HOW ARE BUSINESS DOLLARS A NEW FINANCIAL INSTRUMENT AND NOT MERELY AN ELECTRONIC DISCOUNT?

A common fear with promotional programs that involve coupons, frequent flyer miles or discounts of any kind is the potential disruption of a company’s already beleaguered cash flow.

The difference between Business Dollars and simple discounts has been difficult for most people to grasp. This has mostly to do with seeing things through our habitual lens or paradigm. If we are used to thinking merely in terms of one currency, then any time that a merchant accepts less of that currency, it appears to be a discount.

A useful analogy in grappling with this distinction is the emergence of paper currency, at a time when precious metals and tradable goods and services served as money. Even though early paper currency was a little suspect in value, and perhaps not as desirable as goods or gold, it was never-theless
not a discount against the price of an item calculated in gold coins. It was the first halting exploration into what would become one of the most powerful financial instruments in history. It is potentially the same with Business Dollars. It may appear to early adopters of DualCurrency Commerce that merchants are “just offering a discount, like they always do,” and that “Business Dollars have no value, because the merchant doesn’t even keep them.”

But, Business Dollars are as real as any money ever invented or conceived. They are contractually backed by the promise of participating merchants to redeem them in a specific ratio with U.S. dollars (that ratio set by the merchant). This means that a virtual warehouse of underutilized busi-ness
capacity backs Business Dollars. Perhaps the definition of a “hard currency” should really be one that is backed by the promise of goods and services offered by businesses, rather than a currency backed only by a limited supply of gold or by government promises to issue more money.

There is also a dual nature to discounting, much the way that there is a dual nature to money and competition. While discounting does put extra purchasing power into the hands of consumers and stretches their dollars, this positive feature of discounts is more than offset by the general down-ward pressure of economic competition on market share, profits and wages. There is a distinct limit to how much prices can fall, before the production and sale of a
product or service becomes unprofitable. So, while productivity is dramaticallyincreasing day after day in the Information Economy, the falling of prices only partially keeps pace. And for those who are downsized out of jobs, discounts are not of much value. After all, it takes money to take advantage of discounts.

We are amused by the person who announces that they saved $100 while shopping…timidly acknowledging that they spent $400 to do it. The truth is that discounts are an aspect of spending money. Simply spending the same limited purchasing power will never solve the problem of limited consumer purchasing power.

As well, discounting is central to the current competitive game. Discounts contribute to the downward pressure on market share, profits and wage as described above. When merchants discount, they simply have fewer dollars to pay their employees, and so employee/consumer purchasing power
declines. The crushing downward economic pressure to survive in today’s economy leads to holding steady or even forcing down the wages of employees, as well as vendor costs. In sharp contrast with this dilemma of traditional discounting, Business Dollars can put new purchasing power into
the hands of employees, managers, owners and investors, as well as into the hands of the same group of stakeholders associated with a business’s vendors. Therfore Business Dollars are a tool that fosters good will and cooperation between all business stakeholders alike.

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