The Buy-One-Give-One Business Model: Does it Work?

9 Jan

This is a guest post by Edgar Frohme.

The term BOGO once referred to consumers getting an item for free after they made a similar purchase. This drove customers to stores and websites because it made them feel like they were getting a great deal. However, a new form of BOGO has developed in which consumers themselves aren’t receiving the benefit from the purchase, rather, it’s donated. Now BOGO commonly refers to buy-one-give-one and rewards consumers by donating a good to those in need. While this seems like a better, altruistic alternative to traditional BOGO, does it work? The answer depends upon whom you ask.

Is BOGO Feasible?

As any good businessperson would want to know, how do BOGO programs affect revenue? By initiating a BOGO program, business owners are essentially obliging themselves to a future debt when a good is purchased. Before any BOGO program is started, it’s advised to investigate how this will affect the company’s cash flow. This may be easier for some than others.

hand holding the heart. charity

Using services such as American Express cash flow, which allows business owners more flexibility on when and how money is spent and paid back, make BOGO simpler to implement. Cash-flow services provide business owners with the opportunity to use BOGO programs without worrying about the financial commitment they’re making to customers and those receiving charitable gifts.

The most widely recognized success story with BOGO is that of Tom’s Shoes, which donates a pair of shoes for every pair of shoes bought. More than 2 million shoes have been given across the world, and Tom’s Shoes has become a chic choice for those wanting to help others. However, this business model has come under fire recently when it was learned that, while this program is profitable for Tom’s and well meaning, it might have negative effects. Charitable gifts abroad can have a distorting effect on developing markets by undermining local business and creating an unsustainable aid-based economy.

3 Questions to Consider When Developing a BOGO Program.

What’s the Local Market? – If the GO of BOGO improperly skews the market for a good, it may do harm. Undercutting local manufacturers and retailers who earn a living from those products has a net negative effect on the local community.

What’s the Production Chain of the BOGO Company? – Many times, a more-positive effect can come when the supply chain comes to the community. Sourcing materials and manufacturing not only puts money in the pockets of the local community but also provide much-needed skills.

Does the Product Solve a Root Cause of the Problem? – Temporary relief is appreciated and valuable but does not address the overarching problems present in a community. Charitable gifts should be centered on a sustainable, long-lasting way to support an impoverished part of the world.

BOGO programs are a net benefit for business, consumers and those they help only with proper forethought. By investigating what possible effects a BOGO program will have on recipients, business owners can confidently use these programs to create a win-win-win situation.

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