The Fundamentals of Coupons

During my time at BookRenter, I got a front row seat as colleges much smarter and more experienced in the ecommerce space drove growth through couponing. Now, at a much earlier stage startup, I’m faced with decisions about when we should and shouldn’t offer coupons, and the framework through which to approach it.

Should you Offer Coupons at all?

  • So let’s say you are selling something on the internet. Maybe it’s an online course like Bloc  or maybe it’s a whole catalog of things like BookRenter or JCrew.  Eventually you’re going to want to try offering coupons.
  • Why offer coupons? The most common use for coupons is price-discrimination. We’ll get back to this later, but here are a couple other reasons you might use coupons to keep in mind. One is tracking – you can put a coupon in a TV commercial and see how many people use that coupon to get a sense of how effective the commercial was. Another reason to use a coupon is for customer service – either to thank loyal customers or to assuage the anger of unhappy customers. As any small business owner will tell you, it’s often better to give them a coupon for their next purchase than to refund them for their last purchase!
  • Price Discrimination: You may remember from Econ  101 the Keynesian economics concept of the demand and supply curves. See the graph below. That green line is the demand curve. If the price is $100, the demand is very low. If the price is 0, the demand is very high. Within that demand curve there may be multiple segments. In this case, let’s say you are looking at the demand curve for J.Crew. There are plenty of folks who shop at JCrew who are upper-middle class and in their late 30s, 40s, and 50s and can afford to pay $50 for a nice polo shirt. So JCrew designs for those people, and it prices it’s Polos at $50 a shirt. At $50 a shirt, they will sell 20 shirts = $1000 in revenue – represented by the yellow box.
  • Price Discrimination and Couponing

    Price Discrimination and Couponing

  • Now let’s say they’re starting to see growth slow down. And they know they already have a huge share of those 50-somethings.  Meanwhile, they know all these younger 30-somethings and 20-somethings feel JCrew is too expensive and won’t shop there, even though they like the style. They want a way of making JCrew accessible to this group of people. If they don’t, young people may spend their whole lives shopping at a competitor like Express or Gap, and JCrew will lose it’s edge with this young but up-and-coming group.
  • So why not lower prices? If they lower prices, to $30, they’ll sell 30 shirts, so that’s $900. That’s less money than the $1000 they are making now! They can’t do that! Plus, if they lower prices, their regular customers will think the clothes aren’t really worth $50, and will expect prices that are lower too! The way they do this is through price discrimination!
  • Younger shoppers are more attuned to channels like online coupons, Facebook coupons, and mobile app coupons. So if they create coupons and place them in just these specific channels, they can try to target younger savvier shoppers who are more price-sensitive. By offering this group a $20 coupon, they effectively make the price $30 for these people, and unlock the blue square of extra revenue.
  • How much can they make this way?
    • They’ll sell the first 20 shirts at $50 per shirt, making $1000
    • AND they’ll be able to capture another 10 shirts at $30 per shirt, making another $300 in the blue square
    • for a total of $1300 in revenue.

Add a Coupon Box at Checkout vs. Coupon-through-a-link

  • So now we know why JCrew might want to add a coupon. Here’s a good question – on the online checkout page – should they add a coupon box or do all coupons through a link?
  • If they use a link, then all users coming to the site off of a coupon-link will be cookied, and will be shown the cheeper price at checkout. But if a user leaves and comes back after clearing cookies, they’ll lose the coupon and be unhappy with the experience.
  • If they have a coupon box on the checkout page, that box might actually encourage customers and train customers to go out and look for coupons. This isn’t good, because this means people who might have paid full price might stop and go coupon-hunting. We’ll get to coupon-hunting later.
  • Ultimately, most companies feel that it can be confusing and that the safest course of action is – if they offer coupons at all – to add a coupon box at checkout.

Multi use vs. Unique Coupons

  • Now let’s say you gave a coupon to a loyal customer as a special thank-you. And let’s say it was a really JUICY coupon for 50% off on ANY item. Now what if that coupon gets onto twitter? Worse – what if it gets onto one of those deal websites like SlickDeals.net? All of a sudden, this coupon that was for one specific person is being given away to millions of people and you are losing money on every order!
  • This is why you might consider building totally unique coupon codes. You’ve probably used these. Sometimes coupons will be something like “Save5” but other times they’ll be some random number-letter combination – those ones are usually the single-use kind. This type of coupon can only be used one time, by one person, and then never again. That way, there’s no risk.
  • If it had been  awhat if the company that you set up the partnership just leaks their coupon online? then anyone googling for a coupon will find theirs, and you’ll be paying them for users they didn’t actually drive.
  • at this point you start wanting to create coupons that are for one single person to use. give them a stack. and they can give each of their users a unique single-use coupon and prevent leakage.
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Meldium and Okta: shared logins across teams

I had read a lot about a fancy “bring your own device” enterprise service called Okta – the idea was identity management for all your company’s apps across all devices. Essentially a way so that your employees can go to one place to log into all their company apps, and one place where an IT person can provision who gets access to each app, and one place where an IT person can turn-off access to everything when the person leaves the company. It was smart. I figured something so fancy was only available to enterprise customers, and I wasn’t sure that it would work with every third party service I needed.

I just started using a new service called Meldium. It’s super-affordable (Okta wants me to “request a quote” vs. Meldium is free for 5 users and $29/month up to 20 users) and solves this same problem and more!

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Getting Organized: Why the NRA Always Wins when 80% of Americans Support Stricter Gun Control

I recently read this piece that said that charted the decline of union membership and the decline of american middle class incomes over the past 50 years. At first, I was dismissive: correlation does not equal causation. Unions & Income Graph
A few days later, I watched an episode of the newsroom where they continued to ridicule and underestimate the Occupy Wall Street movement. Of course Aaron Sorkin and the audience know that Occupy would will eventually become a huge movement, so the point of the story was to explore how the media first struggled to grasp its importance.  But the crux of the characters’ argument against the Occupy protesters was that they weren’t organized. No clear leaders or spokespeople, and no clear demands. The protesters would argue that this groundswell movement was a response to problems too great, and emotions too fundamental, to create a short list of demands. And that it was part of their communal idealogy to not designate any clear leader. The producer argued that they need organization, clear and reasonable demands, and a spokesperson, in order to interface with the political system and the press in a way that will bring about real change. She didn’t state it that clearly, but that’s how I understood it. And that resonated with me.
A few days after that, my very liberal cousin Pavni posts something that I had never really considered before: an anti-gun lobby that rivals the NRA.
BradyCenter
According to the NYTimes, The problem is that congresspeople who might otherwise stand up to the NRA are afraid of attacks by SuperPACs. In 2012, the NRA outspent the Brady Campaign (the leading anti-NRA lobby) 73-to-1. And today, the financial might of the NRA is so well understood that the mere threat of being targeted is enough to keep congresspeople from talking about gun regulation.  Why didn’t I know that? Why is the NRA a household name but the Brady Campaign isn’t?
If the Brady campaign were better funded it could act as a counterweight to the NRA and put money behind congresspeople being targeted by the NRA, or even go on the offensive. But the Brady campaign would spend that money on advertising, with the hope of winning votes. So my first reaction was that we should all donate to the Brady Center. But then, I realized – if money is just a proxy for votes, why not go directly to the heart of the matter and organize votes? What about grassroots mechanisms of organizing voters?
Again, I came back to this idea of “getting organized.” Perhaps the millennial generation isn’t apathetic – that isn’t the right world. They are empathetic, and filled with rage, but they are disillusioned by traditional organizations and political parties and traditional press. They express frustration on social media and through groundswell movements like Occupy – they think of unions only in the context of history books and stories about Teddy Roosevelt and factory jobs. Unions sound old fashioned and depressing.  The only organizations this generation can relate to are student groups in high school and college – most of which are merely bullets to put on resumes – nothing that truly made a difference. Unions aren’t sexy. And no other organizations have sprung up to organize Millennials to get them to vote. No new machinery was developed that existing politicians can make deals with in order to deliver these groups at the polls.
So perhaps it is a legitimate point that the wealth of entry level workers has declined because of the decline in uinons. Perhaps the important function unions once served was to be that piece of political machinery that protected the interests of entry-level workers and worked with political leaders to counteract special interest powers of the wealthy.

Organic Growth Hacking: how to build quality customers from seed stage

Image It’s really fascinating going from a company with a few thousand users (SoFi) to one with over eight million (Scribd) – the skills required to be a marketer – or a growth hacker – at these two companies – are sometimes very different. As Director of Acquisition at SoFi, I took the company from a few dozen customers to a few thousand in less than a year. That required some really scrappy tactics that no one is talking about. Uunfortunately I think today the challenges of early stage growth aren’t being talked about enough – and growth hacking focuses too much on tactics that are primarily going to help companies that already have millions of users. I think that’s a misrepresentation of what will truly help budding marketers at early-to-mid stage companies that aren’t lucky enough to have millions of MAUs.
Semil Shah wrote a recent guest post in TechCrunch, and spoke specifically about distinguishing between inorganic growth-hacking tactics and more organic, qualitative, often-offline tactics. This begins to drive toward the question of what are these early-stage-growth things that startups should be doing? One example: at one startup when we wanted to get students to finish signing-up, we actually called them and asked if they had any questions we could answer. Imagine the CFO of a startup calling a 22 year old on their cell, answering a question, or walking the question over to customer support to find an answer. A lot of startups tell stories about this. But I don’t see anyone in the marketing community embracing these practices. They are more than a publicity stunt – they imbue your company with a sense of substance and quality that is hard to measure but perhaps crucial to establishing organic growth.

Raised.com could be a great way to buy discounted gift cards, but not yet

So I recently came across this great site Raised.com for buying gift cards at a discount. Since Plastic Jungle has shut down, this seemed like a fantastic option: a peer-to-peer marketplace for buying gift cards at a slight discount. For a $100 purchase, you might be able to save an extra 10% by paying using a $100 gift card you bought for $90 on Raised. And although you can’t “stack coupons” at most stores, you can apply 1 coupon and still pay with a gift card – hence you might be able to get an amazing deal.

Where do MOOCs go from here? Non-Traditional Education and Apprenticeship

I’m not sure where MOOCs go from here. I’m just thinking “aloud.” One way to think about this is to explore the question: “What purposes do traditional top tier universities serve?”

 
Well, traditional top tier universities:

 
1) Assess quality: In a world without perfect information, hiring from Harvard and Berkeley can be used as a proxy for hiring “high quality” workers. 
 
2) Establish networks: And in a world without perfect information, we hire the people we know. Universities allow us to  quickly and efficiently form friendships. Alumni organizations serve to indoctrinate a shared identity and reinforce and rekindle those friendships. Business school is almost entirely geared build around the idea of getting drunk with as many past, present, and future leaders as possible.

Thoughts on Merchandising, Social Recommendations, and Content Curation

I was following the twitter of Oyster CEO Eric Stromberg’s twitter when I came across this article on curated content vs. recommendation engines. Oyster is a new startup in that hopes to become Netflix for books. As you can imagine, given my background at two different startups that aspired to be “Netflix for Textbooks” you can image I was quite interested and had some great subsequent discussions on the right mix between different types of recommendations and this area of “product discovery.” 
 
I looked through Fab every day for a month and found Fab pretty useless. Perhaps it was the wrong curator for me. I didn’t really like their taste and I felt like most items would just be apartment clutter. I think I might be up for trying Trunk Club if I had the money, but I’m skeptical that anyone else is going to get my “fit” with clothes. When I was redesigning the apartment I spent hundreds of hours on Pinterest but too much of it is dreaming and not enough is real pictures of real apartments executing stuff that is within reach. Same with Houzz. So discovery for me has remained very much a manual process.