Filed under: Clients, News, Restaurants, Running a better business, Survey Feedback, Surveys, Technology | Tags: better business, customer service surveys, economy, entrepreneurship, interchange zero, low costs, new businesses, start-up
For those of you unfamiliar, interchange zero (IZ) is a term supporters use when talking about eliminating the interchange costs associated with the use of credit cards. Interchange fees are those pesky percentages card companies charge merchants when they accept credit card transactions. The belief among many like Seth Priebatsch, creator of The LevelUp, is that by reducing or removing those fees, ‘Friction’ that money can better be used to build commerce and drive revenue to benefit all parties involved. I realize one sentence doesn’t do it justice, but redirecting $50 bllion of current non-value-added expenses toward driving consumer and enterprise value is an extremely powerful idea – especially in light of the current state of the economy.
A logical and possibly larger extension of this idea is the opportunity around what I call Obligation Zero (OZ), the ‘Friction’ that results from contract terms. This topic came up as we recently launched our start-up, On The Spot Systems. One of the first things we needed to figure out (after identifying that we had an excellent concept) was a go-to-market strategy. When we thought about what type of company we wanted to be, we instantly defaulted to our vision of the kinds of companies with which WE would want to do business (One of the simple pleasures of starting your own business!) We immediately concluded that “No Contracts Required” was a good place to start. My business partner and I firmly believe that if we aren’t delivering the promise we made to you as our client, we don’t deserve to keep your business. Period. More importantly, we found that this approach keeps us always pushing forward, always looking for the next unique tool or innovation, always looking out for our clients’ best interest. Essentially, it keeps us hungry.
I speak from experience: When a client isn’t obligated to continue to pay us because of a guaranteed contract, we ensure that we are ultra competitive. We continually press innovation into our clients’ hands, continue to improve the efficiency of our business to deliver lower cost solutions while maintaining or growing our margins. We believe that ultimately we will capture a larger share of the market as a result of this approach to doing business and that we will maintain a reputation for ensuring our clients always get the best we can deliver.
The flip side of OZ is the impact of obligating your clients to pay for unrealized value. What is the cost to business and the economy of this approach? The net result is negative economic value as businesses are forced to accept sub-optimal performance and products or services they no longer want or need. My guess is that this could result in billions of dollars of sub-optimal performance across the business landscape. Consider this industry example: Based on a recent GSM/Wireless Intelligence study, global revenues for mobile service will reach $1.1 trillion (with a ‘T’) this year. If 1% of that revenue came from customers that had better service options available – but couldn’t switch carriers – and if by switching they could save on average 10%, it represents $1.1 Billion dollars of economic impact… For that single category of business alone! Think about all of the contract obligations, personal and business, in existence, and do the math. It represents a colossal number…and doesn’t include any of the non-cash benefits, like better, faster service.
This played out in the real world recently. After successfully piloting our Survey On The Spot product, one of our hospitality clients decided to move forward with a system-wide rollout. They encountered one major problem: Their current supplier refused to let them out of their contract, essentially forcing the client to continue using what they perceived to be a sub-optimal product for the remainder of the contract (about a year). Rather than looking in the mirror at what they had failed to deliver – they just fell back onto the contract. The client called us, exasperated, so we put our money where our mouths are… We offered the client our product at no cost for the first year, thereby demonstrating our commitment to our clients (and a healthy belief in our Survey On The Spot product) by walking-the-walk. It’s still too early to tell how this story will end, but we are committed to this OZ approach to business, and people are taking notice.
We recognize that eliminating all contracts is easier said than done, but we do believe that reducing the situations in which contracts only serve to arbitrarily lock in a revenue stream is good for business. This is at the heart of the opportunity and impact. If companies are motivated to be as efficient as possible to benefit their clients, how much capital would flow into the economy to fuel growth? A lot. If contract-obligating companies always tried to find a way to innovate to improve the efficiency of their clients, what would be the lift in economic productivity?
It’s hard to know, but “Obligation Zero“ is a good place to start.
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