Case Summary and Analysis

Making stickK Stick: The Business of Behavioural economics

StickK.com was founded by Jordan Goldberg and Yale University professors Ian Ayres and
Dean Karlan in 2007. StickK allowed users to create commitment contracts, in which they
committed to achieve a goal, or, if they failed, to (potentially) forfeit money. With experience
in the field of behavioural economics, the founders hoped that the financial incentives or rather
stakes would encourage people to achieve their goals.

How stickK works?

Any new user would first have to create an account with stickK by providing some basic
information. After that they have to go through a simple process consisting of the following
steps:

Step 1: Set a goal

Step 2: Set stakes
Step 3: Set a referee
Step 4: Ask for support

By 2012, stickK had around 100000 users on its platform who executed nearly 70000 contracts.
Also it was observed that most of the goals were related to weight loss programs.

Why stickK worked?

stickK applied the concepts of behavioural economics to help users reach their goal. The basic
value proposition as explained by the company was that the people who put stakes (money or
reputation) are far more likely to fulfil their contractual obligations than others. With an
impartial referee, the users would be forced to subvert impulses to renege on their commitment.
Around 80% of the contracts with stakes succeeded and the choice of recipient affected the rate
of success.

stickKs New Opportunity: A Business-to-Business platform

Due to popularity among individual users, stick received business requests from businesses for
customized versions by 2009. Staples and American Cancer Society were its first two clients.
Staples asked stickK to create a programme that encourages customers to set goals to organize
their office space or to start small business with the help of staples products. American Cancer
Society had more complicated demands from the platform that stick provided, when compared
to Staples. ACS programme was not time limited and they also wanted some unique features
that even Staples for its users. With emerging needs, the management at stick came up with a
sales pitch for its platform and offerings for the B2B scenarios and eventually signed two more
contracts.

Dilemma of the management

With huge the management possibly foreseeing huge potential in both B2B and B2C markets
and also reflecting on the initial social objectives of the company to help people achieve their
goals, the company is facing a dilemma about the path that it should choose for growth. The
management believes that if the company is focussed on the B2B market, then they would have
to scale up their own team, whereas the current team can efficiently handle the website for
customers, as the reach grew to potentially millions of users.

Recommendation

The cost of operation for the company for B2B projects is very high due to the required
customizations and additional account managers. StickK has modified its revenue model to
overcome this high operational cost by charging a flat startup fee and a monthly administration
fee based on number of users handled. This eliminates the risk for the company even in case if
the users from that particular company do not place many stakes. But at the same time, the goal
of the founders was to help people achieve their own goals using behavioural economics. Thus
the company can ideally pursue both the channels if the resources are not a constraint, as B2B
market would provide a security while B2C market can be explored for achieving maximum
growth.