Category: Product

In India, most consumer internet brands have used discounts as a hook to lure in users. If your service is good, those users will stick. If not, they will go to the next brand that gives discount. Discounts are good to drive consumption, change habits and make people use your app to indulge in the newly formed habit.

For B2B, discounts are not a sustainable way to create new marketplace.

Here are some reasons:

1. Timing – Businesses do not have a need for a new service/product all the time. You can buy an extra t-shirt if there is a heavy discount but can you buy something extra for your business just because it is cheaper. An extra phone number? No. An extra LMS? No. Over procure commodity for trading – may be yes. Sustainable? Debatable.
2. Cost – B2B has High ticket size transaction so high absolute amount of discount is required to move the needle.
3.  No lock-in. If it’s a commodity service/product, it’s easy to come in and easy to leave.

Let’s look at “tools” as a way to create a sustainable B2B hook? 

We are not talking about selling the SaaS tool for profit but using a SaaS tool as a hook to marketplace or network. How does a tool fight the above 3 problems.

1. Timing – There is always a need for the tool, new companies will adopt your tool faster because they haven’t adopted any tool as yet. If a tool itself is powerful, it might give competitive advantage to early adopters and hence drive industry-wide adoption. A popular category tool will always find takers.

2. Cost – Initial development cost is as much as it take to create a SaaS company. Incremental cost of serving a new customer is negligible with SaaS. Giving it out for free or at a lower price will hurt, but not so much if the network it is building is valuable. Read this on when to choose free as a pricing model.

3. Lock-in – SaaS Tools are great for business lock-in, here’s why:

1. Workflow and adoption – Each tool has its own workflow, if you have adopted one, it is very difficult to leave unless the incentive to move out is too high.
2. Data – Moving existing data to a new system is cumbersome, if possible at all. Doing it across an organisation is like moving a mountain.
3. Network effect is a true lock-in and a SaaS tool can do a strong seeding before the network effect kicks in. It’s like supporting each other  for sustainability.

Why do tools not work to seed a network/marketplace?

1. Bad tool – The tool itself is of low value or bad. In this model, you still have to make a good SaaS product. Future network effect is not an excuse to make a bad tool today.
2. Unrealted tool and network utility – There is little to no relation between the tool and the network. This will end up being 2 products in the same org competing for resources and that do not add value to each other.
3. The network is not valuable– The utility of network is of low value. You have a working and sticky SaaS tool but the value unlock is not valuable enough for businesses using it.

The tool, the network and the relation between the 2 must be analysed for this to work. It’s tricky, but when it does work, it is great.

Some companies doing SaaS enabled marketplace in US

1. Stripe – Payment tech is really a SaaS tool. A lending company unlocks major marketplace level value. If a lending company has to be built otherwise, what seeding or lock-in do you have?
2. Wave – Free book keeping software. Upsell accounting services.
3. Zenefits – Low cost HR software, capture employee data, upsell insurance.
4. Invoice.2go.com – SaaS for book keeping. Upsell invoice discounting.

All of them have used SaaS for seeding the demand side of marketplace. None of this has used a network effect. FrieghtOS has seeded the supply side. Network effect is still minimal.

Examples in India:

1. Wishbook – Funded by Naukri. A SaaS tool for apparel manufacturers. Building a B2B marketplace on top.
2. IconScout – Won grants from Adobe. SaaS tool, delivered as plugins for popular design tools, to manage your design assets. Building design assets marketplace on top – icons, illustrations, stock images.
3. Refrens – Yours truly’s startup. We made an invoice and payments system for freelancers and SMEs (SOHO), and seeding sales referral network on top.

Ecosystem will take time to embrace this as a model because this is literally like making 2 products at once, with 3 chances of going wrong.

Will marketplace enable tools? Or tools enable marketplace or is it a case of “it depends”?

Related reading: 1, 2, 3.

I gave a talk on effective product communication at Webengage’s Engagemint Confrence in Dec’18. Here’s the video from that. The adjoining slide deck is also attached.

 

 

There is a lot of debate lately about the right business model for news content. Ad supported models are failing for various reasons and some publications are seeing success with paid subscriptions. Here I have categorised various forms of content based on why it is consumed and how best it can be distributed and monetized. Please see the chart below. The rest of the article only tries to advocate the chart.

Here’s a look at different reasons why people consume content online. See details in the chart above.

1. Utility – You already know a specific question. You are looking for an answer. To save time and/or money.
2. Hope – You don’t know the question but you will know when you find a good answer. Gives you hope of being smarter, instills long term pride. Most non-fiction books and business tycoon blogs fall in this space. There is some shareability in such content.
3. Porn – There are no questions. There are no answers. It generally has no takeaway but it instills some emotion like envy, nostalgia or anger, which is short lived. Quantity rather than quality should be the focus here. It has to be new for the consumer, irrespective of when it was produced. This is just like real porn that instills momentary lust but has no value after you have (s)wiped off. Such content has high shareability due to the emotion it triggers.
4. Professional Utility – This is a mix of Utility and Hope. It revolves around consuming content around your specific profession. This content is partially actionable for the consumer but is not an answer to any specific question. Industry journals fall in this category.

Same content could be packaged in different ways for different audience.

• Reading about the price of a newly launched iPhone is porn.
• When you are looking to buy it, is utility.
• An iPhone seller would need to subscribe to price change alerts, serving professional utility.
• A consumer brand owner might read about the price change pattern in the hope of understanding the strategy.

Some Examples to Understand the Context of the chart above:

1. One would subscribe to Scoopwhoop or Buzzfeed on Facebook but would you subscribe to it over email? May be not. How often would their article land on a search engine result page when you are searching something? Not enough to make them survive.
2. A price action movement in stock price for a stock trader needs to be reported instantly (Professional Utility). But if you are just drooling over a 40% price jump news for a tech stock IPO, you are most likely just reading for orgasm, hence it’s a porn content. You were never really searching for that content.
3. Inside.com does a great job of category specific news digest emails. Most of the content they serve has low shelf life hence they do not write but just curate the content.   
4. Skift.com for travel industry is a great professional utility content. Similar to Medianama for digital media in India. Most of their content has short shelf life but is important for their specific industry.
5. Subscribing to the-ken.com is hoping to become smarter. It doesn’t serve a particular industry but their articles cover some nuances of doing business in general. Subscribing to Naval Ravikant on twitter serves a similar purpose, hence we might even buy his quotes packaged as a book.
6. A how-to site wikihow.com would serve limited purpose to subscribe on twitter or FB but do great if it shows up on Google’s result page.

When we built version 1 of Freecharge, it was targeted at first time online transacting users. The transaction flow had more explanations regarding “Why” a certain info was required and “How To”. We even had to explain things like we are safe to transact. The media coverage helped. We did succeed but the flow was slow for repeat users.

In 2011-12 when Paytm was becoming popular they were particularly attracting the power users. Faster flows, coupon screen could be skipped, maintain wallet, recharge over IVR. The users who only wanted a clean and fast recharge moved to Paytm.

Had Freecharge started with a power user flow, we may have never succeeded. It would have been impossible to explain things with minimalist UI. Had Paytm launched with the first time user UI, there would be no reason to move to Paytm.

I recently moved all my family’s MF to Kuvera. While there are many apps trying to get users to buy Mutual Fund through them, Kuvera has 2 features that gets the power user i.e. single sign-in for family accounts and ability to import old transaction. MF is a complicated product for first time user to figure out on their own online. Once the power users are captured through these features, these users can influence the laggards as well.

Depending on what you are building and when, it is important to note if you are building for first time users or a more valuable product for a power user.

Hotstar was the first and fastest 100MN download app from India. Indian women were a major contributor to this. They are the bread buyers of the family so it make perfect sense for media companies as well.

Stay at home women in Indian households are major consumers but they are also considered a major reason for low growth of Indian economy. The social structure does not allow enough freedom to go out of home for standard work hours.

I am particularly talking about educated women in urban Indian family. Typically a women’s income in such family is “additional income” and not mandatory to run the household income.

Here are few traits that I have been noticing. It will help you understand what they want.

1. Age 25 to 60. Married.
2. Can use popular apps on smartphone. Not necessarily tech savvy. More browse, less search.
3. They are influential but not necessarily on Instagram.
4. Everything goes Viral. Word of mouth is fast. Comparable to college kids.
5. Have free time from early noon to early evening. Not necessarily on all days. Not at the same time everyday. About 30-50 hours a week.
6. Do not appreciate physically intensive work like data entry. Creative works helps.
7. Need Social recognition for work. They need “colleagues” to work.
8. Not pressed for money. Not looking to meet a need or target to achieve.
9. “Sales” and “Creation” are most suited. Operational work is difficult remotely. Any work that requires time adherence is difficult.

There are few companies that are trying to tap this workforce. Let’s see what they are doing right.

• Foodybuddy – The startup enables home chefs to sell online. This domain has been explored by startups earlier. Shef just graduated from YC to address the same domain. Amongst other things the one thing they are doing right is that they are selling long shelf life items. Along with immediate consumption item like dosa, they are also selling dosa batter. They are selling pickles and Ladoo. These need to be less predictable in terms of time of service. It’s difficult to beat a restaurant’s time adherence for immediate consumption food. Fast and convenient will always over take taste. For other stuff it is has a strong story, as powerful as that of Lizzat Papad’s self help group. Women do creative work, app handles sales and delivery.
• Meesho / Glowroad / Shop101 / Wooplr– These are decently funded apps. All in the dropship category. Mostly selling non-branded women clothing. Apparently they are doing good in tier-2/3 towns. The local store may not have as much curation and catalog size so these apps work. Meesho sellers are like ecommerce assistants. Curating on Meesho is a creative skill. Same audience as Amway or Tupperware. Women do the selling work, app handles supply.
• Flyrobe’s Trunk Show – Flyrobe is into rental of premium clothing. They are trying their hands becoming the suppliers for women who want to setup kiosks at local Flea Markets. They deliver the goods before the orders are placed by the consumer and allow of a more physical viewing. The unsold inventory can be returned. App handles supply.
• Makemytrip has had work from home holiday consultants for sometime now. Sales centric again. But makemytrip gives leads to their holiday consultants. Users aren’t really selling to their own network. Time adherence will be higher in this case.

At my new startup, Refrens, we are looking at bring more work to this audience. Creative people who are good at what they do but may not be able to go out and sell.

Kingfisher recently launched Radler in Gujarat. It’s an aerated beverage, similar to Sprite or Mountain Dew. They promote it as 0% Alcoholic Drink. There are atleast 5 more “0% Alcoholic Beer” drinks sold in Gujarat. Branding the product closer to beer allows it to differentiate it from “soft drinks” and also keep a premium pricing.

In software products when you are making a category defining product for your market you have to choose your “tags” well. Is Slack replacing team emails or improving chat? Is Airtable a smarter Excel or a faster built custom app.

At my last startup, FindYogi, I liked to call it a “shopping decision platform”. I would always need 3-4 more sentences to explain what we do. Had I called it a “price comparison site” it would have been easier for people to understand in the first go. It would hurt the team’s ego that we were building in a crowded domain and not building anything fancy but that would be a separate problem to solve.

These “tags” are different for employees, partners and investors. This is your quick pitch and the goal is to let the audience put you in a “bucket” or “shelf” they already know.  

1. Keep it simple and generic. Even if it defines only half of what you do. A “price comparison site and we also help you decide which product to buy” is a better pitch than starting with complicated phrases.
2. Let the audience link it to a popular product that they might already know. Let them come up with that bucket in their head and don’t get offended with whatever they call you. If it’s a 50% match, it’s a win.
3. Let it evolve with time. Product and market maturity will give you new tags. Embrace it.

At my new startup, Refrens, I am currently pitching to potential users as “JustDial +Linkedin for B2B service providers”. It doesn’t sound fancy but gets me a foot in the door. This is how a user defined it. I am going to stick with this for some time before I find a better pitch.

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.