Business Models - Using Technology for Profit at RecycleBank

We've just received a blue recycling bin. Nothing much remarkable about that. But behind the bin is a company and a business model which displays a clever combination of technology and creative thinking. Such combinations can transform a sector for the benefit of customers, partners and of course the business itself. WIN-WIN for everyone involved, in this case planet earth included.

RecycleBank (RB) is a "cleantech" business from the USA that is entering the UK market with a partnership with RBWM. .As RB's founder and outgoing CEO Ron Gonen says “People were looking at the economics of recycling incorrectly. The true value of recycling is not in the value of the commodity it is in the value of diverting from the landfill.”

Clever Use of Technology

On the technology side they're doing two things to make the whole system work:

1. Waste Collection: The blue bins are fitted with a Radio-Frequency Identification (RFID) tag that only records the address of the premises. The refuse collection truck weighs each bin and the relevant household is credited with reward points (an odd 5.5 points per kilogram of waste). 
2. A Web-based Customer System. Households registers their bin to a web account and then use the website to redeem their points for various benefits. RecycleBank suggests this could be worth some £135 per year for a typical family, although it's not clear how much of this is the likes of the £5 registration discount voucher, and how much is actually from recycling. If a week's recycling isn't worth £2.60 to a typical household, what is it worth?

How Everyone Gains

The key to the whole scheme is of course its commercial feasibility. As with all business propositions, everyone in the "model" needs to benefit for the business to work. This is where RecyceBank have been really clever:

1. Capital Efficiency. They don't own the collection vehicles, the bins, the recycling plants or any other assets in the collection process. Instead they partner with the local councils, and their collection provider (where sub-contracted). There doesn't appear to be any need to have any partnership with the recycling plants, which is left to the council and collection provider, though this is a key part of the business model (see later). Investment in equipment is therefore zero. That's a great start!
2. Long Life. The equipment fitted to the trucks has a long working life, longer than the trucks, so can be removed and re-fitted to replacement vehicles when needed. That reduces the annual spend.
3. The Local Authority Wins. They reduce the amount sent to landfill, saving on waste disposal costs. In RBWM's case, they reckon the savings will pay for the bins, which the council bought. In any case as they expected to have to pay for replacements anyway, the positive cash flow in their case is even stronger.
4. The Households Win. But of course none of this would work unless households recycle more of their waste. Here it's carrot rather than stick. Firstly they've made it easier by using one bin to replace two. Now the household doesn't have to bother to pre-segregate - that's all done at the recycling plant. Excellent example of KISS (Keep It Simple Stupid)
5. Secondly The more you recycle, provided it's "approved" rubbish such as paper and plastic bottles, the more points the household earns. As this is done on weight not volume, of course the temptation is to  recycle things they don't want (which presumably makes recycling more difficult and the remaining waste has to be disposed), or weight paper with water (a trick almost as old as the hills). It's not clear how they will manage these issues. It's not in their FAQs, so I suspect they'll make an example of a few people and let the news travel. The "Account holder Rules" state "If any Participating Household contaminates the recycled materials with any non-recyclable items of any kind, the Participating Household may, at RecycleBank’s sole discretion, be subject to forfeiture of RecycleBank Points or dismissal from the Program" In fact it's so important they say it twice (rules 22 and 24).

But How Does This Translate Into A Business?

So far no mention of any revenue for the business:

1. First Revenue Source. In the USA it is common for the council to pay the recycling plant for their service, rather than be paid for material provided. RecycleBank take a small cut on those fees, which are intended to be higher with the new system. This commission is intended to roughly cover operating costs (website, customer call centre etc). A similar commission applies if recycling plants pay for rubbish, and indeed if no fees are paid.
2. The Profit Generator. The company makes its real profit from selling sponsorships and advertising through its multitude of marketing channels including online and direct mail.
3. The points can be used with trusted partners for all kinds of rewards, such as discounts, money off, gift cards, products, promotional codes and other exclusive offers For example, singing up on the website provides a £5 discount voucher at M&S. Presumably this means these partners are also gaining in excess of their investment.

In Conclusion

RecycleBank have used a clever combination of technology, both in operations and with a web-based system, as the platform for a canny business model. Everyone gains - councils, recycling plants, households, retailers and other sponsors, and mother earth - and on the back of that the business should make a healthy profit. Where there's muck there's brass!

Who can better that with another technology-based business model? Do add a comment.

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