals had earned for completing behaviors. A cash crunch for us meant individuals that had earned rewards such as gift cards might not get their rewards. For example, a Washington Mutual mortgage processor might have earned several hundred dollars in gift cards for closing mortgages on time.

When the crisis hit, for every $10 of rewards we needed to ship out, we had $2. Prior to the crash, for every $10 in rewards we needed, we had $20. This all occurred in a matter of weeks. Every day gift cards needed to be shipped. Imagine if we were unable to fulfill these rewards, it would have been the death of our business. How do you turn $2 into $10 overnight?

“There is always a way.” 

I was in my office one night at midnight thinking about it. I remember seeing marketing programs that sent you free vacations or give you hundreds of dollars for trips to Las Vegas and was wondering if there was a concept that would allow us to get significant value at a low cost. I knew that whatever value we got, it would have to approach the value of gift cards or our customers would never go for it. It couldn’t be a discount coupon book. These were individuals who had already earned and picked the gift card of their choice from a well-known retailer (e.g., Barnes & Noble). Only something of equivalent value would work. At 2:30 a.m. one day I came across a company that offered $25 of value that you can use at a network of restaurants at a cost of ten dollars. Their basic premise is that the restaurants in their network need to fill seats in the restaurant that will otherwise go unfilled. Once those seats go unfilled for a meal, the restaurant loses that revenue. For each certificate value at $25, they would charge the customer $10.

I was onto something. I reached them the next day and asked them for their best offer for $1 million in certificates. I knew I would need several million but started at one million. I communicated that I was making a decision between multiple vendors and needed their best offer. They came back with $5 for $25. Even at $5, this would reduce our cash needs but I needed more. After a few more rounds of negotiation, I told them “no deal” and that if they wanted our business, they had to do better. I thanked them and hung up. I didn’t have an alternative but I needed to get those numbers down. They called me back and offered me $25 for $1. I told them fine, but if we went over one million, any amount above that would be calculated at $25 for 50 cents. They agreed.

This reduced each one-million-dollar liability to $40,000 but I still had to convince our customers. Their employees would not get the gift card they selected, but rather an option to select from a national network of restaurants. It seemed to me to be a tough sell. We proposed the following. If an individual was entitled to $25 in gift cards, we would offer them $100 in certificates. While this would increase our cost to $160,000 for a $1 million liability, it gave our customers real value for exchanging their existing gift cards.

Over the next several months we implemented a plan that included everything from training call center agents, changing our website and reaching out to individuals. It worked. This helped us emerge from the financial crisis.

Turning $2 into $10 is not easy. You bring creativity others don’t have.

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By | 2019-02-24T15:47:24-04:00 February 28th, 2019|Daily Perspective|0 Comments

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