LEGACYBOX: Do Startups hurt themselves with too many coupons?

LegacyBox actually started out as a KickStarter, KickStarter success story. It was successfully funded early last year (January 2, 2014) with $12,022 funded.

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And now as of today they are currently at 50% off. Use code SAVE50.

Customer acquisition Cost

Depending on what their actual cost is for their service + they also include free shipping and you can start to create your own number.

Their service ranges anywhere from $75+, the lowest option is their ‘three item package’. Potential combination could be one tape, 1 film reel, one set of 25 photos, for a total of three items.

Most tapes are within 60 minutes, most film reels are within the 3 minute – 5 minute amount, and we all know how many 25 photos are.

The tape would eat up most of their processing time, as well as individually scanning and quality controlling the 25 photos are.

You’re looking at the average customers items possibly taking 1-2 hours.

So let’s do the math and will go with the lowest type of shipping which would be priority mail:

Customer #1
$75 Buy – $30 (40% off coupon ) = $45 Costs Customer

Shipping a box to customer- $10.00
Labor Costs 1:30 – ($20/hr) – $30
Shipping from LegacyBox – $10.00

Total: $50 -$5 Loss or maybe break even.

Even if my labor costs were high, remember that they may also have other costs such as health care, rent, utilities, web hosting, computers, software, etc.. that would factor into that price.

But the fun part is that the customer only pays $45, however the cheapest option they offered their Kickstarter backers was $59.

Once you start making it rain with coupons, your potential customers know that they should never buy anything from your company at a normal price. And a company like Legacybox shoots out a new coupon every 2-3 days.

Obviously what LegacyBox is trying to do is build out word of mouth, the startup is around a year and a half old. But it does seem like a great product, in my mind at the current price $45 it offers a great value. However their current pricing doesn’t seem sustainable and might eventually fall victim to what happens with other startups, where they coupon themselves to death.

We saw it with HomeJoy & Handy, and currently with Delivery.com & Seamless / GrubHub / UberEats / Eat24Hours.

Consumers are winning this battle, as soon as one startup fails based on coupons, another one is right there waiting to solicit any future customers. And they have all that beautiful VC money to burn through in order to coupon, coupon, and coupon.