Author: naman

We discussed the basics of coupons earlier. Here is a look into common pitfalls and the best way to do coupons for the elite audience. Elite here means an audience that has some value for its time and generally has a high spending capacity. Typical desirable audience for first world hospitality and services industry.

The Problem with regular coupons:

1. It’s too embarrassing for the “elite” to ask for discounts. You don’t want to show your BOGO voucher on a coffee date.
2. The process of asking for discount is confusing. Do you present the voucher before ordering, before billing or during payment?
3. Most businesses in service industry like, restaurant, spa or hotel, will give you an inferior service if you presented a discount voucher or a Groupon. Try booking a hotel directly over phone/walk-in vs through the popular no-frills hotel booking company, chances are that you will get far inferior room in the latter case.

Other problems:

1. Repeat usage by non-target audience.
2. Lack of data on usage pattern.

Target Feature: 

1. Make the redemption invisible. Only the person paying should know about the discount. This way there is no confusion or embarrassing moments.
2. You declare you are going to use the coupon, before entering the store. If there is condition that you don’t satisfy, like time of the day or day of the week, it should be told before hand.

Possible Solutions Points:

1. Booking system – A pre-paid table booking system could book you for a discount but it wouldn’t be very flexible with respect to what was finally ordered by the consumer. Good for a single price product not good enough otherwise.
2. Payment system – A payment system is robust to address all of the above issues. Like a credit card company giving you a 15% cashback on your total bill amount. The waiter doesn’t need to know anything. The bill is of full amount so it’s not embarrassing when you have a companion along.
3. A billing + payment system – This combination ticks all the boxes, specially when you want to run a product specific promo. The billing system can pass the purchase details and payment system can enable the redemption. The integration though is very high touch. It’s not going to be easy to execute.

Payments system as a loyalty and discount system:

1. 1. Tap the app to “claim” a coupon before entering the store. This is to make sure, that just about everyone doesn’t get discount, even though their decision to buy was not get triggered by the coupon.
   2. Read the amount paid via the SMS and process a cashback.

A company like Paytm with Little is well positioned to do this. I was really hoping something of this kind from Paytm. A loyalty program /promotional marketing product run by a payments company is a powerful thing. What if you don’t want to or can’t wait to build a payments system?

Build a payment aggregator!

Imagine a system that can read my credit card statement. It can as well send cashbacks to my card. An app that can read my location and transaction sms, can very well do this through any non-cash payment system, without the restriction of single payment mode. Having the ability to read my card statement and have my phone logs also means that the campaigns can be highly targeted.

Giving discounts is the easiest way to drive short term sales. How to give discounts depends on what you want to achieve in the long run. This is an intro for things to consider before giving a coupon for discount.

Why do you want to give coupons/discounts:

1. Encourage Trials – You are trying to reduce friction of trying a new product or service so you offer a discount to share the risk with audience. You could just keep the prices low by default but that might hurt perceived value of the service. So you keep the prices at what you want to keep in the long run and distribute coupons to drive trials.
2. Liquidate inventory / Utilise capacity – This is for products that are nearing expiry or services that have a perishable inventory like hotel room nights. By offering a discount you are expanding your target market with a lower margin. Since the discount is temporary it does not hurt your regular market. Most food and services industry falls in this category. You would want to make sure that your regular audience does not learn about the discount being offered.
3. Drive perception – A lot of brand value is perceived through the price. Some Indian brands have been notorious in keeping the label prices high and then offering a discount. The discounts are almost permanent and easy to redeem. Apparels ecommerce company, Myntra, followed this strategy very well. They never showed discounted prices upfront but almost always offered a 30-50% discount coupon. You feel you are buying a branded high price clothing but by paying lesser.

How is the coupon distributed:

This is the key to how successful your campaign will be. The main goal is to choose your base audience.

1. Along with a product or service – When you offer a free salon visit with a bottle of shampoo, you choose your audience as the market of the Shampoo brand. The brand equity rub off is high. And the product and freebie complement each other well. This is the one of the best ways to distribute a trial.
2. Free in a push medium – Like a newspaper flyer. This is cheap way to reach out to a large audience. The audience you get generally depends on the language of the newspaper or the neighbourhood of the distributor. The redemption rates may be too low here. If you do this too often, it will hurt your brand.
3. Free on a pull medium – Like a coupon site, say Retailmenot. Although, this is a popular thing to do but it serves almost no purpose. A coupon site cannot send new users your way, unless they are pushing those coupons on a emailer or notification. Most likely, such users start looking for a coupon after they see the coupon code text box on your checkout page. You might as well host a page on your own blog with such coupons. Traditionally, online sales tracking follows the last click attribution so it seems that the sales came through the coupon site, but they are rarely responsible for the sales to happen. A coupon/discount has to be distributed through a push medium, always.
4. Buy coupon on a site –  A typical Groupon style. This is suited for inventory liquidation. Since there is little control on the target audience, it is not advisable to launch a new service on such a platform. Customer loyalty will be low. This is what Dominos did for most of its early years in India.

Restrictions on a coupon:

Terms like, valid only 1 per user or only on weekdays etc. are required results for a successful campaign but not necessarily required conditions for the user. Do not apply conditions if only a small audience is going to misuse it. Get a marketer to write the conditions of the coupon, not a lawyer. Keep it simple.

There are 2 kinds of coupons with respect to redemption:

1. Low Friction – Low friction coupons are easy to redeem and generally have a believable offer. These are generally redeemed for the purchase of product that is being promoted.
2. High Friction – The typical redemption process is 2-5 steps long. The offer is too good to believe so the idea to make lesser people redeem it. The coupon is given with the promoted product but the redemption happens for a cash voucher or other freebie.

Real Life example –

Steps involved to Redeem a coupon from Ashirvaad Ready Meals worth ~Rs.50 for Bookmyshow voucher worth Rs.100

1. Once you get the product open it to find Bookmyshow voucher inside it
2. Write ashirvaad <voucher no>  and sms to 09902391200
3. After getting conformation message u need to call 080 4055 48445 betwwen 10.30- 5.30 to get ur win pin
4. You can use winpin to get 100 off while booking movie tickets at Bookmyshow for 30 days.

If you are running a discount through a coupon/voucher to drive more trials of your new service, make sure your staff is well trained and incentivised to understand and accept the coupons. Many a times, the service degrades at this point itself. Either, the sales man is not trained enough regarding the terms of the discount or their incentives depend on net sales, so they make an extra effort to dishonour the coupon. A college student might still be OK spending some time negotiating the terms of a coupon but an “elite” crowd may not be. Read more about how to do coupon right for the elite crowd.

First order product management is when you are thinking of immediate effect of your action. 2nd order product management is thinking everything else that ultimately have a long term impact on your core metric.

For every change in product, there is always a short term impact on all metrics. There are metrics that you are either not measuring or you are not able to find a direct correlation with. We generally shy away from measuring such metrics because they are either beyond the standard analytics tools or it is a qualitative data that cannot be measured. Such metrics have detrimental to the long term sustainability of the product.

Here are few examples:

1. Freecharge coupons – When Freecharge was launched in 2010, there was a limit to the amount of coupons users were issued for every transaction. This created a virtual scarcity and hence value for the coupons. That value for coupons was the basic differentiator between a newspaper flyer or retailmenot.com kind of website and Freecharge. Our estimates said that the coupon redemption rate was upwards of 50%. A number unheard of for coupons. In 2011-12, the sites that copied freecharge, like Paytm, were offering unlimited amount of coupons. Freecharge was losing the traffic war with Paytm because of bad SEO, non-availability of a good mobile site and heavy discounting. Amongst many things that was changed, freecharge started giving unlimited number of coupons. That was the point of death for freecharge. It had lost its initial value proposition and was now chasing a base metrics of number of active users but with a monetization engine that was losing its value. Unlike Paytm that created wallet, mall and bank on the back of recharge based acquired users, freecharge, as a product, had no new vision. There was little contribution of unlimited coupons on growing the user base but definitely the long term impact was adverse on the core product. The original business model of freecharge was similar to American Express, “an exclusive discounts club” but over time that was dead. Today Freecharge, as a product, stands for nothing.
2. Mithai and bakery shop discounting – A lot of Bakery and Mithai shops discount the highly perishable products in late evening hours. The idea is to make some money instead of letting it perish and additionally spend money to dispose it. When a bakery introduces this, there is a direct impact on topline. Over the long run, customers see this as a regular feature and delay the purchase untill late hours. As a result, the number of products being sold is same but now at a lower price.
   This discounting model is good for bakeries inside hotels where the audience is not regular and the display is highly visible, hence creating an impulse purchase but not for those attracting residents of a neighbourhood.
3. Dominos – I believe, this brand in India has exploited coupons the most. The coupons were so abundant in early 2010’s that it would look stupid to order Dominos without coupons. Short term sales went up but long term value went down. As a result, when there was no coupon, we would order from a “premium” place. This isn’t great for a brand, unless they want that perception.Regular discounts are not a marketing activity but a product feature. A lot of product managers assume they have found a product-market fit because the product has a huge adoption when some discount is offered. They assume that the discount can be removed later with no impact on adoption. These are good tricks to test a hypothesis or raise venture capital but not for a building a sustainable product. The product-market fit you know is actually product-price-market fit. When the price changes, so does your target audience and perceived value of the product.
4. Affiliate systems – Amazon in US pays 4-8% fee for affiliate marketing. The direct impact is that it brings sales but as a second order benefit it also improves SEO and accelerates word-of-mouth, because most affiliates are influencers. Both of these second order benefits are not measurable directly. Oh BTW, I just launched Refrens.com – an affiliate management system for offline sales channels.

Second order product management is like playing chess. You have to think of next 3-10 moves. One good way to visualize second order impact of product management decisions is to think in terms of relative metrics, rate or percentages, instead of absolute numbers. Like, revenue per user instead of absolute revenue or CTR instead of total traffic.

If you are offering free, freemium or free trial of your product, read this old post to understand what to use when. The Linkedin example at the end might be useful.

Update: Someone pointed out Maslow for B2B from Prasanna. Do read that for better articulation driving the same point. 

There are 3 kinds of business softwares, that do 2 things viz., save you money (bottom line), or bring you more money (top line).

1. Software that saves you money – Software that saves you money directly tend to optimize your procurement viz. server costs, power costs etc. These are generally an upgraded technology or a smart resource monitoring system.
   1. Value proposition is very clear. Customer invests X amount in the software and any directly measurable saving above X is a win.
   2. There shouldn’t be human on the client side to manage the new system. Installation etc. must be handled by seller else selling becomes tougher.
   3. Easy to sell in any region but generally has to be bundled with or piggy back on a bigger system. Like a resource monitoring system on top a server system.
2. Software that saves you money through saving human time. These softwares bring money saving at second degree. They decrease manpower requirement which ultimately results in money saving. Most business softwares fall in this category as they bring some form of workflow automation.
   1. Being able to show the value proposition is tougher as it is difficult for a lot of businesses to fire manpower. In businesses where only one person’s time is saved because of your software, it’s of little use as they cannot fire half of that resource.
   2. Manpower training is required. Must be done by the seller. Generally the decision maker isn’t using the software but his sub-ordinates are. There is a shyness to adopt new system hence they complain. New systems also results in fall in productivity temporarily due to steep learning curve and some the software is never adopted. When done right, this also creates a lock in.
   3. Easier to sell in regions where avg. wages are high. India is tough country for such software.
3. Software that brings you more money – These are generally “intelligent” softwares. A/B test, targeting etc.
   1. The management and employees’ tendency to adapt such a software is always higher as the affected metrics is also a key metrics for any business.
   2. A lot of work flow softwares also fall in this category, like a notification tool that reaches out to your customers for upsell. The incremental revenue in such a case is only the difference between doing no marketing vs. doing some marketing. A good software in such a case should add intelligence by telling you what is the right time to send notifications to each customer, else the software would soon be a commodity. A tool that brings the benefit of network survives this game better.
   3. Sell it to sales/marketing team. Keep it as independent as possible so that other departments do not interfere during adoption.

Webengage, the marketing automation software, started as Webklipper, an annotation tool that would save time in design feedback. It later converted to a feedback capturing app. A feedback capturing app is only useful until you have team/resources to act on the feedback. For the last few years, Webengage is a marketing automation tool that pitches higher conversion rate as its USP. This value proposition appeals to a wider audience.

A popular restaurant wants users to order through apps like Zomato or Swiggy because taking telephonic orders in busy hours requires lots of man power. Whereas, a new restaurant latches on to these apps for the new customers they bring.

The first set of restaurant are coming for the tool whereas the second set is coming for the network. Should the commission pricing be same for both? Does it help to know the segmentation and hence approach both set of customers differently? From what I know of last year, Zomato was treating them differently.

Take another example of Star Network vs. TVF on Youtube. Star’s content is popular and has a ready set of viewers. By being on Youtube, Star was giving more to Youtube than vice versa. May be YouTube did not care for the differentiation much, so Star network launched HotStar. TVF has an app but the Youtube channel is what the audience prefers. It’s like a small restaurant trying to make its own app and hoping to compete with Zomato. Possible to save some commission but not worth the effort.

In offline world, popular retail brands like BizBazaar or McDonald’s have the ability to drive footfalls to any corner of the city. Should a mall charge them the same rent as regular brands? They don’t.

On a related note, does a businessman in Delhi take car loan for the same reason as a techie in Bangalore. No money vs. no white-money. Will their interest paying capacity be same? Which of the two is looking for convenience of assisted service vs. lower price of online buying?

Does the person making a CoD order on Flipkart really not have a debit card? Are such users willing to pay a higher price because it helps them consume untaxed money?

It helps to know the real reason why your product is being used. The pricing and User Experience metrics will change when you know that.

Any exchange, crypto or otherwise, has to find the correct brokerage model to balance network growth and revenue growth. There are 3 parameters to look at while deciding the most suitable  model –  User friction, market liquidity and transaction execution.

Here’s looking at the various models followed by popular crypto exchanges.

1. Buyer and seller both pay equal – In India, Coinsecure and Zebpay follow this model. User friction exists for both the parties, revenue burden is distributed but liquidity in market will always be low.
2. Maker and Taker, both pay equal – Maker/Taker differentiation became popular in crypto world. Primarily, this separates liquidity creator from the liquidity absorber. Works in similar way as above for all 3 parameters.
3. Only taker pays – GDax from Coinbase follows this model. Only transactions that absorb the current liquidity from the exchange have to pay. This model does incentivise creating liquidity in the market but there are too little transactions that get executed as the taker has to pay a penalty (the fee). There is too much anxiety with respect to being a taker vs. a maker. If you become a taker, you pay a fee which you wouldn’t need to pay if there was a cent of a difference. If you become a maker and wait, the market might turn against you and transaction might never happen.
4. Only Buyer pays – Koinex in India follows this model. Seller is incentivised to create liquidity in the market. Seller has 0 anxiety. Buyer pays a little fee, which is fine as he was anyways looking to invest in the instrument. As compared to Gdax model, there are more transactions that get executed here, with the same revenue generation per transaction, as one side is still paying.

In ecommerce marketplace, it’s always the seller who pays. On the contrary, Airbnb makes the buyer pay for the transaction/convenience fee, over and above the tag price. Would Airbnb do more transactions if the tag price was the final payment amount for the consumer?

Which model works where? Your thoughts?

When enabling a transaction becomes commodity, the value of marketplace lies in enabling trust. Trust that the marketplace will connect the consumer with worthy service provider. Feedback from past users are the key to building this trust. I have written about this in detail back in 2013 for various industries.

There are few practices in feedback collection that are being overlooked by popular marketplaces that will end up creating less trustable profiles in the long run.

• Forced and Untimely feedback: From what I recall, Uber started this practice of collecting feedback about previous transaction at the beginning of new transaction. While it is designed to collect feedback at the end of the current transaction, users have no reason to look at the app in the end. What are the chances that I actually remember my last transaction unless it was horribly bad? What are the chances that I want to pause for a while and put efforts to give a genuine rating. At this moment, the feedback screen is just a pop up with a skip button camouflaged in the rating stars. I wouldn’t want to sound too judgemental and there is always room for improvement so I give a 4 star. Most users end up giving 4 or 5, because thinking, at that moment when you are waiting to book a ride, is too much cognitive load.
  While cab rides are commodity and all factors are hygiene factors (from Herzberg’s theory, not from the Dettol ad), this practice didn’t quite seem right when experiencing on Zomato’s Delivery orders.Solution: Have a time limit. If the feedback isn’t submitted by then, don’t ask. The time limit should depend on the impact of service. A holiday experience could have a month’s time limit but for a cab ride, probably not more than 24hrs.
• Value of Individual feedback: If a person gives only between 3-5 stars everytime would you treat his 3 same as that of a person who only gives between 1-3 stars. If a feedback was given 1 year ago would it still be treated same as the one that was given yesterday? Zomato did a great job with this, described in detail on their blog.
  Lately, Zomato has started treating delivery orders’ rating at par with dine-in’s rating. The basic problem with this treatment is that these 2 are very different services with food being the only common aspect out of 5. For dine-in, I would value service and ambience as well. Whereas for delivery, the packaging and delivery time would also be valued. Now by looking at a rating on Zomato it is difficult to say what this restaurant is good at. By design and the point mentioned earlier, a restaurant that does more delivery will continue to get better ratings.

• Representation of feedback: How reviews and ratings are shown helps make best use of it. Showing who gave the rating (couple on honeymoon or solo traveller), when was it given, what was the rating specifically meant for (product or delivery) etc. helps comprehend better. It is also important to differentiate between what part of the feedback is for the service provider and what is for fellow users.

Should a transaction platform care about ratings and reviews? Ratings are an important aspect for curation. What comes on top of search and collection pages is determined by rating. A misinformed rating creates wrong expectation and that leads to a bad user experience. Remember, payments and delivery are a commodity, trust is the only differentiator.

Notes:

1. Tripadvisor does a great job with reviews. Pretty detailed. Focus is on quality and not quantity.
2. Youtube used to have a 5 star ratings system. Now a binary system. Lesser cognitive load.
3. Flipkart web app used to ask ratings on past orders in a widget on the side bar, never forced over a pop-up.
4. Avoid using reviews system as a way to build content for SEO. A QnA section can do that job better.

SnapDeal, the ecommerce company, has a Sunshine Program to help Charitable Organisations. The program allows organisations to create their shopping list and publish on SnapDeal. SnapDeal promotes this amongst its users, who can order whatever they want to donate. SnapDeal delivers the products directly to the organisation.

Publishing wish-lists and gift registry for birthdays and weddings is popular in some cultures and countries. Letting charities do this brings in a lot of efficiency in the system, as only the most needed stuff is received as donation. And what better place to publish this than an ecommerce store? Users will be inspired to donate through this efficient as there is very little decision making to be done. Since these are usable products and not cash, there is more trust as well. All this while the store enjoys a positive brand recall. A true win-win-win.

The current state of the program is a great start and bringing bulk buy discounts, non-branded low cost products, donation receipts will make this a full fledged default destination for the privileged ones to give back.