When we think of coupons, we imagine that most contradictory statement “Buy now and save money”. Obviously most people recognize that spending is NOT saving but the objective of this apparent contradiction is to project the idea of “value”. So what is value and exactly how valuable is someone’s the idea of value? Is Value Fungible?
Inventory management tools
A coupon is a powerful inventory management tool that is made up of several parts. The first part is the face value, often called “retail price” – this is the price that the retail market is willing to bear. The second part is the discount value which is the actual price of the offering based on a vendor’s need to move inventory. The difference between the two numbers is the “Value Proposition”.
Public Stock Exchange
Alone, that would be a very simple form of currency creation. By limiting the number of coupons precisely to the amount of inventory that is subject to liquidation, the coupon becomes a fungible instrument. If the supply is limited, then people will trade the coupon value that they hold (but don’t need) with people who hold coupon value for other items (that they do need). Or, since the value proposition is denominated in dollars, they can trade the coupon for dollars up to, but not exceeding, the retail price. After a while, people will literally form a “stock” exchange out of the community inventory of goods and services represented by coupons.
Most enterprise can expect to spend 10% – 30% of their revenue on advertising.
The third and often misunderstood component of a coupon the friction value – a negative number. This is the cost of producing the coupon campaign (marketers and printers) as well as the cost of advertising, distributing, and processing the coupon. Finally, there is a certain amount of social friction associated with redeeming a coupon such as clipping, organizing, and presenting the coupon to the vendor. Rebate schemes will often introduce so much friction that the buyer gives up or forgets the expiration date, etc. On the other end of the spectrum, Groupon often exceeds the inventory intended to liquidate and increases cost of liquidation.
In a coupon economy, we can initially define social currency as the absence of an “anti-social” currency. We can say that social currency is equal to the coupon’s original value proposition (denominated in dollars) minus advertising friction. We can make this assumption based on the fact that social capital can be deployed in a community INSTEAD of advertising.
Collaborative Production – when the community decides what to produce
When advertising friction is removed, it becomes a very simple matter to make coupons fungible. In the event that the dollar collapses, people can easily switch from the discount currency to the value proposition currency, i.e., social currency. After a while, social priorities will drive wall street production priorities instead of wall street production priorities driving social priorities.
Believe it or not, the key to financial sustainability may just be in the wholesale elimination of advertising. The Value Game by Ingenesist project is designed to correct this market friction.