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.