Sub-Segmenting Cash-on-Delivery

I’m sure we must have all read enough about the immense COD business in India. Estimates of this market’s size vary between 50% to 70% of the entire eCommerce opportunity in India. Interestingly enough, I’ve seen many businesses talk of this segment as just One segment. How can two-thirds of your market be just one segment? It seems natural to peel layers here. There could be various gaps and opportunities to be unearthed if we stop seeing this entire COD opportunity as one market, with similar consumers, needs & wants, drivers & barriers etc. 

India is supposed to be amongst the most cash-intensive economies in the world. India has more than twice the number of bank notes in circulation compared to the US, at a fraction of the GDP. The bank-notes to GDP ratio stands at 13% - which for most countries is 2.5-8%, and this proportion is rising in India.

Too add further perspective, India has also not had a history in catalog shopping. Far from it, India’s traditional retail has been next-door. Most commodities were bought on touch-and-feel - the current pre-weighed flour and pulses is a very recent and marginal phenomenon, and paid-for after a month’s free credit. Banks have always ‘rewarded' savings with sub-inflation interest rates. Tax avoidance has been, and is, common. Retailers commonly charge more for card transactions over cash. Just the amount of India’s black-money stashed abroad runs into billions. There’s more stored in real-estate, gold and sometimes just wads of notes buried underground. The phenomenon is bigger than the broad cash-for-convenience label that’s put on it. 

Specifically for eCommerce, I think there are various subsegments including, but not limited to, the following:

• offline buyers: These are genuinely financially-disconnected buyers who do not have access to instruments needed for online transactions - they may have internet access but not online banking, credit or debit cards, or digital wallets. 
• cash economy buyers: There are people who earn and store money in cash, and for whom a digital transaction involves first depositing cash into an account.
• convenience-led buyers: The most-well known segment perhaps, but to note, there are two key sub-segments here. For these buyers, either the use of cash, OR the process of cash-payment is convenient. COD is often if not always a faster transaction with lesser steps. The trade-off on convenience is of-course that (some)one has to be present at the time of delivery, which is inconvenient to some, but everyone defines convenience differently. Particularly of note is the case of the mobile buyer, who finds it hard to input 16 digits, sometimes twice, then the CVV, then exit the app and go to his SMS inbox for the OTP, then come back and complete the transaction- often on a small screen and sketchy bandwidth. COD is a single-click option in comparison. 
• trust-deficit buyers: These are people trying out a platform that they’re not sure about. Maybe they don’t trust the product that they are buying, or the service that the platform will deliver. Once it’s delivered properly, and the packet is opened, they feel comfortable paying.
• post-paid buyers: These are people who simply prefer paying after. Simple. These could technically do a card-on-delivery transaction as well if incentivised to. Unlike the trust-deficit buyers who won’t pre-pay for a specific reason, these buyers are on a default setting of post-paying. They need a strong reason to even consider pre-paying. 
• impulse-buyers: These are buyers who are not sure if they want to buy the product. They often click on buy, sometimes to check the final price, and they don’t take it seriously enough to cancel the transaction (for them refusal of delivery is as good as cancelling the transaction. The subsets of people ordering expensive things for ‘fun’, or to try out the experience belong here
• remorse-affected-buyers: Let’s be real. Many a buyer continue their price-research even after their purchase is done. More often than not, a buyer either discovers a cheaper source or worse, the price of the same article on the same website drops. It is tough to feel like a fool. It is easier to order post-paid COD so that one retains the right of refusal, and the bargaining power.   

Naturally, all these segments are similar symptoms of different diseases with different treatments. If one wants to expand or reduce or even understand the COD phenomenon, one needs a finer lens.   

What do you think?

How different is "my" customer and "yours"?

So many brand discussions start with customer profiling. There are deep dissections on the difference between our customers and those of our competition. Our customer is more open to using her credit card online while the competition's customer favors cash on delivery. Our customer is older but more evolved. Our lapsers are more likely to be staying in big cities. It stops striking some of us after a point that we're using a cognitive shortcut by giving an identity to an aggregate average statistic.

More importantly, we forget that in many if not all cases, all these different identities are just one person. These many customers aren't different people who behave differently. Our customer also shops with the competition. Our customer is the competition's customer.

This is not trivial. We draw up pen-portraits, day-in-life's, mood-boards of preferences and so on and forth for these supposedly different characters. We do qualitative research around customer groups that are 'our customers' and 'our lapsers' or 'competition customers' to understand them better. If we see the same person turning up in two groups, we suspect incorrect recruitment if not foul-play and impersonation. How could the agency mix up our customers with theirs? Or customers with non-customers? Sounds familiar?

If there are more men in the people who end up converting on my platform versus my competitor's, this may show up as 'our customer is 70% male while our competitor's is 80% female'. I think it starts off being a small poetic license (the use of the singular) and ends up sounding inane. There is no one out there who is 70% or 20% male.

Reality check - it gives us great pleasure to prick this balloon with the pin of knowledge you had all along. These different characters with their distinct unique personalities are like the average man. Like the man with exactly the average height, weight, hair and nose-length - who doesn't exist.

These customers - yours and mine, are heuristics, short-cuts, simplifications - and just that.

What we really should be talking about, and thinking about - are different need-states. In one need-state, a customer prefers my shop and in another, my competitor's. That's really what it is.

If my eCommerce platform, for example, is great for technology products and not so great for lifestyle products, the same customer, in the lifestyle need-state is my competitor's customer and when in the technology frame-of-mind, is my customer. A frequent misread of this state is as follows: my customer is a technology buyer and the competitor's is a lifestyle buyer. Familiar?

So what?

A lot of things. Just as a starting example, do you think segmenting users or customers makes more sense now or segmenting need-states, use-cases or states-of-mind? Litmus - think of yourself, are you ever just one brand's customer?

Social Recommendations, Discover-ability of the Truly New, and the Aha!

I'm sure you see a lot of "people who bought this also bought this" or "people who read..." or "friends who listened..." or "friends who watched...." nowadays on sites. That is social recommendation for a lot of businesses. The assumptions are clear. We are sheep. No, that sounds bad, but we're some similar creatures.

I kind-of agree. Most of us are not early adopters, and we seek sanction in the actions of other people. Why should we try untested waters unless we know people who jump in them come out alive, or better, enjoy it? The friends part makes even more logical sense. If we're sheep, we follow sheep and now flies. We make friends based on some commonality, and if my friends like something, maybe I like it too. Better chance than trying out a product none of my friends like. Right?

Yes, except that most of us are also unique. Sometimes, actually most of the times, we are sheep. But some times we are deliberately not. We don't want to wear the same shirt as everyone else. We also try to be different. We want to seek our own New. We want the thrill of being the first to discover something cool which then, other people also like. Some times we want to hold on to what we discover and don't want others to know about the small cozy cafe we discovered because once they do, it'll stay neither small nor cozy. Also if you think about it from the other perspective, that of someone / something wanting to be discovered, you have a terrible cold-start chicken-egg problem.

No one knows you, no one likes you, so no one follows any one to your door. Seems like a dead-end.

Not on the Music Genome Project, not on Pandora.

Anyone who's used Pandora is a fan, or I haven't had the fortune to come across any other type. Pandora is a radio-station for those who still don't know, that will ask you for a couple of songs you like and then will go on to predict, based on what you like and what you skip, to progressively suggest songs that you love, but have never heard of. Pandora doesn't do the 'like' business. The Music Genome Project, in the background, describes each new song, through an algorithm on about 400 attributes (genes), and each new song is rated by a musician on those attributes again, and that is what it uses matches to match your taste. This means that if Pandora has figured out what kind of music you like, and there's someone who's written a song like that, you discover it, hear it, love it - without ever needing to hear about the band, or the genre, or the country or century it was written in - and without any of your friends having heard of it. For those who can (it's legally available only in US / AU / NZ I think), you must try it for genuine aha moments.

What I find even more amazing is that this stuff is possible in as complex a realm as music. What I find amusing, however, it how much simpler it might be for, say, books - and you don't see this happening. T-Shirt fans could be following the herd in styles and trying to stand out a bit in terms of the slogan, but book fans really look for that unheard of book that gives them the aha.

Recap, recommendations work. Social also works. Attribute-based cataloging also works. There are categories (like the undiscovered), and occasions (imagine gifting someone what everyone else is gifting), and people (the cult of the non-conformists) for whom a Pandora of things is a crying need.

It is more difficult to build this out, but this could be well worth its while. I'm sure, at least hoping, that there is stuff being built as we speak.

Loyalty Programs versus Loyalty

What comes to your mind when you think of loyalty? My guess is, one of two very different things. You’ll think either of a loyalty-program (which is really a way of either incentivising repeat purchases or re-activating potential lapsers) or of Harley Davidson. Both, now that you see, are very different from each other. 

The loyalty I’d get through a points program is ‘purchased’ loyalty. You stop giving me points, I stop buying. This ‘loyalty’ is a reward for threatening to be disloyal, for being a bad customer. The Thums-Up or Laphroaig loyalty is not only unlike this but I suspect opposite. I mean if you do start incentivising / paying a Thums-Up guy to drink Thums-Up, he’d hate it. He wants to be seen as the guy who loves his soft-drink and doesn’t compromise. He’d rather drink nothing than drink Coke or Pepsi. He’d hate to be seen as the guy who drinks Thums-Up since he gets a discount. 

The other big(-ger) issue is on withdrawing benefits. Benefits in perpetuity stop making a difference, and temporary benefits leave the consumer with withdrawal symptoms. We’ve all read about the day-care that started monies for parents who picked up their kids late. The percentage of parents coming late increased, and what was worse was when they got rid of the monetary penalty, the percentage increased further. So translating a monetary value back into an emotional value is impossible. 

Moral of the story - it’s tougher, but much much better to start creating emotional loyalty. Get that experience, that taste, that message right. Re-consider what your ‘loyalty’ consultant is telling you. Re-think before you go down that one-way street. I’m not saying points are bad, I’m just saying that it might not solve the loyalty problem. What’s common to Islam, Pink Floyd, Classic Milds, Manchester United, Old Monk and Royal Enfield is that they don’t offer points. And the day they do, they’re no longer on this list.

Post-script, maybe can be split up into another post, is a note on B2B. This is different, please do not confuse that with this. That’s a different ball-game altogether. Employees of a certain company will fly the most expensive airline as long as the company pays their bills, and never for personal trips unless they’re redeeming miles. Some other company will stick with sub-optimal bill plans of some telecom operator as long as one admin / facilities person is really happy with the operator for some reasons. Interesting topic, that one too, clearly not the ‘loyalty’ we’re talking about here, so maybe some other time on that....

How do you fight a suicide bomber?

There’s a term called asymmetric warfare that is commonly used for terrorism. One party in this war (the Government) has to secure all vulnerable points to win, while the other (the Terrorist) has to penetrate just one to win. Naturally, in most cases, the terrorist wins. It is just so much easier.

Of late, I’ve been wondering if we should worry about another similar, though not same, problem. How do you fight competition that wants to blow itself up? You come to the meeting armed with logic, profit and loss, analytics; while this other guy just parts his jacket to show you a string of bombs strapped to his belly. This kind of competition is not rational, or maybe is, but not in your conventional sense. You seek victory while he seeks martyrdom. You seek P&L while he seeks valuation. He’s happy showing a 200% rise in traffic even if he can’t sustain it beyond the year because he hopes to sell some stake within the year (aside, I know the offline guys are giggling here, guess how much traffic we can build at our stores if we sell at a loss :D). Worst, our suicide-bomber will spend till the consumers are so drunk on a cocktail of discounts, cash-on-delivery, coupons, no-questions-unlimited-returns and a variety of unknown ingredients that any rational person can’t persuade them to listen to anything sensible. 

What is worse is that your hope of sanity prevailing is faint. When this particular guy runs out of money, the next free-drinks guy walks in, and till there’s even one joker left in the pack, the suicide bombing continues. Even if someone does it sporadically, you’re done. 

Like the Uncle who walks into your house and spoils your kids on ice-cream, now the businesses are left dealing with irrational expectations of spoilt kids. eCommerce consumers would ideally like everything free, next they’d like to be paid to use eCommerce I guess. Soon we’ll have to send chauffeurs to their homes, with iPads encased in soft blue velvet for the users to tap - all for products with negative contributions. 

If Soft-Drink Giants can agree (unofficially, of course) on pricing for 200ml of soda, why can’t we eCommerce guys have some sanity?

The Escalator Problem

Is stepping on an escalator easy or tough? The answer depends on whether you’ve already been on one. Imagine someone who’s comfortable on escalators (e.g. me) explaining “how to step on an escalator” to someone who’s not (e.g. my Mom) and I’d probably say something like, “you just take a step forward, that’s all - nothing will happen, worst case, just grab the handrail and you will be fine”. and no prizes for guessing how effective this is. 

Doesn’t work.

This is the escalator problem. However, it is not just an escalator problem. I have seen teachers (“maths is easy”) explaining it thus to students (“maths is hard”), and I see it happen every day now on eCommerce. Let’s face it, most of eCommerce is built by techies and not retailers, not consumers. Hence you have this common occurrence of people in the room (“eCommerce is easy”) not being able to figure why the traffic (“eCommerce is tough”) isn’t converting. How many of us working in eCommerce companies have taken efforts to design a site that’s easiest for the first-timer to figure? 

As a first step, we should try and understand the first-timer better. Identifying him / her is easy, researching his / her state is easy, creating a simple flow for, and assisting the first transaction is also easy (remember Microsoft’s paper-clip assistant that us evolved users found irritating? guess what, a lot of newbies loved it). What is not easy is convincing the nerds around the table who’d think this isn’t cool. These guys think it is cool to tell you there are 247,000 results for your search (and ten ways to sort the results), free-shipping is available for some articles and not for others, cash-on-delivery has a minimum limit, T&Cs apply on all these and the personalization engine knows there’s no history for you but is still trying to do a good job and therefore throwing junk at you. Remember the movie-sequences with the waiter asking too many questions, and the customer ends up ordering nothing?