Something very interesting happened while I was using the Linkedin App on my mobile. I liked an article and pop came the message from Linkedin checking if I would want to share my love of the Linkedin App itself.
The timing of this “Rate us on PlayStore” screen intrigued me.
Do folks over at Linkedin believe that if I have read a lengthy article and liked it, I am in a good mood?
If you ask me, may be I am. Atleast for sometime.
And since that mood is caused by the content that was delivered on the Linkedin App, Now might be the best time for ask for a rating. I would rate them much higher.
Maybe they didn’t do this on purpose and this was just a coincidence.
But it still piqued my interest in “Mood as a potential context for marketing“.
Did a quick Google and found that both Apple & Microsoft have applied for patents long ago on Mood based ad targeting. If this is at play, its surely super exciting stuff.
For one, mood is a very strong context. I remember once being told that the reason behind gorgeous women in skimpy clothes selling electrical switches was to get the predominantly-male-customer distracted and lower the apprehension about the product itself. If that’s been working for ages, surely a more trackable and insight driven model will be more successful.
Also, this might help “push” marketing be more effective. Google driven pull marketing works predominantly on context – what is the customer looking for actively right now. Imagine products and services being thrown just at the right moment. Feeling all mushy thinking about your partner, and pop comes the mention of a romantic cruise. Imagine how hard would it be to not buy it then n there.
Yesterday, I got to experience the WhatsApp payment flows. It surely felt like a neat experience both for adding/mapping bank accounts and for in-chat payments.
And in my excitement I forwarded it to a friend who didn’t have any UPI handle so far. And I was surprised by the reaction.
How does WhatsApp know my bank account ??!!
And frankly I had looked at it the other way round – they are showing me the specific account that I want to associate here.
And this got me thinking about friction in digital consumer experiences.
I remembered my Amazon experience.
I have recently changed my laptop and phone and each time I logged into my Amazon account from a new device/browser I got a security challenge. I had to enter a security code that was sent on my email.
This is inspite of me using my Amazon login id & password. So why the additional step? Why add to the friction of logging in?
Its a friction-less way of doing XYZ !
We have drastically reduced the friction in each transaction
Our platform provides the most friction less experience for ABC
Am sure like me, you keep hearing how every venture and corporate is focused on reducing friction and there by making it a significantly better experience for their consumers/stakeholders etc.
And I get it.
If I almost always use an offers platform to look for offers near me on a mobile app, it should not ask me to choose a city, then location etc – it should just pick my location and show me the offers. I get it.
Similarly, if my online or in-app payment process need an OTP and there is a way to automatically read the OTP rather than needing me to toggle from the merchant app to the messaging app and back. It is definitely so much cooler and easier.
BUT, ALL FRICTION IS NOT BAD
What I don’t get is how suddenly friction has become such a bad thing.
Way back in my school days, we were taught in Physics that while friction caused wear and tear, it also was the main reason wheels work – friction prevents slippage and aids rotation. Snow chains for tyres – aid driver confidence by increased traction (apart from helping break the top ice layer).
My current thinking on friction less experiences is as follows:
All consumers are not same. What is a great experience for some may be a concern for others (elevators vs escalators) . Hence it may be best to have varying levels of friction available for consumers.
Friction can help build consumer confidence – esp amongst users concerned about security
Friction may be useful in the on-boarding or early days of consumer-product relationship. As confidence builds, some more steps can be reduced.
Friction is also an industry level phenomenon. As an industry matures and consumer confidence builds, need for a faster, smoother way to do the same old task would become stronger.
This happened yesterday – We settled down for a discussion first thing in the morning and a colleague says- smile guys, its a good day!
But, it was a spirited discussion . And the smiles quickly vanished.
We shared our views and debated. And I realised I was talking with a lot of emotional energy.
I told myself, its ok – because I am committed and passionate about this. But there was clearly another voice telling me – its not ok.
And then something interesting happened later in the evening.
I was reading Pegasus Bridge June 6 1944 – By Stephen Ambrose and came across a section where it talked about the front in North Africa.
In particular the book was introducing Hans von Luck – a protege of Rommel – who agreed with his British counterpart to fight a civilised war.
Every evening at 5 p.m. the war would stop. The Brits would break for tea and the Germans for coffee. They would then get on the radio and share the details of captured personnel and any messages these POWs may have for their families – usually messages confirming that they were ok.
In one particular instance, the Germans learnt that the Brits had got a fresh supply of cigarettes. Von Luck offered to trade a captured British officer for a million cigarettes. The British countered with 600K. And a deal was stuck.
But the prisoner refused to be exchanged because he insisted he was worth the million initially asked for !!
I was shocked !
These are men at war. They are willing to kill and die. Yet they manage to keep humour and civility intact.
I am lucky to have read about this incident the same evening I was telling myself its ok to lose my cool. It has helped put things in perspective.
I went back to my colleague and shared this story. Thanked him for opening the meeting with a request to smile.
He has decided to make sure that every meeting he attends, he would put smile(s) as the first agenda item.
And I am inspired to go a step further. To keep humor intact at the workplace – the place where we spend most of our waking hours does not need to be such a serious place.
Ask any payment professional, and while they might disagree on what’s the best payment experience, they would all agree that Cash is sticky.
And one of the core reasons for the stickiness of cash is that the migration journey is intimidating for most cash-heavy users.
Too many choices
Here are some of the many questions the cash users who want to migrate away from cash, grapple with:
Is it safe to use a card for payments
Should I use a separate card for ATM withdrawals and purchases
What should I start using – prepaid, debit, credit , mobile wallets
If it’s a card, should I go for a basic, gold, platinum or some other variant
Should I get a product with shopping benefits or one with fuel? or the one with air-miles
Should I take a Visa or a MasterCard or a Rupay
I have accounts with multiple banks, whose product do I begin with
How do I apply for the card? Can I apply online, or do I go to the bank branch?
What is a UPI or IMPS payment? How do I do that? What is the fees on the transactions?
…….And it goes on and on.
The simple fact is that there are way too many products with different features, brands, offers,benefits and form-factors. It is a tough choice to make.
And post demonetization, most banks are show-casing ALL their products in each of their ads. Leaving it to the consumer to pick and choose.
I have seen Mumbai buses covered with ads, that have all the digital payment instruments from that bank. Not sure if most consumers even know what those mean.
The famous Malcolm Gladwell research on choices, happiness and spaghetti sauce also harps on the risk of too many choices.
The migration away from cash, has to be made easier with fewer choices or a recommended path to walk on (recommendation itself coming from a trusted partner).
In the absence of this, most consumers prefer a wait-and-watch stance. And the product(s) with simpler choices and/or more brand-ambassadors will see higher adoption. No wonder, many a millennial adopted the mobile wallets. There were no variants of PayTM, Mobikwik etc.
And this brings us to the other point.
Hurdles in the migration
Ok, so you have a cash-user who is convinced about that one digital payment from your bank. How does she go about getting started?
Do you remember the forms you filled to get your first credit card.
I remember that during my Deal4Loans days, the card application forms used to have almost 50+ fields across some 4-5 stages of the online application for most banks.
While the consumer on-boarding has come a long way in the digital era, it still is complicated for many products/banks. Unless the consumer is really convinced about this migration, why would they jump through so many hoops to get the product.
The access and on-boarding has to be simpler. A convinced consumer should be active on Day 0 if not within Hour 1.
In my opinion, if we are serious about displacing cash, we need to make the transition a simpler choice for the consumers.
What do you think?
This is part 2 in a series of posts where I try to understand why Cash is sticky? What are the some of the obvious things, we may have overlooked in our zeal to digitize payments.
Many of us have argued for the need to build convenience, security and ubiquity for digital payments. And then cash would start receding. No debate there.
But we forget that as individuals our brains are wired to go back to cues that are triggered at the sub-conscious level. We are not always the rational individuals economists would have us to be. Our decisions are influenced more by emotions.
CASH IS NOT THE ENEMY
To appeal at the emotional level, we need either a villain or a hero.
While bankers and payment professionals would disagree with me, but for most Indians cash is NOT the enemy. Consider this:
The currency carries images of Mahatma Gandhi, of the National Emblem and now of Mangalyaan etc. These are symbols of national pride. We are wired to feel proud to hold a piece of paper with these images on it.
We have traditionally celebrated an auspicious occasion with gifting loved ones with money. This association of gifting currency with happy moments is also tough to break anytime soon. Again deeply rooted positive connect.
When the Prime Minister announced the ban of old currency notes, the villain being chased was corruption. Not cash. So we never really took the storyline that cash is bad.
I don’t think any country would even want to walk down the path of trying to build a negative connotation with its currency.
Hence a story where cash is the villain may not work. We need something else to pitch Digital Payments at an emotional level.
This is part 1 in a series of posts where I try to understand why Cash is sticky? What are the some of the obvious things, we may have overlooked in our zeal to digitize payments.
Big Data is all the rage. Everywhere you go, any meeting or presentation one sits through, Big Data seems to be there.
But there are opportunities beyond big data. E.g. how we handle small data fast.
Here’s an example of small data that I experience almost everyday.
In many corporate buildings in India, you would notice that you need to punch in the desired floor into a panel, which prompts you which lift-car to hop on to.
Simple yet brilliant solution.
You club the waiting passengers into specific cars by their desired floors. The average wait time is lower, the average travel time to your floor is significantly lower.
And all the magic happens in a jiffy.
The data becomes irrelevant soon (apart from being used by the algorithm for learning and further optimization). And in a classic example of not-so-big-data. But the fact that this small set of inputs from users is taken, crunched and optimized for elevator allocation in almost real time makes it so amazing.
Small but fast Data.
In Data-led-solutions, the following typically have significant impact:
Data-accuracy: How accurate is the data that we feed into the system
Data-freshness:How fresh is the data as it moves across the value chain
Data-velocity: What is the speed with which we process and move data
This small-data use-case is very high on the data-velocity parameter and I guess just solving for data-velocity has allowed for the solution to be adopted.
So in summary, there is life beyond Big Data too. 🙂
How do we drive adoption for rules in a country, a community?
Should a good rule be easily enforceable too?
I think it should be.
If we want to build a society where most follow the rules, enforceability should be an important criteria.
To decide whether a new rule should be introduced or not. Whether an existing rule needs to be modified or scrapped.
It is my belief, that when we have rules that can be easily broken without any consequences, it sends a signal to the community. And this signal usually leads to a gradual loss of respect for the law of the land and for the fellow citizens.
Let me explain with an example of two rules, which most of us are familiar with
Front seat passengers should wear seat belts while traveling in a car
All vehicles should have a valid pollution-under-control (PUC) certificate
While both these were introduced in the last 20 years or so in NCR, the first one has seen significant levels of adoption whereas we all know that very few cars and bikes have a valid PUC certificate.
If you ask me, the reason is very simple.
For seat-belts, the fact that you are complying (or not) is visible each and every time you are driving. Any traffic-cop who sees you not wearing the seat belt can pull you over and issue a challan. So you run a very high risk of being punished if you are out on the road w/o wearing your seat belts.
Contrast this with the pollution certificate rule.
A traffic cop on the road has no clue if your vehicle currently has a valid PUC certificate or not. Hence the cop would rarely pull you aside asking for the certificate. It is usually asked for when you have already been stopped for some reason and they feel that they might put more pressure on you if you are w/o the PUC. Hence as car owners, we are usually not very afraid to drive w/o this certificate. The risk is just too low. And hence very few cars actually have a valid PUC certificate.
So while almost everyone knows that the laws need them to drive a non-polluting vehicle, very few actually end up doing so.
And I think its very simply just the issue of how easily the rule can be enforced.
In my opinion we should have few rules, but all should be enforced strictly.
While one cannot argue with the numbers and the line of reasoning, I somehow felt that this discussion has ignored the long tail of ad-revenues or the lead generation aspect of these platforms. These reports are focused on big co’s with big media budgets who may typically have brand-building as the key target.
Let me explain this in some more detail.
There is no doubt that for Google or Facebook, the big marketing dollars would come in from big spenders like Ford, Coca-Cola & Pepsis, Samsung, Levis, Red Bull, Wells Fargo, Amex etc.
But if we were to evaluate these platforms from a start-up point of view (small budgets and maybe need to do lead generation instead of brand building), the story is very different.
1. Social targeting is profile based, too many bidders
On Facebook, the same user may be targeted by multiple brands, because there is hardly any other context. E.g. a 35 yr old male who lives in a metro and has liked multiple lifestyle brands would be a good target for many.
We do NOT have additional context for the specific session on FB when the ad is being displayed. One FB session is hardly different from another in terms of the intent or maybe when mood based marketing algorithms evolve things would change.
This means, each of the target users FB session will appeal to all the brands. Multiple brands would be vying for that same ad-impression, which in turn means higher bid rates and CPMs etc etc.
And this means that small budget advertisers would be elbowed out of the platform by big budget cos.
2. Search has deep context, removes non-relevant advertisers
Search on the other hand has hugely relevant context. E.g. a user looking for Mortgage loan options on Google will be targeted by Financial Services brands vs someone searching for Fine Dining Options in India.
And this means, that as an advertiser you are just competing with other competitors or maybe some adjacent industry players.
Bid rates would be lower and even with small budgets one can get the message out to a relevant audience.
3. Lead qualification is efficient on search
If one is looking at online advertising for lead generation, chances are search may be a better platform.
Before the Facebook fans pounce on me, let me qualify my statement.
Many of us run “boring” ventures – we pitch services that consumers may not want to share. And/or we do not have the creative bench strength to get a funny/interesting message out. Our content strategy may still be a WIP. Realities of life.
If the message/ad we create has low viral coefficient (i.e. we do not expect people to share it much), Facebook may not be the best platform. Coz then we are burning marketing dollars to talk to a prospect who may not be primed for our services and who is also not helping spread the word.
Google, on the other hand is a very different story. If a consumer is online actively writing into the search box key words that resonate with your offerings, you may have a very interested customer. Intent is high.
Also, my guess would be that the long-tail ad-spends are stickier.
But all this is just my 2 cents on how small ventures, start-ups and SMEs should look at spending their advertising money online – across the broad theme of Search Vs Social Marketing for the long tail in particular.
Unit Economics is all we hear these days in the consumer technology world. Unfortunately for many start-ups seeking venture funds, this is the biggest hurdle they need to cross to build a strong case for their business.
What is the concept of Unit Economics
I will not go into the definition and relevance of Unit Economics. That’s well documented here and here. Or just Google it.
Lets refer to Microeconomics 101 for our discussion – Marginal Costs(MC) and Marginal Revenue(MR). We all know that its a healthy sign if Marginal Revenues are higher than Marginal costs. And this delta (MR-MC) is what is unit economics.
On the other hand, if we are losing money on each transaction, either we see the losses reducing or we stop growing transaction volumes.
At least rational individuals would choose to do so. Or so goes the basic Economics assumption.
Unit Economics in web/mobile start-ups
Marginal costs are volatile
A big chunk of a start-ups costs is the customer acquisition cost. ( I am excluding businesses with very high repeat volumes in early days where the operating costs contribute heavily to the overall transaction costs).
Most start-ups need to market their products and services. They are in a continuous state of transaction ramp-up along with concurrent improvements in experience or efficiency.
And in a world where most advertising/marketing channels are bid/auction model driven – this translates into the marginal costs being highly volatile. How volatile?
In the early days when you don’t have the luxury of brand-pull or of time, almost 60-70% of transactions may be coming from Google Adwords/Facebook/Ad-networks. Meaning 60% of your business is not insulated from pricing shocks.
Bid-rates may vary as much as 30-40% to maintain the same positioning. Maybe more, if there is a competitor who has just raised a round. Also, if you are competing in a category where big brands play, anything can happen. E.g. At Deal4Loans, we had seen bid-rates on our key-words jump significantly every time a competitor raised venture money or a bank launched a new digital campaign.
Add to this that the conversion-rates of your campaigns have not yet stabilized. Remember, these are early days, you are experimenting on your landing pages, and funnel optimization is still underway. So the final cost per account gets even more volatile.
2. Customer Pricing is relatively in-elastic
Theoretically, if you could pass on the burden of increased bid-rates and hence the ups/downs in marginal costs on to the consumer, your unit economics would be safe. The neighborhood vegetable vendor who has daily-prices does exactly this and is hence able to retain his margins.
But this is rarely possible. Pricing is just not that elastic. Most mobile/web start-ups can not /do not change prices so frequently.
3. Marginal Cost CURVE is UNPREDICTABLE AND NOT SMOOTH
We know that the bid-rates can inflict wild fluctuations(as seen in pt1) in the cost of acquisition, thereby making it unpredictable. But a bigger challenge is that the Marginal Cost curve is not smooth.
One rarely finds gradual changes in marginal costs with increasing through-put. It happens in unpredictable steps. Here’s why
Each fluctuation in effective bid-rate leads to drastic ups/downs
As a start-up you are experimenting with multiple channels. Success in any one will bring down the blended MC immediately.
Referral/Viral coefficient and % of in-bound of the campaigns can impact the costs significantly. e.g. One PR mention may bring in huge self-select traffic.
SEO traffic which is typically very predictable can also swing wildly with a new Google update as we saw with Penguin and Panda.
So what do we do?
Keep Experimenting. Do know that customer-acquisition at optimal price is a moving target. You are never really truly there. It can always be better.
Invest early in content. In-bound has significant ripple effects.
Raise money but don’t throw it all on branding. Consumer memory is short lived. Discover and test more channels, unlock access to more segments.
I would love to hear from bootstrapped ventures as to how they are/have handled the customer acqui costs. What worked, what didn’t?
I have always been intrigued by product design and by extension policy design (& implementation). If the government were to look at itself as a start-up technology venture, the policies, schemes and guidelines issued by the government would possibly be the “products” of this venture.
And like any good product manager, one should study not just the immediate impact of change(s) in product design but also the delayed and maybe stickier changes in consumer behaviour.
And that is what I want to share with you today.
Shift in dietary habits due to Green Revolution
Sometime last month, I was visiting an uncle of mine – someone who is in his mid 70s, reasonably fit, exercises regularly and has borderline diabetes. While we sat at the lunch table, I noticed that he had multiple other grains in his roti as against mine which was from just wheat atta. It seems most physicians recommend adding ragi, chana etc in your atta mix as a healthier alternative.
And that’s how our conversation began.
And what came out was quite surprising for me.
It seems in their childhood days in villages of western U.P., wheat was not the staple grain. Infact it was considered a delicacy and wheat-chapattis were made when they had guests over. And he comes from a well-to-do farmer family. This was not because of economic constraints, it was just how things were.
So as the elders started talking about this significant shift in probably the most important component in a typical North-Indian meal – roti – what emerged was that the shift was triggered by the Green Revolution in all probability.
This lunch group which included scientists and government employees, agreed to the following sequence of events:
Government stepped in on the supply side with higher yield varieties, irrigation support etc
It also created artificial demand by setting up floor prices thus encouraging farmers to grow wheat. Making wheat a critical component of Public Distribution System also ensured a big buyer for wheat at these prices. This in turn ensured that a higher percentage of land under cultivation now got sowed with wheat
This brought the otherwise-considered-premium grain into the middle-class households at a very affordable price. Imagine if suddenly, you find yourself able to afford an item which for years or maybe generations was considered premium, chances are you will buy more of it to feel good (my assumption)
And they all started eating wheat more, skewing our diet heavily towards this singular grain in North India.
And the subsequent generation(s) like ours has come to believe that our rotis have always been a wheat-only product. Coz wheat rotis is what we ever saw.
Am also very clear that India’s self-reliance on nutrition has been contributed heavily by progress on wheat and rice. So there’s no doubt that this has worked as planned.
The fact that wheat may not be the healthiest grain is probably something new. Gluten intolerance was probably unheard of during the Green Revolution.
But with the new facts before us, should the government re-evaluate its focus on just a handful of grains in its policies.
What if, the support prices on wheat are relaxed a bit? What if other “healthier” grains are encouraged similarly? Will the cost of managing supply chains and warehousing for multiple grains offset the advantages of a wider-spread in our diet?
Many questions and I don’t have any answers.
Low availability of fodder for cattle
Ask any elder who has seen standing wheat crop in the fields now-a-days vs in the old days. One thing they would tell you is that the wheat crop is now stunted. Its much much shorter.
This am told, was probably one of the biggest breakthrough in developing High-Yield-Varieties. The nutrients and water is no longer “wasted” in the growth of the non-grain-yielding parts of the crop.
But on the flip side – this has increased the cost of cattle-management for local farmers. Why?
There just isn’t enough fresh fodder for the cattle. The non-grain part of the wheat crop was used as fresh and dried fodder for the cattle that the farmer had at home. This is gone.