Are you someone who used to drink a coffee (or two) everyday at the barista next to your office? If, yes spare a quick minute to tell us how WFH during COVID has impacted your coffee+work association.
Read below on why this quick poll….
Let me explain why this quick poll.
There’s a lot of talk about how COVID and the resulting lockdown has resulted in a compression of demand and supply across sectors and across categories.
In most of the articles i read and discussions I am part of , people talk about how demand for most non-essential items will take a long time to pick up and reach the old levels.
No arguments there.
But I think for most non-essential spends, we need to ask what is the elasticity of behavior.
What is behavior elasticity?
I am defining this as the # of days it takes consumers to get back to the old patterns of spending.
Yes, it will vary by the spend-category . Essential and non-essential spends will have very different elasticities.
Hence I have chosen coffee for this poll.
Why Coffee for this poll ?
For many like me, coffee is an essential spend 🙂
Its reasonably addictive to nudge consumers to find alternates – espresso machines, other brews etc
For years, marketing dollars were spent to leverage the power of association. For regular coffee drinkers, work/productivity may have a strong association with coffee. Is this association broken down easily
Yesterday, I got to experience the WhatsApp payment flows. It surely felt like a neat friction-less 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 authenticating myself using my Amazon credentials – 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
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.
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.
I spent the last week reading up “The Marshmallow Test by Walter Mischel”. And while the book is a fascinating summary of key findings (and some of its applications) from Walters more than three decades of research, I found some of it is relevant for how we look at Insurance Marketing and Sales.
What is the Marshmallow Test
Walter’s team designed a test for pre-schoolers where the kids were asked to pick their favourite treats from Oreos, marshmallows etc. One of the treats was placed in a tray in front of the kid on a table. The table had a bell, which the kid could ring to bring back the researcher. There was another tray which had two of the same treats, on the same table. The kid was told, that the researcher needs to step out. If the kid wants to bring back the researcher she can just ring the bell, but then he/she gets just one treat. On the other hand, if the kid waits for the researcher to return on her own, she could have two treats.
As one would expect, there were all sorts of experiences that were witnessed in this experiment – from kids who waited easily, to those who found it very painful, to even those who ate the cream from all three Oreos and kept it back as if they had not been touched at all :-).
Walters team ran these tests and tried to understand how the human mind manages self-control, Takes decisions which can postpone instant gratification. What techniques work and which ones fail, consistently. And in all of these interesting findings, I found these as most relevant for Insurance Marketing.
Me Vs Them, Now Vs Future – HOT & COOL Minds
In multiple versions of the tests it was discovered that when asked, whats the logical thing to do for someone who is given the option of 1 treat now vs 2 in the near future. Every kid said that any smart one would wait. And interestingly when the same kids were asked, what would you do – most of them responded by saying “I would take the one treat”. Walter believes that this is due to what he calls the HOT and COOL brain system getting activated. When its a hypothetical situation that involves someone else, the cool mind takes over – it is good at coming up with rational and logical answers and hence every one knows that we should wait. But when the situation involves us and in the present, the hot mind takes over. This is where it becomes tough to manage the temptation.
The book talks about another experiment conducted by Hershfield, where in participants (in their mid twenties) were asked to create a digital avatar of themselves. For one set of participants, they were shown their regular avatar and asked how much would they invest in retirement planning. And the other group was shown their own aged avatar (aged mid-sixties) and asked the same question. Surprise surprise, those who saw their future self said they would save 30% more than those who saw their normal self.
This tells me few things (& I would love to hear what you read into the findings)
Insurance purchase decisions are very similar to the Marshmallow test conditions. You forego immediate spends for deferred benefits.
Walter discovered that the specific tactics that were adopted by each kid who waited (for the better rewards) fell into a generic category – Cool the now, heat the future. Which means, reduce the temptations of the immediate future and build temptations around the choice of waiting. Sounds logical, and there are good insights for Insurance sales and especially renewals. Buying on monthly installments is easier as the psychological barrier is 12 times higher than when buying an annual policy. Auto-renewal (Standing Instructions or Auto Debit) is better for persistency, as the consumer is not subjected to the same choices every year.
Personalization – Creating Insurance ads that showcase a happy retired life may not trigger purchase decisions, because the consumer may or may see himself in the lead actor of the TV ad. If he doesn’t, chances are he understands the theory of why insurance is needed, but when presented by a choice to buy, he would forego. And this infact has been the experience of most life insurance products. We have only moved a step in this direction with calculators and personalized models for generating scenarios. But they are far from effective in building a true connect with the future self of the user. Calculators and models talk to the cool mind, what we need are ways to get the buyer involved actively in the future self. And decide now in favor of the future self or future selves of his/her dependents.
I see a bright future for digital in Insurance marketing – we have been going at it in the wrong way. Cheaper term plans is not the only opportunity here. Disintermediation and cost-saves is just one slice. The Insurance agent was selling successfully not only coz of the trust & proximity he has with customers. Maybe he can narrate stories from closer home, talk to the customer by giving vivid examples and building scenarios where the customer can easily imagine himself and his family.
Like all interesting studies on behavioral economics and psychology, I feel Marshmallow Test is a great set of hypotheses to bring into the marketing themes and design of campaigns.
In the early days of Deal4Loans, we used to get a lot of traffic and leads through SMS campaigns. Especially for products like Personal Loans (Simple pitch and high-urgency in a need based product)
During those days, NDNC (National DO NOT CALL) list was not introduced and there were very few players who were sending bulk SMS for lead generation. Response rates were high.
Market quickly figured out that this was a cost effective and easy channel to scale up. A tsunami of SMS campaigns started to happen and finally the National government had to intervene with its NDNC initiative.
And while SMS acquisition campaigns have largely died out, it seems to be back again. And with even more potential.
In a recent campaign we closely observed, a bank reached out to a select base of consumers through SMS and emails. The resulting traffic on the portal was significantly higher in case of SMS.
Apart from all the other factors (higher delivery rates, targeting time of intervention), now most recipients have a 3G or Wifi enabled smartphone, where CTAs are simple. This campaign had a short URL taking to the Landing Page after a crisp text talking about the offer.
If you can withhold the temptation to abuse your mobile registered users, SMS can deliver amazing results even in marketing campaigns.
Acquiring New To Bank (NTB) customers is a key agenda for most Digital Heads at Banks.
Its only logical that online acquisition budgets are getting bigger, given the following:
Consumers are spending more and more time online. Digital is the best channel to start a dialogue
Digital channels are tracked exhaustively. You can measure the return on each dollar spent.
Digital channels allow data to flow at higher speeds. This could translate into better context, targeted products, straight-through-processing, upfront checking of applications etc etc.
Tablets have provided the ideal form-factor to do an assisted digital sourcing, as has been proven by the success of ICICI Bank
Regulatory changes are also making it easier to acquire online – Aadhar database, eKYC, wet signatures to go away in some instances etc.
Here are 3 seemingly simple tips for anyone who is doing NTB acquisitions today at a banking set-up.
Choose the right on-boarding product
Which product will you focus on to get more customers into the bank?
Many would say, we do not have a choice as each business line would be relying on the support of digital channels. Be as it may, it might be prudent to take a step back and understand the advantages of choosing a particular product for consumer on-boarding vs another.
Do we reject a lot of applicants for this product. Typically in case of credit cards and most loan products, the rejection rates are high and hence we need to sieve upfront to reduce the cost per lead or cost per account. Are there other products in the portfolio which have lower rejection rates e.g. most liability products may fall in this category
Does the product start giving me more data and insights about the customer? Can I build strong contexts to pitch the next product. Any payment product would be a good bet as it starts building a lot of relevant data points about the customer.
Is this being sold or the customer has a well articulated need? Loans should see a higher conversion as against credit cards because the customer has a need. But the scenario may change if the card is free and loaded with offers.
Is the process straight-through? If not, how many steps are there? The higher the number of steps, lower would be the conversion rates.
Competition – given that you are not the only bank trying to talk to the customer, the kind of marketing money it takes to interrupt a customer would increase for the segment with higher competition. Back in 2007 the bid rates for Personal Loan keywords moved almost 100% in less than 6 months. Every bank in India was focusing on acquiring Personal Loan customers.
Manage the Drop-out funnel
With all the tools available for tracking, doing A/B testing it is so much easier than before to manage the drop-outs in the acquisition channel. Over the years, industry has also learnt and created a best-practices library. Use it. E.g.
Acquiring through partners who have data on customers is more efficient and reliable. This is why most banks are exploring SME financing through ecommerce platforms.
Allow applicants to save applications and continue later. Across channels.
Build for a true OmniChannel experience. As the customer journey will definitely toggle devices
Provide for assisted filling of forms. What might sound simple & easy to you may be confusing to others
Authenticate the communication fields upfront (email, mobile). This allows you to follow-up on leads more proactively.
There are no permanent rejections – a customer who is not eligible today may be eligible tomm. Except may be those who are already over age :-).
Build data-led acquisition platforms
What has changed significantly in the last decade is the amount of data prospects and customers are generating across various channels and touch-points. The future (if its not already upon us) of digital acquisitions is data-led.
E.g. acquiring SMEs for working capital financing can happen in multiple ways:
Bidding on search engines for loan keywords
Putting up banners on B2B portals
Showing banners to specific SMEs on a B2B portal basis some cuts
Deep integration with portals to get fresh data about SME’s transaction, reputation, growth trajectory etc.
And so on.
Its easy to see that as the richness of data improves and also its freshness, the credit decisioning becomes better.
But this is not easy to do. It requires bringing together credit , product and digital teams into a room and understanding clearly the opportunities ahead of us.
Some banks are already working hard to evaluate the new data-points available and calculate their influence on the traditional credit models. Its a matter of time before this becomes the new normal.
Uber has changed the way we travel within cities. On a recent trip to Jaipur, the first thing I did on reaching the city, was to top-up my PayTm wallet to get going on Uber. (yeah no card-on-file yet 🙂 )
And over the next 3 days I took more than 12 rides across the Pink city. Here are some of the interesting observations I had:
Jaipur is really a small city – Only one ride was over Rs 100/-. All others barely crossed the Rs 75/- mark. Given the distances are not too much, the per ride fare is expected to be low. This is a critical point because the supply-demand balance can be easily titlted in a small-population. Also the per ride metrics are sensitive to even the slightest changes.
Free market economies tend to be cyclical – Almost all the drivers I spoke to talked about the good old times they have had, driving around as Uber cabs upto almost 6 months back. It seems back then Uber was super aggressive in signing up cabbies and were paying as high as Rs 1800/- per day. Guaranteed. This came down to 1600, 1400 and now is at 1200/-. And its all because of the immensely huge supply. Most cabbies now complained of getting too few rides on a daily basis. Add to that the low average per ride fare and it is clear that this city needs volume of rides to be high. Or to quickly reach an optimal sweet-spot of supply and demand match. As the word of tough times (for the cabbies) is spreading, fewer are joining and many who had joined Uber are reportedly quitting it. Some can’t even pay their loan EMIs.
There is no consistency of vehicle experience – I got from a Nano to an Innova under UberGo. Firstly, UberGo is where most customers go, hence even cabbies are registering themselves as UberGo. So you are better off choosing an UberGo. The Innova guy said that he wasnt getting any rides so he switched from UberX to Uber Go. Also it seems you make the same per ride across both categories. Hence UberGo seemed a logical preference. The Nano guy was proud of his decision, he claimed that he would recover his investment much faster. And thats true. I think this is a classic example of how the market evolves when its close to a free market.
Drivers understand and give importance to rider feedback – I have never seen so much sensitivity from an Uber Driver towards the feedback/rating. To have been able to crack this is really commendable on Uber’s part. The drivers have strong appreciation for this feedback being utilized for giving them ride bookings. Again, there might not be a completely transparent system but the fact that information and feedback is flowing across the supply and demand side, is strong enough motivator to influence decisions.
Locals are avoiding taking own vehicles – Lot of areas constantly face bad traffic due to construction activities. Parking is a challenge. Most of my local friends have either started using an Ola or Uber over self-drive or are seriously considering to do so. Atleast till the fares are this low !
And back in Delhi.
There was a surge charge of 1.9X due to high demand and unmatched supply I guess. This allowed UberX guys to also pick up UberGo customers without formally registering into the UberGo. Complete reverse of what’s happening in Jaipur. I guess Delhi customers prefer the more spacious UberX and there is sufficient demand therein.
The first cabbie who picked my request, called me and asked me where I need to go (instead of asking me where to pick me up from), and hearing my destination – declined. Just put the phone down and on my Uber screen I was back at fresh request. No way to even go and give feedback on this bloke ! So I guess Delhi cabbies have a hack to the feedback-driving-behaviour loop also. Land of Jugaad !!
Today’s the launch of the Digital India initiative and quite a coincidence that I had an experience which makes me believe that Digital India is already here.
Here’s what happened.
I was in Mumbai and called for an Uber. I started talking to the cabbie to understand the target market for a specific use case for mTuzo . We are pitching to banks that with mTuzo we can help move their debit card customer from an ATM only to ATM + POS relationship.
So I asked him which bank account he gets his Uber payments in – it was a SBI account and it was his choice. Uber gives him complete freedom to choose the banking partner.
Next I asked him if he had a debit card for that account . Turned out he did.
I asked him if he’s been using that card at ATM or for shopping also. As expected he had been using it only for cash withdrawals.
Probing further I asked him what if he got 15-20% discount if he shopped using his debit card, would he consider switching from cash to card. And his response just stumped me.
He said he’s already used his card for online purchases at SnapDeal. He did his first purchase using COD (cash on delivery) but once he was sure that they delivered just fine, his next transaction was through his debit card,
Let me repeat that – a 30 something male who has been driving a cab in Mumbai for last 10 years, is only schooled till class 10th, who uses his debit card only for cash withdrawal, has used it online at SnapDeal.
And what really really shocked me was his first purchase on SnapDeal. I can bet you will never be able to guess it.
Take a few guesses…..
He bought a selfie stick for Rs 300 (after a 66% discount). A selfie stick !!!!