Membership purchasing program Student Advantage helps college students find
discounts on the products they need most.
As an undergraduate at
Dartmouth University, Ray Sozzi faced the same dilemmas as nearly everyone else
on campus: Not only did he worry about grades, exams and writing papers, but he
also found himself concerned over more basic struggles, such finding enough
money to buy clothes or school supplies, call home or get a train ticket for
the holidays. However, the business ethics major didn't fret too long. Instead,
by using his already-burgeoning business savvy, he created ways to make money
and, in the process, developed a plan that would make him riches in the future.
That was nearly a decade ago. Today, Sozzi, 30, is founder,
president and CEO of Student Advantage, the nation's largest discount network
for college students. Based in Boston, Student Advantage sells $20 membership
cards to students at 3,500 universities around the country. In return, Student
Advantage's network of 20,000 businesses provide members with discounts on
everything from shoes to music CDs to hotel accommodations. Some of those
businesses offering Student Advantage discounts include heavy hitters such as
Amtrak, Foot Locker, Tower Records and AT&T.
College students are a niche consumer group that Sozzi
identified at an early age, because, he says, he was one of them when he
conceived the idea. "The college student community, which is 15
million-plus strong, controls a tremendous amount of purchasing power," he
says. "Some estimates have it in excess of $100 billion a year in
discretionary spending."
While still at Dartmouth, Sozzi realized that there was no
one group that was able to pull all of those students together and leverage
their purchasing power. Seeing a significant business opportunity, he set out
to make it work for him.
"I saw that, from the student side, you feel like
you're a part of this huge national group, but there's really nobody out there
acting as an advocate or representative on behalf of students to help negotiate
discounts based on their purchasing power," Sozzi recalls. "I saw it
first as a student and then recently after graduation, that became the
foundation for the Student Advantage business plan."
Likewise, the entrepreneur in Sozzi realized that
corporations were looking for easy, cost-effective ways to reach the elusive
and much sought-after college market. He was determined to finally bring the
two sides together, and it is a marriage that has reaped big rewards -- to the
tune of more than $20 million in 1998 revenues and predictions for more than
$30 million this year.
But, even though it has taken less than seven years to reach
this point, it wasn't an easy mountain to climb for Sozzi and Student
Advantage.
Before there was Student Advantage, there was a creative and
crafty young man wandering the Dartmouth campus who would do almost anything
for a buck. But instead of odd jobs, Sozzi's entrepreneurial instincts led him
to loftier business ventures when not in class. The young student made his way
through college by running a number of small businesses on campus. He
distributed newspapers and an information guide, delivered care packages and
balloons, ran a disc jockey service for parties. In all, he built a small
empire of half a dozen businesses. By his junior year, he employed more than 50
part-time workers and had annual sales of more than $100,000. In short, he had
become something more than just your typical college student.
In the meantime, Sozzi kept plugging away at his idea for
the student discount network. After graduation, he worked on drafting his plan
while biding his time working for the prominent Boston management-consulting
firm Bain & Co. The ironic part is that Sozzi actually took a pay cut from
his college businesses to work for the company.
"Although I was formulating the plans for Student
Advantage, when I graduated college it was still very much in its theoretical
stage," Sozzi says. "So, I decided to join Bain & Co., which I
knew was not a long-term plan for me."
Sozzi says he was looking at a two- to three-year commitment
at Bain, and a way to get a real-life, real-time business education without
actually going to business school. There, he dished out advice to companies
such as a brewery and a Wall Street bank. But the lucrative gig didn't even
last as long as he planned because the students were beckoning.
"I was only in it about a year or so, when I was
reading a magazine called Collegiate Trends, which is a collegiate
newsletter," he recalls. "Featured in the magazine was a headline
that said, 'The Princeton Review Launches Student Access.'"
Sozzi was quickly taken aback by what he saw. His years of
planning now faced a challenge -- and a big one at that. The Princeton Review
is one of the biggest brands in college marketing, and the company was now
launching a student discount service that nearly followed the same business
plan that Sozzi had been working so hard on developing.
"There I am, thinking that my long-awaited launch of
Student Advantage was still a year away, and one of the biggest brands in the
education marketplace has my exact idea and already had IBM, Kinko's and a host
of others already out on the market."
As it turned out, several others had the same idea, as well.
By the time Student Advantage was launched, four competitors, including The
Princeton Review, already existed. The three others were all regionally based
organizations. "There were a number of people that tried to push forward
on the concept over the past 10 to 20 years," Sozzi admits. "When we
came out, there were only four doing it significantly."
Suddenly, Sozzi found himself at a crossroads: He had to
decide whether to give up in the face of stiff competition or quit his current
job and move forward with his plans. He chose the latter.
Quitting a steady job on a whim to start a business requires
a fighting spirit -- and Sozzi had just that. He's also creative. And lucky.
His decision to leave Bain was met with a great deal of support from his
superiors, who were familiar with his interest in starting the business.
"I went to them and told them what happened, and they
allowed me to transition, really prematurely obviously, off my clients over
about a four- to six-week period," he says. "They also allowed me to
really facilitate the startup of Student Advantage right from my desk at
Bain."
Sozzi says that the surprise beginning immediately put the
company in a tough position because it had to burst out of the gates without
any financing or a true strategic plan in place. "It was really not too
much more than the concept I had in my head," he admits.
Once he cut ties with Bain, Sozzi was left without any
income and needed to finance his new company at the same time. In fact, Sozzi lived without any type of
salary for the next three years.
"I was able to make a fair amount of money in college,
so when I got to Boston, I bought a downtown condo and had a nice car and a
decent-sized bank account. Then I quit, and two years into Student Advantage, I
had already sold my condo, sold the car, and the bank account was at
zero," Sozzi remembers. "The credit card debt and family debt was up
around $50,000 (Sozzi borrowed money on his credit cards and from family
members to initially fund Student Advantage). So it was a pretty interesting
time, to say the least."
He also enlisted the help of several friends and colleagues,
often convincing them to give up their jobs to join the cause. One of the
firsts to join, Sozzi says, was a high school buddy who joined six months into
Student Advantage's first year. Later, a former partner in the Dartmouth
businesses also joined, and suddenly the ball was rolling.
Together, the group used their business prowess to cut costs
wherever they could. In the early days, one of the main benefits they enjoyed
was obtaining superior deals on operating costs. Sozzi says they were able to
get a bargain from a landlord for downtown Boston office space. The landlord
allowed them several rent-free months and supplied the new company with
furniture and phones. They then received an "extremely competitive
rate" on the rent over the following years. "He was betting on the
fact that this business might actually work," Sozzi says.
In hindsight, it seems as though the landlord was equally
adept at business investments.
It didn't take long for this young bunch to build a name for
themselves. In the first year of operation, Student Advantage signed up 15,000
members at colleges around the nation by personally visiting campuses and
talking up the service. Likewise, they quickly crafted an art for attracting
corporate sponsors to offer discounts.
"It was tough," Sozzi says of that first year.
"In the beginning, we were really selling a vision."
They went to companies such as USA Today and Amtrak and sold
them on the fact that if Student Advantage became successful, it could be one
of the most powerful opportunities and competitive advantages a corporation
could gain in the college market. Likewise, since the corporation didn't have
to invest any of its own cash, the trio had nothing to lose.
Student Advantage works like this: Students buy memberships
and receive discounts on products and services from participating sponsors. The
sponsors only incur costs when a student asks for the discount. Therefore, if
the membership doesn't pan out, there are no discounts to be given and no costs
to the participating company. However, if the membership brings in student
sales, Student Advantage makes a commission.
"A lot of businesses went in from almost a competitive
defense position," Sozzi admits. "They said, 'Hey, just in case this
thing works, we want to be in it.' I think a lot of them were skeptical about
the success this thing was going to have in the beginning."
Sozzi says that the company can now charge for sponsorships
because it has millions of customers ready to offer to the companies.
"It's a different sell now," he says.
Student Advantage built its membership base over the years
by participating in active recruiting at college campuses. That task came with
challenges, since college students are such a disparate group, according to
Sozzi. But the company took a unique approach.
First, on the marketing side, they established partnerships
with the universities themselves. Sozzi says the universities looked at Student
Advantage as a great resource to provide for their student bodies. "I
think that was an important part of our strategy," he says. Second, they
invested in long-term, exclusive partnerships with the sponsors, which gave
them legitimacy and value in the marketplace, Sozzi says.
Another important step was to make their effort grassroots.
Sozzi eventually opened nine regional offices to more easily stay in touch with
students. "I think what makes our program so valuable, both from a
marketing and product standpoint, is that we have the regional infrastructure
to be able to manage a local network of businesses, manage university
relationships face to face, and to really spearhead a school-specific and grassroots
marketing effort," Sozzi says. "Nobody in the marketplace had ever
made that type of investment before."
And it worked. Eventually, membership began to grow and
sponsors came aplenty. In due time, Student Advantage became the dominant
company in its field, and Sozzi was back on the payroll.
In 1997, the company received a big payoff for its efforts
when it signed a deal with AT&T to offer Student Advantage discount cards
on long-distance service. The deal added nearly a million new members overnight.
With that type of momentum building, the company grew to include more than 200
employees. It even began to grow through acquisitions. Sozzi and friends made
enough money and gained enough power in the market to buy out a number of
regional discount services, and they eventually even acquired The Princeton
Review's Student Access, the company that had scared Sozzi into launching his
business earlier than planned. A number of key executives with those companies
have taken on roles with Student Advantage.
"I think [acquisitions help growth] in a number of
different ways," Sozzi says. "When you acquire successful
entrepreneurs, you end up having people who that can function very autonomously
and are interested in moving very quickly," Sozzi says. "We wanted to
foster an environment to give entrepreneurs the opportunity to grow their
business and grow revenues and reach their vision without having to worry about
day-to-day things."
Now that the folks running Student Advantage have become
seasoned leaders in the college-marketing arena, they've been rewarded with
profits and honors. In 1998, Ray Sozzi was named Ernst & Young's Young
Entrepreneur of the Year, an honor he says he shares with his entire team.
"We have a tight group," he says. "I think
they took a lot of pride in the award. The company's been so driven on success
that it was just a rare moment to step back and reflect on what we were able to
accomplish, and that was gratifying."
But the rewards don't mean that Student Advantage is
thinking about taking a semester off. Recently, the company launched a number
of support products, including Student Advantage Magazine, now one of the
highest-circulated collegiate magazines. It also launched an integrated suite of
online services, which Sozzi says will play an integral part in future growth.
"The goal from day one was not to just have Student
Advantage be a resource for savings and discounts," he says. "The
vision is much more all-encompassing and in many ways similar to the role the
AARP plays with senior citizens. We wanted college students to look to us to
get an advantage on everything about getting a higher education."
The magazine and online services provide information on
college financing, study abroad opportunities, making meals in dorm rooms, and
almost anything having to do with higher-education issues. "The strategic
plan was to start with discounts and then expand the relationship," he
says.
The Web, Sozzi says, is a great way for Student Advantage to
reach its membership base, because college students are probably the biggest
population on the Web. "It enables us to connect directly to our student
base in real time," Sozzi says. "To be able to have electronic commerce
as part of our site is clearly a big part of our plan."
More growth plans are on the way, as well, and the company netted venture financing to the tune of nearly $10
million in 1999. The private company won't reveal the source of the funding, but it is
earmarked for "strategic investments."
Regardless of what the company does for an encore, it's sure
to be a hit with the college crowd.
Company: Student Advantage
Founder: Ray Sozzi
Industry: College Marketing
Location: Boston
Employees: 200 (approx.)
Revenue: $30 million (predicted for '99)
Copyright © 2000 by Virtual
Advisor, Inc. All rights reserved.