Wize Thoughts

Working with DreamIt Ventures companies and other high tech entrepreneurs on their business models and how they can best monetize their business has me constantly thinking about the alternative sources of revenue.

One thing that I have been thinking about recently due to both our DreamIt companies and my work with WizeHive is that people seem to have different mentalities when it  comes to paying for work related items vs paying for entertainment.

As we conceptualize different monetization models for WizeHive, for instance, I take notice of people posting on forums and asking others if they know of a free version of  this or that, rather than paying just $20 or $30 for a productivity or work tool.    Yet, Zynga and many other online gaming companies get people to pay tons of money to buy virtual goods that have no real economic value, just so they can entertain themselves.

That is one reason why this story about Swoopo caught my attention.

Swoopo lets you come in and bid pennies for very high end items.  And if someone out bids you, you can increase your bid…but only in twelve cent increments.     So, for instance, with only seconds to go I’m looking at a screen for a new high end laptop that is currently bid at $87 and a Wii that is currently bid for $1.56.

But the beauty of what they have done comes next.    Since you can only bid in 12 cent increments, the prices rise very slowly as people bid against each other…which is OK…except every time you bid they charge you .60 cents. And, if the clock is ticking down with just seconds to go…and a new bid comes in…the auction gets extended.

So, while you may end up winning that $1500 TV for only $300, there had to have been 2500 bids to get to that $300, meaning they collected $1500 in bid fees plus the $300 winning bid to sell a $1500 TV!   I’ll take that model anytime!

And what is interesting is that once you have spent an amount – say  $12  - bidding (20 bids),  I think there is a natural inclination to not give up until you have to…so you don’t end up wasting that $12.

In some ways this reminds me of the games that you see at Carnivals or fairs.    You pay $3 for 3 balls to knock down the cans, or for 3 darts to puncture the balloons.   Meanwhile, if you win, the prize probably cost them .50 cents … so if you win they win and if you lose they win.

I think the beauty of both models is that at the core level it is entertainment.    As the article describes I’m sure it is easy to sit there and keep bidding something up for the excitement and thrill of it, even if in the end you wind up with a good deal not a great deal because of the fees.

I am very fascinated to see where this goes and how long before others copy the model and instead of charging .60 cents, charge .30 cents, and instead of .12 cent increments, allow .20 cent increments.     But either way this is an incredibly creative revenue generating model and something to keep in mind while you build out your own site.

Its not that often I can share 2 lessons based on a visit to a fast food restaurant for lunch but in fact I can do that today.

One is that in the startup world those that succeed usually need a good or great idea bundled together with good or great execution and it is in part those two factors that determine to what extent an idea or company will succeed.   The other is the old adage of “under promise and over deliver.”

So what’s the story?

I don’t watch TV that much any more but the other day I caught a Wendys commercial about their new Boneless Wings.     Since I try to watch what I eat (a hazard of getting older) and I also try to watch my carbs what appealed to me was a fast food restaurant offering what looked like grilled marinated chicken without the carbs.

This is what the ad looks like:

So today while running some errands I stared to think about lunch and  noticed a Wendys so I thought I’d give it a try.

When it’s my turn in line I order the Asian Sweet & Spicy ones shown in the picture above.   I’m thinking it will come out something like fast food Chinese chicken does… grilled with some marinade sauce on the top.   Fairly low cal (other than the sauce) and tasty.

Instead I watch the woman behind the counter scoop up what looks like a bunch of  chicken nuggets into a black plastic container, pull out a plastic squeeze bottle, squirt some sauce into the container, put a lide on, and then shake it vigorously for about 10 seconds, then put it on my plate.   I have to say I was a bit shocked, otherwise I would have told them – never mind.

I got back to my table and although this is not my picture (found it on the web) this is what it looked like:

After taking a bite it was in fact their chicken nuggets (or as someone else on the web commented, something similar to their old chicken strips) with some sauce squeezed on top.   Worse yet I looked at the board and 5 chicken nuggets with sauce cost $1.19 at this location.    I counted 8 pieces of chicken in here and it cost $3.99!    More than 3 times the price!

In general, I like Wendys.   I don’t eat there much but if I need some food and there is one around I’ll get burgers or Chicken from time to time and like their salads.  But this has to be one of the worst executions of what could have been a good idea…and worse in my opinion one of the worst cases of mis-setting customer expectations I have experienced in a long time.