Lessons Learned From a Failed Ivy League Entrepreneur

A "Case Story" By Chris Cononico
 

Chapter Five

While I approached merchants, Jake was getting very positive feedback from students and parents about our idea. George became ecstatic and it was as if we already owned a successful business in his mind. He was the first person to verbalize interest in actually starting the company. As a result, George became adamant about changing his role, so he could co-develop the marketing plan with Jake. I think George wanted to ensure we positioned the program effectively with students and parents.

Jake’s research consisted of lots of surveys, interviews with students, as well as telephone interviews with parents. Jake was careful to sample an adequate number of data points, and he tabulated the results and coded them. He concluded that “convenience” and “variety” drove interest in the QuakerCard plan, and that students and parents would prefer a meal plan that didn’t penalize them for missed meals. In addition, 91% of the parents surveyed said they preferred that students use debit cards instead of cash for “safety” reasons.

We explored people’s main reasons for being on a meal plan, asked them to rate their experiences with the school cafeteria, and gauged their level of interest in our program. We gathered lots of data points that we used in our sample marketing materials. As a result, we had a very clear view of our strengths and weaknesses versus those of the cafeteria. Students and parents practically told us what we needed to offer them, and how we needed to market the plan to them.

George took a different approach to the market research task and explored whether or not other off-campus meal plans existed at colleges across the country. He was already thinking a few steps ahead and wanted to get a sense of the broader market opportunity beyond Penn’s campus. At that time, there were no similar programs like what we were contemplating. A few schools had off-campus debit card features on the back of their school ID cards, but these were just bank accounts that could be used to withdraw cash or make generic purchases. They weren’t restricted to food, and they weren’t offered as meal plans. George also researched how other school cafeteria plans marketed themselves.

Since George switched his role to marketing, Mark and I began to research the technology. We just walked into the school cafeteria, looked at the card terminals the school used, and copied down the phone number of the manufacturer, Campus Meter Corporation (CMC). We reasoned that having a compatible system with Penn was a benefit if we ever merged with the school’s cafeteria. CMC sent us information and, after we described our idea to them, estimated for us the cost of the equipment we needed to run an off-campus meal plan with 40 restaurants.

It was determined that every merchant needed its own DCT-2 terminal (card swiping machine) near the register and a dedicated phone line from their store to our office (wherever that was going to be). At our office, we needed a database server, a front-end PC, one clearing terminal for every six restaurants, one card encoder machine, a backup server, and a DAT tape backup machine.

CMC pledged that all hardware would come complete with necessary software. The entire system was estimated to cost $120,000, and could be leased over five years (about $25,000 per year), and purchased after the last year for 15% of the initial price ($18,000). The supplier would provide full service and support for the system for an annual fee of 10% of the total cost ($12,000). Bottom line, for $37,000 per year we could have the program up and running. CMC even agreed to send an engineer to Philadelphia to set the entire system up for us.

At the time, Mark was spending most of his time on the phone with CMC engineers, working out the logistics of the network. That’s why we weren’t shocked when he got a call from a senior VP at CMC. She was very candid with him. She knew from talking with her engineers that we were students, and she told Mark she didn’t mind working with us, so long as we weren’t wasting her time. Basically, she requested that if this were a class project, she needed her engineers to be free to work on real business opportunities. Otherwise, she would be happy to continue working with us.

At that point, we had not formally agreed to start our own company. Our business plan wasn't even finished yet. It was awkward, because if Mark had introduced himself as a student doing a class project, we never would have gotten the information we needed to evaluate the idea. As the business began to look more attractive, it was very possible we would go for it. Nevertheless, we weren’t ready to order $120,000 worth of equipment.

Mark did what he could to maintain the relationship with CMC, and reassured the manager that we were evaluating the opportunity. He suggested that any determination would hinge upon the completion of our business plan before the summer. Assuming the results were favorable, we would be in touch.  It was an uncomfortable situation, but we weren’t 100% sure if we were going to commit to starting QuakerCard.
 

Copyright  2005 by Chris Cononico
All rights reserved. No part of this manuscript may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval systems, without permission in writing from the author, except by a reviewer who may quote brief passages in a review.