Making Stickk Stick: The Business of Behavioral Economics

Making stickK Stick: The Business of Behavioral Economics

Major Issue: Should stick continue to sell its services primarily to consumers (B2C), earning revenue when consumers wagered and lost money on their commitment contracts or should they sell stickK’s services as a platform to other businesses and institutions for monthly fees?

Recommendations: The company should focus on both B2C and B2B and create separate departments to handle both channels if needed.

Market Sizing: As more than 30% of Americans were obese by the late 2000s and majority (80%) of stickK customers’ goals are around weight loss and fitness, the potential customer base for weight loss alone is 100 million, compared to which stickK still has large potential to grow its individual customers.

Profit analysis of B2C Business (2012): Based on the information given, we can derive that 80% of contracts with stake are on-going contracts. And below is the break-down of profits from both on-going and one-shot contracts:

Contract w/ Stakes (on-going):

[pic 1]Contract w/ Stakes (one-shot):

[pic 2]

Assumptions: The average amount lost for on-going contracts with stake is half the stake. Fixed costs are not considered.

Findings: The total profit from B2C in 2012 is around $100K. As the customer base and contract volume have doubled from 2010 to 2012, and there is still large number of potential customers in the market, we anticipate the profit could increase exponentially over the years.

Profit analysis of B2B Business (Estimate based on 6 deals a month): As startup fees are largely devoted to software development costs, profit is mainly derived from monthly administration fees. Assume additional 2 account managers and 2 developers are needed each year, the net profit from B2B is 740K per year ($15,000/mth*6 deals/yr*12 mth/yr - $85,000/staff * 4 staff/yr)

Recommendations: Due to large organic growth potential for individual customers, its stable and established platform, low operating cost and less support required for B2C business, stickK should continue to expand its B2C business. The referral strategy seems to be effective for now and if customer growth rate slows down, stickK should also explore other marketing strategies such as google ads. B2B provides a predictable and large revenue stream from the monthly administration fees, and the potential profit from the business is much higher than B2C business with existing individual customer base (740K vs 100K). However, as the platforms for B2B are highly customized and require large time and effort to stabilize the platforms, it is hard to have a generic development model, therefore could be less sustainable to expand.