Stock Broking Industry: Some perspective on Pricing / Brokerage & Way Forward

We started our journey with Dhan last year on Muhurat Trading day of 2021 and it has been an exciting ride ever since. To be honest we have struggled a bit in our early days and it took a while for us to figure out our direction, approach and way forward. Even right now we are in our early days, Dhan has been in the market for just 10 months and we launched 5 platforms (Dhan app, Options Trading app, Dhan web, TradingView console and DhanHQ APIs), with that we have a long way to go.

The industry is nearly 150 years old and most of the largest 10 stock brokers who possibly are our biggest competitors have been in the business for more than a decade. The stock broking industry has witnessed major and also rapid changes through recent years – while one can classify most brokers as Traditional, Bank Operated or Discount Brokers, the reality is that everyone (almost 90% of industry) is into discount broking today.

Being a startup we get a lot of advice on disruption – and the common thread is to disrupt by pricing. Which means – either make the pricing or brokerage completely zero or introduce monthly subscription fees or one-time annual / life-time fees. We are well capitalised and with that comes more unsolicited advice – just make prices zero (read brokerage zero), capture market share and then raise more money from VCs. Having personally seen and tracked many of these tips, advices or hacks in the playbook – at Raise / Dhan, we are doing things very differently. We are very customer obsessed + massively focussed on a product & technology led growth, I have written briefly about that here.

But this post is not about our approach, it is largely on why we would not want to compete on pricing and possibly never will – and some perspective on the Stock Broking industry and way forward.

#0  We are building a business, not startup.
As a team, all of us at Dhan know from day zero that we are building a business. We are very serious not just about product, technology and customer service, but also about our spends, revenues & profitability. 

We have signed up for building a business, and not valuations like most startups. Invest-tech, while it is a hot vertical right now amongst fintechs with multiple plays in the startup ecosystem – there are 8-10 companies that are traded publicly on Indian stock markets. No business is valued at more than 20X of its revenues, so it’s best to stay grounded for and build a business, not valuations.

#1 Revenues justify a business, not valuations.
India, we now have many startup stories of ones that offered products & services for free or at zero cost, to growth hack themselves. Its to be always remembered that when you invite / acquire users with incentives or freebies – 9 out of 10 come for the incentives and not for the product or customer experience. In most cases when incentives when taken away, growth gets stalled, retention rates drop and customers churn. And when growth stalled, so did valuations and even if these startups have higher valuations, their revenues don’t justify that. 

#2 Stock Broking is a commodity business. True differentiation comes from Product, not with Pricing.
At Dhan one of our core beliefs is that the true disruption comes with product & innovation, not with pricing. Disruption with price is a much easier choice to make. Wealth / Invest tech specially is a super commodity business – be it Stock Broking, Mutual Funds or almost much of it. If you can’t differentiate on product & customer experience, there is very little that is left to do.

Personally for me as well, I am a big believer on this – for instance when I founded and led Paytm Money, it was the last player to get into the mutual funds business and in less than 18 months it got a market share of over 50% of all direct SIPs in MF industry and 18% of overall new investors added in a month. I do get feedback from many that it was for Paytm’s distribution and all, but to that argument most people forget that Paytm Money was an independent app & product from day 0. That aside with all distribution it has access to even today – Paytm Money now is reduced to a mere 5% market share in new SIPs and is nowhere considered a serious player in the industry. In my view, it is a perfect example of – when you lose the edge, you lose the game.

#3 Interoperability is coming soon, the edge will be Product, Tech and Customer Service.
The edge in Invest / Wealth tech now and also going forward will be product, technology and customer experience – and one of the reasons for this is how quickly this industry is going to become inter-operable. 

Today the underlying infrastructure has become interoperable – KYCs can be updated or fetched across KRAs, Exchanges trade most common stocks, stocks can be moved between Demat Accounts, Clearing Corporation, and so on – in sometime from now it will become super easy for anyone to switch Stock Broking platforms as well. I know it’s possible even now through services like Easiest, but it will become super simple and easy. With that happening, without a better and differentiated experience – there is no place for a newer or existing player to grow. We also learned this the hard way – when we launched in Nov 2021 our traction was minimal for the first 3 – 4 months as there was not much to differentiate, while in the last 4-6 months we have started moving in the right direction based on lots of customer feedback and shipping things faster. Yes, still in our early days. 

However, doing what we do – this does cost a thing; we are investing (or in startup terms burning) about $1Mn USD every month. So without deep pockets and investments in business, it will be difficult to make a cut for new players. We also have tracked a few new players who have launched with or after us – and they will also have to go through this journey and it’s tough! For existing stock broking businesses – be it traditional, bank owned or even fintechs, many are witnessing churn every month in their user-base.

One of my personal observations has been – you can’t grow exponentially in this business by spending lots of money on marketing, growth or customer acquisition. Yes, we do spend in bits and pieces, as much minimum we should but about 90% of our spends are in product, technology and customer experiences and just about 10% in pure-form of marketing. The decay in returns for every additional rupee spent in marketing kicks in fairly quickly.

To summarise this – for new players to grow you will have to innovate and for existing players to survive they will also have to innovate. Large existing distribution (for example in case of online players – Paytm, or large offline distribution) does not guarantee success in this vertical. Interoperability is a double edged sword for this invest or wealth tech businesses. 

#4 Unlike the US, in India investment platforms have fewer opportunities to make money.
India, isn’t a market like the US where stock brokers (like Robinhood) could make revenues from alternative means like sharing of order flow information with large market makers, or offer non-regulated crypto products to their investors. 

While Robinhood started as investing in stock markets, it was able to cash on the opportunity to let its users invest or trade in Crypto which later formed the majority of its revenues. This won’t be true for Indian startups – by now everyone knows how Indian regulators think of Crypto. For some time, let aside Crypto, Indian regulators are not even comfortable with regulated investment platforms offering non-regulated products like Digital Gold. With that, yes – there are only limited things one can do in India to make money as a business in the wealth & investment industry.

That said, some of the non-regulated businesses that are into Crypto, CFD, Stock Games, Social Trading etc are making plans to make entry in regulated businesses like distribution of Mutual Funds, Stock Broking, Advisory and likes. If they are permitted to license to enter and operate, it will be an interesting turn of events and open up lots of opportunities for regulated players like us.

#5 Everyone in India is now a discount broker.
Yes, this statement is true. There are many stock brokers that offer brokerage pricing less than the industry standard of INR 20, or with one-time / monthly plans and some even offer life-time free brokerage for free or few who say we charge money on profitable trades or likes. 

There are many things to note here –
a. By data, such broking platforms collectively contribute < 0.5% of accounts in India and they have been operating for a while now. It has not happened that everyone dumped their existing broking accounts and signed up for the free or cheaper alternatives. There are reasons why this didn’t happen. 
b. With aggressive pricing on zero brokerage, many such platforms outsource most of the things to do – app or web, technology, customer service, operations, product, infrastructure, devops, use off-the shelf products that are not customised to user’s needs, have not been tested for scale and more. And few of them outsource everything to 3rd party vendors and outsourced software developments or operations. 
c. Broking is a super complex product with thousands of moving pieces that have to work. After spending about 2 decades building many products myself – I can say that with confidence that it’s one of the most complicated fintech products. The day something goes wrong with the stock broking system – it has chances to wipe-out your profits. And you don’t want to be in a situation where your broking platform is not able to come back within a few minutes in market hours, let go for a few hours. The best of broking platforms go down for multiple reasons, there have been instances where exchanges do as well. So yes, you need a dedicated team, resources to ensure everything runs smoothly.
d. Most of the serious traders who we meet, are more focussed on their trades, positions & trade setups v/s brokerage. Their expectation is a super reliable platform, which is the need of most traders – but with platforms that don’t make money – won’t have money to invest and build one. This is one complex circle. 
e. Many first time traders at times even consider charges applied by STT, Exchanges, SEBI, DP, Taxes as ones by brokers. For clarity – these are outside of brokerage and will be there across all broking platforms.

#6 The notion of Float Income or Market Making / Development Fees.
One of the biggest justifications that I have heard for zero / lower brokerages is – brokers can make money from exchanges for higher volumes in trading at scale and float income. Yes, this is true – some large brokers do make money for higher trading volumes. 

For that to play out, brokers need to become significantly large and there have been broker platforms for years with lower or no fees, they are not there yet. Also it has to be noted that such rebates for high volumes are passed by exchanges for market development. It has to be understood that NSE is an exchange / market intermediary and also a private company that is expected to IPO in the coming years. Shareholders would want to increase profitability for NSE, chances are these market development fees can be reduced slightly or significantly or can also be removed completely. NSE, is the largest derivative exchange in the world – and now for 3 consecutive years. In my personal opinion – it doesn’t really need further market development, and the current market can sustain volumes on the NSE without these rebates. 

With respect to float income – now regulations like mandatory settlement of non-trading accounts and quarterly accounts takes out most of the float income that was an opportunity earlier. Additionally there are pressures with higher interest rates and increased working capital requirements, mentioned ahead in this post. 

#7 Market size, client acquisition & pricing trends.
What’s happening in the Stock Broking industry that many end up misinterpreting – about market size, pricing and changes.

Well there is lot honestly, and every day we learn something new – some of the examples that I can share are: 
a. For some odd reasons – size of Stock Broker is considered by how many clients they have. While according to depositories there are now more than 100 Mn demat accounts, the active demat accounts will be about one-third or somewhere like 30-35 Mn. Active daily traders at the max will be 1.5-2 Mn. 
b. User acquisition or client acquisition was highly gamified, it still is. You will see a significant churn of users after 12 months for all acquisition that is done incorrectly, the retention of these channels or such behavior is < 10% – so 9 out of 10 users will become inactive.
c. There are 3-4 different cohorts that India invest-tech has – about 1.5-2 Mn intraday traders, about 15-20 Mn investors who have been in markets more than 2 years and another 15-20 Mn users who have entered in markets post Covid-19.
d. Innovation in Traders product is super difficult to build (we are focussed here), and plain Investor products are just too many – as again, it’s a commodity business.
e. It’s already happening, few brokers who were charging INR 10 per trade have moved to INR 15 / 20 in recent years. Few are charging INR 50 square-off charges to ensure there are no loads on order management systems while markets close, and few are charging INR 40 for exception trades when broker is funding margin obligations.
f. Outside of just 4-5 brokers including Dhan, today almost everyone including fintechs charges for Delivery based trades. There may be a situation where all stock brokers who are serious about building a sustainable business will start charging for delivery trades. 

While everything above makes a point, it is also true that the best days of Indian Stock Broking industry are yet to come. Some wise words of Rakesh Jhunjhunwala sir here.

#8 Capital Requirements for Stock Brokers are expected to go up.
Capital Requirements for running a Stock Broking business going up is an understatement, because they will go up dramatically. While through the post I have focussed a lot on investments in product & technology alone, there are two more additional things that a Stock Broker has to consider – Cost of Compliance & Cost of running Financial Operations. 

Compliance requirements alone have almost resulted in many small & mid-sized stock brokers to leave the business and the working capital requirements for Stock Brokers are intense, for starters one has to understand the changes put forward by SEBI with respect to segregation and monitoring of cash, collaterals and margins. Our friends at Zerodha has done a detailed post about this here.

Outside of the above, there are capital requirements for connectivity with exchanges, technology infrastructure, data, cost of onboarding, and many more – not factoring in costs of people & customer acquisition. We can keep going on and on, but just for the note: Dhan despite still being a new stock broking platform has carved out significantly higher capital for such requirements just to ensure that our users are able to invest & trade seamlessly. 

#9 All that is fine, but why doesn’t Dhan offer Zero Brokerage while few others are doing it?
Few reasons, our thought process with Dhan is that we will focus on product & customer experience. 
a. Currently, (and with all data) I can say that broking platforms that are free or monthly plans make up less than <0.5% of industry. We may review our position on this later, but for now our position is we stay where > 80% industry is or what the industry benchmark is.
b. It’s easy to compete on pricing while it is extremely difficult to compete on better product experience. Business & sales minds will compete on what’s easier to do in least time and lowest effort – which is pricing. Product & technology minds will compete on what matters the most to them and their users – the experience. 
c. Just by simple common sense, it is important that your stockbroker makes money. We have enough examples in India of many instances where brokers shut the shop for whatever reasons and left their customers high & dry. 

Concluding Notes
To reiterate and reemphasise again – the stock broking industry in India is very different from one across the globe. We have a very strong and active regulator when it comes to capital markets.

With increased competition in the industry, limited market size and the current and upcoming costs/capital requirements for running a stock broking platform for both – new or existing players it will be very difficult for anyone to offer stock broking platforms at free or zero brokerage. Some may just do it initially to gain traction or build buzz, but will eventually miss out on creating an edge in product, technology and customer service – which is must for any Invest / Wealth tech startup – where everything outside ‘Trust’ is a commodity.

Bit background – one of the reasons why most of the regulatory changes have come by in the Stock Broking business in India is because of a few bad apples – cases where brokers shut shop and left their customers high & dry. While these are few and exception cases, unfortunately that’s how the regulations get formed and shape the future of a regulated industry.

Raising The Bar with Raise Financial Services

For most of us, 2020 was an eventful year for everyone in a way. Many memories from the previous year will continue to be with us for the rest of our lives. Personally it wasn’t a great year for me, many unexpected setbacks, discoveries, experiences, pushed me back to where I was a few years back – nowhere. 

Many people who know me also know that I am a big believer in this – Always believe that something wonderful is about to happen 🙂

2021 is a year of hope, and personally for me a year of new beginnings. This time I am not starting from scratch, I am starting from my experiences. I have done it before, and I aim to do it again – raise the bar! This time even higher with Raise Financial Services

Financial services in India are in its early stages of adoption and expected to witness a massive change – be it growth, products, service offerings, distribution or expectations from the consumers. There is a large set of startups that are making financial services accessible to millions of Indians, bringing them to Bharat by taking them to tier-3, tier-4 towns and beyond. 

While all this is happening at a much faster rate along with driving accessibility and adoption, there is also a large set of Indians today who are financially aware and financially literate; who value their time, product experience & quality of service much more – residing in the metros, cities & tier-1 & 2 towns that are either looking for a differentiated experience or should be provided with one. We believe that these users in India require much better / smarter experience with financial products and services than the options that are in the market today. Raise will offer consumer products & services that cater to these users directly, and will offer the same technology & infrastructure to partners in the startup ecosystem willing to take the experience to the rest of the market. 

At Raise – we are aiming for zero to one in financial services. We have no legacy, building it all ground up – people (in this journey), culture (that resonates and binds us together), products (that our customers value), (form lasting relationships with) partners, (a fundamentally strong) business and a brand (that users trust). We are building technology-led consumer products & infrastructure services to serve Indians with financial services (across financing, insurance, investments, payments and wealth). Earning money is already hard, managing money should not be. We will launch a series of consumer products, expecting the first one to be available in the second half of this year. 

Starting up is easy, entrepreneurship is not, I have personally realised this over the years. And I am humbled to find support & guidance in this journey from founders, serial entrepreneurs, operators and friends who I have personally admired and look up to.

My gratitude towards founders & friends who have invested in Raise Financial Services, this includes – Kunal Shah (Cred, Freecharge), Kalyan Krishnamurthi (Flipkart), Amod Malviya & Sujeet Kumar (Udaan), Sameer Nigam & Rahul Chari (PhonePe), Amrish Rau (Pine Labs, Citrus Pay), Sandeep Tandon (Freecharge), Anupam Mittal (Shaadi.com, People Group), Jitendra Gupta (Jupiter, Citrus Pay), Girish Mathrubootham (Freshworks), Nischal Shetty (WazirX, Crowdfire), Kuldeep Dhankar (Clevertap, Microsoft, Nokia), Shiladitya Mukhopadhyaya (Clevertap), Sreevatsa Prabhakar (Servify), Uday Sodhi (Kurate, Sony Digital, Rediff), Amit Bhor (Walnut, Capital Float), Shachin Bharadwaj (Markk, TastyKhana), Anuj Tandon (Yoozoo), Manav Raheja (J Sagar) and other family and friends. Some names whom I look upto are missing in this list, all of them have assured me they are always a call away in this journey. 

With this, I would also like to announce our first round of financing in Raise Financial Services, led by Mirae Asset Venture Investments (their first investment from Mirae Asset’s India focussed early stage fund), with participation from Multi-Act Private Equity, Blume Ventures (via their Founder’s Fund) and US based early-stage investor Social Leverage (led by Howard Lindzon) who made their first investment in India.

Alongside the investors, I have also invested in my personal capacity in this investment round – all in!

Being a little practical as some folks know I am, I have assured all stakeholders in Raise Financial Services of 3 things that will be core to everything we do at Raise –

  • ensure our customers are happy & we deliver value above their expectations 
  • build exceptionally better products
  • build a organisation that is based on trust 

With that note, we are building our team from zero. We are hiring for team members in roles across leadership (15-20 yrs+), senior (10-14 yrs+), mid (4-8 yrs+) and early stage (1-4 yrs+) in Engineering, Product, Design, Growth, Customer Service & Operations in our business lines (Financing, Insurance, Investments, Payments, Wealth). A detailed post on our opportunities at Raise across business verticals and culture we are building will be up soon.

We will be primarily based in Mumbai (and connected remotely), if you are someone who wants to make a difference, please me an email with details on pj@raiseholding.co or visit www.raiseholding.co  

Stay updated with Raise
on web: www.raiseholding.co
on twitter: @RaiseTheBarHQ
on blog: Raise The Bar
on linkedin: Raise Financial Services

Raise the bar
pj

The App World is Flat!

The App World is Flat

With Apps / Mobile growth, things are changing at a fast pace in the eCommerce / mCommerce space in India & around the world; for purpose of simplicity – calling it eCommerce without bothering about on which platform the transaction happens on.

The world is fast discovering web on smartphones, gets on-boarded to services like WhatsApp & Facebook, doing their first online transactions on Mobile Recharge services like FreeCharge & Paytm, and evolving to eCommerce, On-Demand Services & Travel. Unlike the previous predictions made in 2011/2012 – which were very company specific, this time the focus is largely around the trends in the Mobile App world.

 

The (App) World is Flat!

In old days of Internet Marketing, there were strategies to acquire users / customers by categories through multiple marketing channels – Adwords, SEO, Email, Display advertising, etc

The App World is flat. Be it large commerce startups like Flipkart, Snapdeal, Ola, Uber or the ones that were launched yesterday in any space, the common ground for everyone to get started today is exactly the same – getting the App Installed. This is disruptive in many ways – if someone has $1 Mn to spend on user acquisition – no matter at what stage / scale a startup is, the cost to get the app installed now remains the more or less similar for everyone.

As other core functions of eCommerce like Logistics, Merchants, Payments get more organised & commoditised; and User Acquisition starts with getting the app installed – a new ecommerce marketplace startup that launches today with $5 Mn Series A investment has much better chance to succeed than ever before or give existing large players good competition.

That puts everything in a interesting perspective – As cost is exactly the same, what are the differentiators? Its the core value proposition of the startup – the one communicated before user installs the app and one actually delivered. This change makes every startup focus a lot on building a great product and an awesome consumer experience than ever before!

 

Discovery, Marketing & Product Experiences:

In the ‘web’ world, Google allowed marketers to reach ‘users with intent’ through Adwords (or SEO) and so did Facebook to reach a certain demographic of users on its platform. This has changed fast. For high growth mobile startups that are scaling up in India – Google & Facebook’s share of marketing spends is shrinking when compared to others.

App Installs plays a level playing field in User Acquisition today; networks & affiliates are able to drive App Installs at better volumes with very competitive rates when compared to Google, Facebook or Twitter. Discounts, cashbacks & user driven growth form new means of acquiring users at a exponential rate. Share of wallet from marketing spends for Google & Facebook is going down.

Any consumer app like Flipkart / Snapdeal or Google / Facebook can now read multiple signals off user’s phones – apps, locations, contacts, texts messages, and so on and redefine how users are targeted for advertising. Flipkart’s plans to build online advertising business are well known; could be huge opportunity if kept independent.

Mobile App capabilities can also translate into building relevant product experiences for end users. For example – a Cleartrip trying optimise its Hotel Booking Offering for users when it reads a Flight Booking SMS from Airline website on user’s phone; Housing showing financing options for house from HDFC knowing that the user has the HDFC Bank App installed on phone; or Flipkart showcasing user products based on how quickly they can be delivered; of a Finance App recommending user investment options based on his Account Balance and so on. In one of my recent conversations this came up – today a user’s mobile phone location is his delivery address.

Till now, Ecommerce products today have just transformed from web to app, not essentially unlocked the value the mobile platform brings. If existing players don’t innovate, some new startups will. Focus on building awesome products.

 

App Discovery will evolve:

App Discovery and Install today act as the top of the funnel for every User Acquisition effort. Visiting a App Store to download any app is a redundant step; its not required if app is discovered through other channels. Expect Google Play to take the Install button (or trigger) outside the Google Play Store and let users install apps without explicitly visiting the Play Store in background. If that happens, expect APIs that will trigger app installs for publishers & advertisers making user acquisition & advertising dollars more efficient. Yes – that possibly kills ASO, App Discovery as we know of today on App Store, and Google’s Adwords product for Play Store.

Mobile Apps ecosystem is cursed with high uninstall rates. Users & Marketers would want to move towards the philosophy – you acquire user only once, does not matter through which channel – App Store or Browsers. Users would want the product / service on-demand on every platform – Smartphone or Desktop Browser whenever they want without hassles of user / account management. Expect browsers integrations & enhanced capabilities on Chrome with App Stores (Google Play to start with) that enables users to access the Apps installed on their smartphones on desktop or any other platforms without having to log-in separately.

App Stores like Google Play or Apple iTunes will also evolve from their current stage of ‘enabling discovery of mobile apps’ to ‘authentication of user credentials’. App Stores will retain user information – personal details, payment info (saved cards or wallet), delivery details and so on to transform into 1-click authentication platforms. Example – Users while shopping on Snapdeal, Flipkart or Amazon Mobile App can do 1-click checkout with App Store authentication that gives the Ecommerce service all user information w/t payment information data that is required for Ecommerce sites to fulfil the transaction.

This is something similar to what Facebook did earlier where Apps & Games on Facebook Platform received user information on Login-with-Facebook. Its still early days for Mobile App Stores, they will evolve in big way going forward.

Note: Google is already working in this direction to distribute Install action with App Invites (Beta)

Engagement v/s Instant Gratification:

As consumers get habituated to transactional & on-demand services – social products & social commerce products (like Wishberg – my previous startup) or any other would find it extremely difficult now to scale up or grow without providing the instant gratification experience.

Existing large companies in this space are picking up clues and started to move towards a transactional experience with Buy buttons. To ecommerce companies, working with large networks for such 1-click transaction experiences is a big win.

Expect focus of large social networks (Facebook, Twitter, Snapchat, etc) & discovery channels (Google, Pinterest, etc) to move from top of the funnel (i.e. product discovery or media spends) to bottom of the funnel (enabling transactions or margins). They are currently driving Mobile Installs or Traffic for their current advertisers, going forward may be looking at driving customers. Such products or services know more about users than anyone else.

Products like Facebook, Google will retain customer information (delivery, location & saved card details) and move towards enabling the one-touch buy experience.

 

Frequency is all that matters now!

This topic itself calls for a longish post (may be for some other time), for now the point to note is that Mobile App makes perfect use-case for a high frequency consumer behaviour. There are already many studies that have concluded that consumers prefer to have only few apps on their smartphones – ones that are frequently used.

Apps like WhatsApp, Facebook, Twitter, Snapchat, Instagram etc which see extremely high engagement (and frequency) are less likely to be uninstalled by user while an app that is not used for few weeks (or even days) is very likely to get uninstalled. Ecommerce products would not be able to match levels of usage demonstrated by Social Apps.

Transactional apps that have a daily / weekly use case like Cabs, Food Delivery, Grocery, etc would see better usage compared to others. As that gets discovered, expect Ecommerce apps to expand into multiple categories / segments that could be completely diverse – Paytm moving to eCommerce or Travel, Ola moving to Food Delivery and so on to drive frequent usage.

This strategy works well with two big motives – increases app usage as users have more reasons to open & engage with the app and also adds up to their topline. But for vertical commerce players like Home Repairs, Home Furnishing, Jewellery, Footwear or others – surviving in App World with infrequent usage will be extremely challenging.

Today, Success or Failure of any startup is just an uninstall away!

 

OnDemand Services may disrupt eCommerce forever.

In past few months, many on-demand services have raised massive Series A rounds, the ones focussing on infrequent use-cases like Home Repairs, etc will start struggling with user retention and other ones who are driving high frequency use-cases like groceries, food delivery will start bleeding because of poor unit economics.

Ecommerce today as we know it has its own challenges – relying on third party logistics, depending on unverified sellers & products, deep discounting of products to drive volumes and their attempts to move from cash on delivery to cashless transactions.

On other hand, offline retailers in India are up in arms against online players but have little competition to offer. If OnDemand services like Groffers, Swiggy and others in this on-demand space started delivering users Ecommerce products partnering with your offline retail giants and local stores – eCommerce changes in this country forever.

No more waiting for even for 24-48 hours, the product that you want, from the trusted store of your choice, in the payment mode of your choice, in your hand – in next 30 minutes. The Amazon Prime or Flipkart First experience delivered to you, every time. This changes everything we have learned or known about ‘traditional ecommerce’.

Concluding Notes

Mobile app & growth story is just getting started. Its too early to declare winners because the App World is Flat!

14 Ways to Emotionally Engage users with your Product

Most conversations with entrepreneurs and product managers who want drive engagement and bring viral features to their products are answered as ‘We will gamify our product through features’. This post is about clearing some nuisance around the topic of gamification in products.

Gamification has nothing to do with building features. In fact, even Product Management has nothing to do with building features. It is not a rocket science, product managers usually figure out the ‘building features’ part of it with time and experience.

“People don’t buy products. They buy better versions of Themselves.”

So how do you ‘connect’ users with your product? Not through features, not through gamification, but by triggering certain emotions with your users.

Gamification = Getting People Emotionally Engaged with Product.

Below are some of the most powerful emotions people have along with few examples that will help you figure out how get users to emotionally engaged with your product / startup.
PS: The number of emotions could be more, I have referred to only 14 here.

1. Expression

Expression – People love to express themselves. Enable it.

Products that allow users to express themselves:

  1. Tumblr
  2. Twitter
  3. Facebook
  4. Medium

Products that allow users to express themselves anonymously:

  1. Secret
  2. Whisper
  3. FML

Tip: ‘Expression’ is used as a core use-case in product.

2. Acknowledgment

Acknowledgment: People love getting acknowledged. With interactions & endorsements.

Help people getting acknowledged. They love it!

  1. LinkedIn – Recommendations & Endorsements are social acknowledgments which users love.
  2. Twitter – Retweets and Replies on tweets are great way to be acknowledged.
  3. Facebook – Likes & Comments are acknowledgments to status messages users shares
  4. Quora – Upvotes & Comments is acknowledgment to your answers.
  5. Tumblr – Love & Reposts are acknowledgments to you posts.

Tip: ‘Acknowledgments’ lead to ‘User Notifications’ which further lead to Engagement. Always build features that enable acknowledgments in products that use ‘expression’ as use-case in product.

3. Exclusivity

Exclusivity or Privilege: People love being privileged. Make it exclusive.

Make it exclusive. No one likes the feeling of being left out.

  1. Gmail – Gmail invites were exclusive to few users. People were ready to buy invites off Ebay.
  2. Quora – Only existing users can invite new users.
  3. Pinterest – Users need to apply for access. After few days they were granted it.
  4. Mailbox – Users were in queue to get access to the app.

Tip: ‘Exclusivity’ works best for initial referral program for driving sign-ups.

4. Being Cool

Being Cool: People want to be Cool. People want others to know they are Cool.

Make your users look cool when they share your product.

  1. Frontback – Share a snap along with a selfie. Lets users be cool.
  2. Vine – Short cool creative videos.

Tip: ‘Being Cool’ will help you drive sharing on Social Networks.

5. Nostalgia

Nostalgia: People have memories. Sweet Memories. Remind them about it.

Remind users about some of the best times they have experienced.

  1. Timehop – Complete product is built around Nostalgia. Reminds users of special moments from the past.
  2. Facebook – 2014: Year in Review videos
  3. Twitter – 8th Anniversary: Which was your first tweet.

Tip: ‘Nostalgia’ helps get back old users and revives their interest. Can be only used once in a year on special occasions.

6. Curiosity

Curiosity: People want to know. They fear on losing out. Keep them curious.

Keep users curious. Keep them looking for more.

  1. LinkedIn – The feature ‘who viewed my profile’ tries to keep its users curious, and engaged.
  2. Twitter – Catching up with Timeline, mostly is the fear of losing out.
  3. BuzzFeed / UpWorthy / ViralNova – All try to trigger curiosity of readers through their post titles.

Tip: ‘Curiosity’ in products helps you increase repeat usage.

7. Competitiveness

Competitiveness: People love to compete with others. Creates a sense of achievement. Make it happen.

Drive users to compete with friends / others.

  1. Foursquare – The leaderboards between Friends was a great way 4SQ ensured people kept checking in.
  2. Quora – The feeling of ‘I have a better answer’ or ‘I can answer this question in a better way’ keeps driving engagement.
  3. Fitbit – Leaderboard that tracks your fitness with friends.
  4. Hackrank – Programming challenges.

Tip: ‘Competitiveness’ leads to greater engagement. Though its novelty in private group is lost after some time.

8. Stay Organized

Stay Organized: People love to organize things. Organize everything. Make it happen

Give users stuff that they want to sort / organize. Keep them busy.

  1. Pinterest – Lets you organize pins / interests/ stuff you love.
  2. Evernote – Organize all your notes.
  3. Wanelo – Organize fashion stuff. Ask girls how much they love doing this.
  4. Calendar / Contacts – They are always in a mess. Its a never-ending struggle to organize this. Google Contacts & Google Calendar help you keep them in place.

Tip: ‘Staying Organized’ helps your users spend more time in your product. It soon becomes a habit.

9. Importance

Importance: People love to feel important. Its about them. Their identity. They want to show off.

Make your users feel important about themselves.

  1. LinkedIn – My professional achievements., that is how a user sees it.
  2. Twitter – My views. My opinions., that is how a user tweets.
  3. FourSquare – Checkin is telling the world – I am here.
  4. About.me – This is me. This is my identity.

Tip: ‘Importance’, everyone wants to be important. The product usually ends up being shared, talked about – and results in others wanting to do the same.

10. Authority

Authority: People love to display their authority on a topic. Give them opportunity to do that.

Help create authority for users. Users want to be acknowledged as influencers by others.

  1. Quora – Authority by Topics. Asked to Answer is being authoritative.
  2. StackExchange – For programmers.
  3. HackerOne – For hackers.
  4. Hacker News – For Geeks.

Tip: ‘Authority’ is the importance others in a community or forum assigns to select users. Users want to be acknowledged as being authoritative, it helps increasing engagement and spending time on the product.

11. Visual

Visual: People love stunning visuals. Its a powerful emotion.

Visuals create impact in product. Don’t miss on it.

  1. Instagram – Personal Emotions.
  2. Flickr – Professional Emotions (yes unfortunately for Flickr).
  3. 500px – Photography community.

Tip: ‘Visual’ is a substitute to all unsaid emotions. Use well when your product is build around pictures and photographs.

12. Freebies

Freebies: People love Freebies. Badges. Credits. It all works.

Freebies work. Make use of them correctly.

  1. Quora – Credits users get when other upvote their answers.
  2. FourSquare – Badges for Check-in.
  3. Uber – Credits to Refer Friends.
  4. Facebook / Twitter / Google – Regularly use Advertising Credits to on-board new advertisers.

Tip: ‘Freebies’ – use it only for one purpose. Can be used for activations, sharing or driving engagement. Use it for one use-case that can measured.

13. Money

Money: People want to make Money. People want to receive Money.

Money is one of the strongest emotions. Portray it positively.

  1. Google Adsense – Opportunity for bloggers, individuals, publishers to earn money online.
  2. PayPal – Receive money from anyone.
  3. Elance – Get paid for free-time work.
  4. Kickstarter – Raise money for your projects.
  5. Gumroad – Make money by selling digital goods.

Tip: ‘Money’ – Receiving Money / Making Money is a positive emotion. Giving away is negative.

14. Sex

Sex: People want Companions. People want Dates. People want Sex.

Keep it simple, keep it safe.

  1. Tinder – Helps you find date.
  2. Match.com – Helps you find date.
  3. OkCupid – Helps you find date.

Tip: ‘Sex’ – It is more about selling the Hope. Keep the product simple. Don’t over engineer.

Concluding Notes:

When you build any feature, try to trigger a emotional engagement with user. If you are in early stage of your product development or in process of making your product roadmap, spent some time with this methodology – 15 Steps Towards Building a Great Product.

When it comes to including emotions in your product, ensure the following:

  1. Use max 2-3 emotions per product.
  2. Gamification is not about building features. It is about emotionally engaging a user.
  3. Don’t exploit users. Be subtle. Be good.

Good Product Manager v/s Bad Product Manager

I recently read – ‘The Hard Thing About Hard Things‘ by Ben Horowitz. This book is a practical guide for Founders & CEOs about running a business, handling tough situations, a must read! 

Ben Horowitz is currently the co-founder and general partner of Andreessen Horowitz, a Silicon Valley-based venture capital firm. Previously he was co-founder and CEO of Opsware which was acquired by HP for $1.6 billion in 2007. At Netscape, Ben was Director of Product Management where he share this note with his team.

The note is from Ben’s book where he writes about difference between a Good Product Manager and Bad Product Manager. I believe this is a amazing guide on what Product Managers should focus on. 

————————————————————————————————————————

Good product managers know the market, the product, the product line and the competition extremely well and operate from a strong basis of knowledge and confidence. A good product manager is the CEO of the product. Good product managers take full responsibility and measure themselves in terms of the success of the product.

They are responsible for right product/right time and all that entails. A good product manager knows the context going in (the company, our revenue funding, competition, etc.), and they take responsibility for devising and executing a winning plan (no excuses).

Bad product managers have lots of excuses. Not enough funding, the engineering manager is an idiot, Microsoft has 10 times as many engineers working on it, I’m overworked, I don’t get enough direction. Our CEO doesn’t make these kinds of excuses and neither should the CEO of a product.

Good product managers don’t get all of their time sucked up by the various organizations that must work together to deliver right product right time. They don’t take all the product team minutes, they don’t project manage the various functions; they are not gophers for engineering. They are not part of the product team; they manage the product team. Engineering teams don’t consider Good Product Managers a “marketing resource.” Good product managers are the marketing counterparts of the engineering manager.

Good product managers crisply define the target, the “what” (as opposed to the “how”) and manage the delivery of the “what.” Bad product managers feel best about themselves when they figure out “how”. Good product managers communicate crisply to engineering in writing as well as verbally. Good product managers don’t give direction informally. Good product managers gather information informally.

Good product managers create collateral, FAQs, presentations, and white papers that can be leveraged. Bad product managers complain that they spend all day answering questions for the sales force and are swamped. Good product managers anticipate the serious product flaws and build real solutions. Bad product managers put out fires all day.

Good product managers take written positions on important issues (competitive silver bullets, tough architectural choices, tough product decisions, markets to attack or yield). Bad product managers voice their opinion verbally and lament that the “powers that be” won’t let it happen. Once bad product managers fail, they point out that they predicted they would fail.

Good product managers focus the team on revenue and customers. Bad product managers focus team on how many features Microsoft is building. Good product managers define good products that can be executed with a strong effort. Bad product managers define good products that can’t be executed or let engineering build whatever they want (i.e. solve the hardest problem).

Good product managers think in terms of delivering superior value to the market place during inbound planning and achieving market share and revenue goals during outbound. Bad product managers get very confused about the differences amongst
delivering value, matching competitive features, pricing, and ubiquity. Good product managers decompose problems. Bad product managers combine all problems into one.

Good product managers think about the story they want written by the press. Bad product managers think about covering every feature and being really technically accurate with the press. Good product managers ask the press questions. Bad product managers answer any press question. Good product managers assume press and analyst people are really smart. Bad product managers assume that press and analysts are dumb because they don’t understand the difference between “push” and “simulated push.”

Good product managers err on the side of clarity vs. explaining the obvious. Bad product managers never explain the obvious. Good product managers define their job and their success. Bad product managers constantly want to be told what to do.

Good product managers send their status reports in on time every week, because they are disciplined. Bad product managers forget to send in their status reports on time, because they don’t value discipline.

————————————————————————————————————–

This article is posted on this blog with permission. You can download the original PDF file shared by Ben Horowitz.

“The Hard Things About Hard Things” by Ben Horowitz is a must read book for Founders & CEOs. Buy it from Amazon.com (Worldwide) or Flipkart (India).

Building The Next Disruptive Startup

The most disruptive word in Startup Ecosystem is ‘disruption’. Its used / abused / misused by almost everyone – entrepreneurs, investors, advisors, mentors, press and so on.

Founders love to call their product / startup as disruptive and so do investors who keep saying they are looking for disruptive ideas, both have very limited explanation of what disruptive startup actually means for them or they run out of examples or ideas when you ask them what exactly is disruptive about it. Most of the answers are – ‘If this becomes big, it could disrupt the market’.

Disruption

This is a random post, not intended to draw any conclusion or summary but sharing few things I have learned about disruptive startups and ideas. Probably also on how to get ideas to build your next big ‘disruptive’ start-up.

Circa 2008

Early 2008, I moved in my new role at Rediff as Product Head for Ecommerce. This was still the time when Ecommerce was extremely small in India, concentrated with some players – Rediff, Indiatimes, Ebay and couple of others; and the other side of Ecommerce was Travel which was growing steadily. At Rediff, we had 3 ecommerce products – Rediff Shopping, Rediff Books and Rediff Auctions (We shut down auctions soon after).

These were the early days of Ecommerce and to say we were not innovating then would be wrong. To bring up more users to Ecommerce, COD (Cash On Delivery) was introduced. To expand reach beyond (limited) online audience, experiments like Reader’s Offers (in Newspapers) were attempted by many. We introduced real-time customer support calls to users who dropped out during checkouts and assisted conversions via IVRs. Debit Cards were integrated. Top 20% products in top 20 cities were delivered in less than 3 days. Back then, all major players were marketplaces – that involved a lot of co-ordination with vendors / sellers for inventory, logistics, deals, order status and operations.

Few days into my new role a colleague mentioned to me about a new service – Flipkart. It was selling books. I loved what I had seen on Flipkart. The product was good if not best, but for a site that was launched just few months back – it did all that it was supposed to do perfectly with attention to detail. Prices were comparable if not the best; what blew my mind was the shipping times – awesome 4-6 days of delivery time.

In 2008, books sold on any ecommerce service took 6-10 days to dispatch (most of them had common vendors) and books that required procurement from US took 25 days on a minimum side (and customers used to wait!). Flipkart was quickly dismissed as a niche website, and books contributed to a smaller percentage of overall business. In fact there was a time that competition was more worried about Futurebazaar for its blistering marketing budget (oh, btw its in dead-pool now).

By end of 2009 I moved out of Rediff. And over time I started ordering books (and then other products) much frequently on Flipkart and was never disappointed by its service. I knew friends and colleagues were admiring loving it too. Flipkart kept growing and so did the word of mouth for them. Flipkart was rejected not just by many Investors, but also by its competitors. Over a period of time, all its competitors lost out on Flipkart as it emerged to be the face of Ecommerce in India.

So what did Flipkart do differently to disrupt Ecommerce? Instead of marketplace approach, it started off as a self-managed service. It picked up Books – the most under-served category then (under-served, but large – in 2008 Rediff Books had 1.2 Million Titles listed). It used most simplest channel for $0 marketing – Search Engine Optimization. Adding a million books to Google Index (this is in 2008) in a category that had less than 10 players helped them rank up well. And they rarely did goof up on delivery, dispatch or customer experience.

That was Flipkart. And the story about ‘disrupting a industry’ by a startup or underdog remains similar across the world. Startups / Entrepreneurs don’t disrupt a industry or vertical by ‘launching just another product’ in existing market. There needs to be a remarkably different approach, addressing a large market which is loved (or appreciated) by its initial users / customers.

So how do you get ideas for a disruptive startup?

Another example in Indian context is Housing.com – picked up real estate as a vertical that had more or less no differentiation and existing players were hardly innovating on product and consumer experience over years. Everyone was a copy-paste product of everyone else. Housing launched with a better product from day one for discovering real estate properties, focused on verified data, authentic photos and awesome user experience. While its competitors were serving advertisers, Housing started serving users. It is still in its initial days, but I am hoping Housing.com will become big someday (PS: its product is now bit more complex that it was in the initial days).

Coming back, a existing market / vertical, a large category, that has not changed for a long time are prefect for disrupting with a product that brings a fresh approach to it. While existing players keep thinking that their ‘yet another feature’ will kill this new startup that is making a dent, unfortunately this never happens. ‘Yet another product’ in a large market does not really disrupt a industry.

This probably is true for almost every big startup or product that is out there today.

  • AWS for Hosting:
    Huge market, frustrating times to set up & costly infrastructure, disrupted by on-demand computing and pay-as-you go.
  • Gmail for Email:
    Huge market, competition offering 4-10 MB inboxes, disrupted by 1 GB mailbox and of-course better product.
  • Square for Offline Payments:
    Huge offline payments market, under-served, simple product to accept payments with a phone.
  • Dropbox for Syncing Files:
    Huge need; users mailed files to save on multiple PCs or used USB drives. Simple & fast web storage.
  • Stripe for Online Payments:
    Huge need; developers where busy doing complex PG integrations. Simple to use payment APIs.
  • Uber for Transport:
    Huge market, demand > supply; Under-served market. Cool product that made the customer look smart.
  • … and so many more I can think of…

So where do you go looking for big markets to disrupt and build large businesses?

 

1. Look for market segments that have not changed for years.

In India context, Flipkart and Housing mentioned above fit in this example. We are (probably) done with phase of getting most of the products / services from offline world to online. Some of the verticals are still broken despite being online for so many years.

Examples that come to my mind are – Travel (Vacations – it is still an broken and under-served market), Matrimony (Nothing has changed in this vertical for more than 10 yrs, however people and culture has changed a lot), Classifieds (Largely served by few players and the model hasn’t evolved much) and so on.

Some markets are so big that there is room for multiple big players – Fashion being one of them. Some of the verticals just came online (Online Grocery & Vegetables) but are struggling to grow, maybe they need to approach differently.

One of my favorite examples here is Stripe and how it differentiated itself from others in Payment Gateway vertical. Or even Quora that came up in QnA space that had sleeping products like Yahoo! Answers or Answers.com

 

2. Look for large products that are ageing fast.

Look for large products that are ageing fast and its early users are complaining or it fails to provide value to them.

Some of the examples, LinkedIn (The product has not changed much over years, its early adopters are not using it as they did earlier or now they have other ways to connect with them) or Facebook (Its evident that the engagement levels are dropping and instant messaging has taken over Social Networking). Twitter (Yes, Twitter is ageing. For new users its complex to use, to understand).

More directions – Facebook was default private product; then came Twitter that was default public product. There is lot of opportunity for both products to reverse privacy. For example, Twitter is a public identity to many people, its private aspect ie. direct messaging is massively broken. Forget private product, even Twitter as a public conversation platform is also broken or difficult to explain to new users. Twitter itself is experimenting with removing @ replies to appeal to new users (while existing users will miss the feature most).

 

3. Look for large products that serve multiple purposes.

Look for large products that serve multiple purposes. Perfect one of their use-cases.

Best example here is Facebook. Large products like Facebook serve(d) multiple purpose – Status Updates, Messaging, Photos, Staying in touch with friends, etc. WhatsApp took up Instant Messaging, Instagram took up photos, perfected the use case and in turn made a big dent with their products. Since usage on a large product already validates the market need, build something that makes it work for users.

One of my favorite examples here is Vine how it figured out a niche for itself in the online videos vertical owned by YouTube. Though Vine was not the first to start off (there was Viddy and Social Cam who focused too much on spamy growth hacking techniques on Facebook), it was Twitter’s push that built this one up.

Also recently Zuck announced ‘Un-Bundling of Facebook‘ which serves similar use-case.

 

4. Look for missing components in daily used products that are ignored

Look for broken / boring experiences in the products around you that are in daily use. Broken, because you can fix them. Boring, because you can make them cool (or add value).

This probably over laps the above mentioned use-cases. Mobile OS features like Camera got replaced by Instagram, Text Messaging got replaced by WhatsApp, Mobile Phone Book got replaced by Gmail Contacts. There is a big opportunity if you can identify and replace basic utilities around you with products.

PS: The biggest broken experience on phone or devices today is battery / charging. And this is a tough one!

 

5. Look for big news or market changes around you

If you are too much into technology news look for changes around you and a need for product that you could build because of market changes and opportunities that come up.

Skype was acquired by Microsoft in 2011. Ever since (and even before that) there have been tons of connectivity issues with Skype. Its time for a reliable Skype, one that works as it should. Big opportunity! There is Google Hangouts, but it still doesn’t make a cut and unfortunately Google still treats this product as a part of Google+ and/or Google Talk. It requires attention as a independent product like Chrome, YouTube or Android.

Another big blow was when Google decided to make Gmail for Business a paid service for all. There are other paid business service providers, I tried a few myself when I recently was looking out for a free / alternate solution, finally giving up and settled for a paid Gmail account. Its a great opportunity to build a awesome product here.

My favorite example here is AngelList, Naval is an angel investor in 100+ startups – sensed the opportunity of creating a platform that connects startups to angels much before anyone else did. Another one is how Admob discovered mobile advertising when the world started making mobile websites (WAP sites then).

——————

Concluding Notes:

How to find Disruptive Ideas for Startup?

Listing down the 5 methods mentioned above:
1. Look for market segments that have not changed for years.
2. Look for large products that are ageing fast.
3. Look for large products that serve multiple purposes.
4. Look for missing components in daily use that are ignored.
5. Look for big news or market changes around you.

Wait, your existing startup does not fit in the above criteria? Nothing to get disheartened with, this is just a reference point. In fact I also realized that my own startup does not fit in this 🙂

Some takeaways,

  • The above 5 pointers all lead to a large addressable market. So next time a investor tells you he/she is looking for a large market, you fit in.
  • Just another startup or just another feature in large market does not make a cut. It should be a differentiated solution / product.
  • Disruptive ideas are plenty, it is the execution and team behind that matters most.
  • Most importantly, don’t build a product or startup in a market that is considered hot. Instead build something that you understand (or understand it well before you start).

And Flipkart, you have my respect for life!

PS: All notes referring to Rediff are expressed as my personal opinion. Most details mentioned here are in public domain already.

Ecommerce Product Management – Getting the Product Page Right

Just few days back I exchanged some notes with Founder & CEO of a Ecommerce company on why I never shop online with them. This venture is among the best known Ecommerce brands in India, but its product experience never gave enough confidence to transact with them.This post is result of that interaction. All screenshots included in this post are not meant to single out any particular ecommerce website and this is meant to be a general post on best practices.

This post is also an extension to my previous post on the topic – Product Management and Ecommerce that was written about two years back. While that post was about general product management principles for Ecommerce, this one is a series of posts that are specific towards reducing cart abandonment and improving conversion rates in transaction businesses. Limiting the scope of this post only to Product Page -> Checkout, this post is first in this series and talks about building the right Product Page and best practices to be observed.

Getting the Right Product Page for Ecommerce – Best Practices

When users land up on product pages through some effort (search, discovery, social, email, adwords, etc), the intent of a users here is positively inclined towards ‘knowing more about the product’ or ‘making a transaction’ and not towards abandoning the page.

The positive reinforcements on a product page are –

  • Product (the product itself), Photos, Price
  • Shipping Information (and Payment Details)
  • Additional Information – If the product, photos & price do not help make a purchase decision, then the additional information that can assist in decision making process.
  • Alternatives & Suggestions

Building Product Pages is a science & art put together with lots of common sense. They should be built / designed as decision enablers and not with the focus that allows users to look at other options in an event the user is not interested in these products.

a. Focus on One Action – ‘Add to Cart’

Yes this is the obvious point. Why is it here, everyone knows this right?

It is here because everyone knows this and because they also know everything else other than this. Simply look at the product pages of the Ecommerce websites, the number of colors on the design elements of page, multiple call to actions – take away the focus from ‘Add to Cart’ button.

As a standard practice, don’t let more than 3-4 colors creep-in on to the product page. Having a color palette helps here and intelligent use of shades of gray to highlight important information if required. Also most critical aspect is knowing that all information cannot be considered as important.

Showcased below are screenshots from top ecommerce websites in India. Notice the excessive focus on highlighting every piece on information, use of ‘design’ and colors in every product element. Have specifically chosen products that have variables like Size, Color – since those are the most complex ones to get right.

Multiple Components asking for Attention, One of top Ecommerce Sites in India

Multiple Components asking for Attention, One of top Ecommerce Sites in India

Multiple Components asking for Attention, One of top Ecommerce Sites in India

Multiple Components asking for Attention, One of top Ecommerce Sites in India

Know how to make ‘Add to Cart’ stand out – look at a product page from NastyGal.com

NastyGal Product Page - Notice the focus on 'Add to Cart'

NastyGal Product Page – Notice the focus on ‘Add to Cart’

 

b. Getting all Decision Enablers next to ‘Add to Cart’ Button

The most important decision enablers (either features or information) should be as closed to the ‘Add to Cart’ button as possible, not miles away. The information should be presented in a top-down readable format – specially for categories and verticals like Clothes, Shoes and others where to process the order you need Size, Style, Color and other such information.

Factors making up the Purchase Decision

Factors making up the Purchase Decision

It is first essential to figure out what are the most crucial 2-3 factors / information that a user needs to know and also accepting that not all information is must.

Add to Cart on Bonobos

Add to Cart on Bonobos

Add to Cart on Zappos

Add to Cart on Zappos

c. Use Standardized Communication & Symbols

One of the key things to focus on your product page (or anywhere on the product) is user communication. From simple things like should it be ‘Add to Cart’ or ‘Buy Now’ or ‘Add to Bag’ to another simpler things – its a tough job.

Standardization? Its a mess out there.

Standardization? Its a mess out there.

Choose widely used terms for communication. I would always suggest using ‘Add to Cart’ because 90% of other websites use it. Remember user is moving on multiple websites, and he has got familiarized with the term. Do not re-invent things for the user. Even for symbols, Shopping Cart has a universal symbol across millions of website.

Same for terms like Cash on Delivery. Free Shipping.

Another issue with Ecommerce websites is the excessive focus on branding everything. It starts from ABC TrustPay, XYZ Assurance, LMN 100% Purchase Protection or PQRS Guarantee, etc to putting up details for Sellers (Marketplaces) – ratings, stars, % feedback, etc. While all that is great, why does a customer need to know this? If its for assurance – there is no need to copy paste such fancy terms across the website.

Thinking from a consumer point of view, if there is any goof-up on any transaction – user will hold the website liable for its service, whether or not it is a marketplace or a store. A simple message like one from ASOS – “Free Returns. Not quite right? Send it back for Free” or from Jabong – “30 Days Free Return / Exchange” does the trick.

One of the leading ecommerce venture says uses the term ‘Free Home Delivery’ which I relate more with restaurant food deliveries and less with ecommerce.

PS: For some reasons, Indian Ecommerce websites love coming up with their own Glossary of Terms!

d. Handling Exceptions on Product Pages

Some of the best user experience practices are seen on products that handle exceptions really well. Only following a simple principle – “Do not show user information that is not applicable’ goes a long way in removing information overload and simplifying user’s buyer experience.

Here are the few common ones that should be displayed only when applicable –

  1. EMI on Rs. 3000 – shown for all the products even those priced below that limit.
  2. Showing Cash on Delivery for products on which it is not applicable
  3. ‘Free Shipping’ when not applicable or Showing ‘Free Shipping on products above Rs. 500’ when the product is already above that amount.
  4. Ships from Chennai – Shown to user who is from Delhi. (Unnecessary second thoughts for the user – what matters is that product is shipped in time, not from where it is)
  5. In Stock. Of-course, why else would you display ‘Add to Cart’ button.
  6. Offers. Most offers kill Ecommerce profits (and the service too) – but since it is a trend now to show them, display only offers applicable to the product. Avoid blanket offers for a category.
  7. Twin Carts
  8. Asking ‘Are these reviews helpful?’ when there are no reviews.
  9. Private Listing of products shown to all.
  10. Free Returns or Exchange displayed on products that are not applicable like Lingerie, Cosmetics, etc

Showing EMI when not applicable

Showing EMI when not applicable

Dual Carts – Not applicable to > 95% users

Private Listing? Why show it to users then.

Private Listing? Why show it to users then.

Feedback on Reviews not written yet.

Feedback on Reviews not written yet.

Showing Offers when none available

Showing Offers when none available

Product  In Stock. Offer that is super-stretch for the user.

Product In Stock. Offer that is super-stretch for the user.

Ships From? Why a User needs to know as long as it reaches him on time.

Ships From? Why a User needs to know as long as it reaches him on time.

Handling Exceptions are really important for every product that is being sold on a Ecommerce site. Simply because every product is different, so are its attributes and not all of them apply all the time.

 

e. Staying away from Fancy Features

Get rid of fancy features on the product pages, some of them really make no sense.

Some of the top fancy features that are seen frequently on ecommerce websites are listed below. Though its debatable that few of them are required, the point to suggest here is not letting them interfere in the transaction process and keeping them passively available.

  1. Compare products on your site. There are different sites available for comparison and decision making.
  2. Ship to my pincode. While this feature has value, actively showing it to everyone does not. Good execution by Amazon India as a passive feature.
  3. Ask seller a question in Marketplaces. Is it scalable if the response is delayed by hours or days. Even users do not ask questions on top selling products.
  4. Login to Save in Wishlist. Almost everyone has feature – why. How many people come to wishlist on ecommerce sites again.
  5. Add to Favorites. This feature is great for social commerce or 100% design-only focus websites like Fab or Etsy, provided it adds value to user.
  6. SEO Fanciness – Many ecommerce services use without understanding how difficult it is for users to read.
  7. Vendor Information. Yes, we know you are marketplace, but there is a beautiful way to telling who the real seller is. (like Etsy).
  8. The filter for filters. Cool, but over period of time they all die and the data operations kill the user experience then.
  9. Comments on products. Again – engagement v/s commerce. Most services that have comments enabled, see user complaints and customer service related comments that further discourage buyers.
  10. Zillion Reviews that make no sense.

Fits SEO, but how helpful is this for user?

Fits SEO, but how helpful is this Product Descripion for user?

Fancy Filters

Fancy Filters – Helped me discover unknown Brands, Irrelevant Form ~ Touch is Qwerty or no. CDMA. Other OS > All known ones.

Reviews that make little sense

Reviews that make little sense

Facebook Comments - Why?

Facebook Comments – Why?

Favorite & Add to Compare

Favorite & Add to Compare

Definitely users don't want to enter in a relationship with the seller.

Definitely users don’t want to enter in a relationship with the seller.

How does this information matter?

How does this information matter?

Thanks for making this complicated. Users only care for price they will buy it for.

Thanks for making this complicated. Users only care for price they will buy it for.

There is a huge buzz around content + commerce, I believe that both of them should not mix. Content products (like Twitter, Quora, or even Wishberg for example) should focus on engagement and time-sink for its users, while Commerce products (like Amazon, Flipkart and others) should focus on transactions that are completed as quickly as possible.

 

f. Photos: Picture Perfect Product Pages

How important are photos on your product pages. If the answer is yes very important, make it a standard practice for product photos to be over 500 x 350 pixels. Optional images are great, zoom-in to see larger photos absolutely great – but those are optional features, the main product image makes a lot of difference.

Large Product Photos on Etsy. Also look at NastyGal's page shared above.

Large Product Photos on Etsy. Also look at NastyGal’s page shared above.

g. Recommendation that kill the Product Experience

Ecommerce sites should put a limit to the number of recommendations that are shown to the users. One of the best known Ecommerce site displays a stunning 9 set of recommendations on its product pages, that includes 35 products being recommended under pretext of ‘for you’.

Recommendations shown for a Mobile Phone

  1. More Mobile Phones from Samsung.
  2. Feature Phones from Samsung
  3. Recently Sold in Electronics & Gadgets
  4. Products Frequently purchased together
  5. More Android Mobile Phones
  6. People who viewed this item also viewed
  7. Top Selling Mobile Phones
  8. Products You Recently Viewed
  9. Recommendations based on your browsing history

Showing 35 recommendations does probably less for making up a buying decision and more for increasing dropouts or bounce rates of product pages. The ideal number of recommendations to be shown to user are 3-4 sets not more than that.

The ones that are most likely to help in conversion are:

  • Products Frequently Brought Together (provided the combined price is not greater than 3X of product price). This recommendation can be also displayed at Cart Level.
  • Customers who viewed this Product also Viewed. (Actual Recommendations)
  • Recently Viewed Products
  • Recommendations Based on Browsing History.

Flipkart & Amazon India does a great job with product recommendations.

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Since I do not want this post to sound like a rant, I have attempted to re-create the first scroll product page (of the one mentioned in the first point here) by applying these best practices that I have mentioned here. This is how it looks. (Note: I am not a designer, this is recreated out of plain copy-paste tools.)

Product Page based on the best practices mentioned here.

Product Page created by me based on the best practices mentioned here. Redesigned the first image.

Concluding Notes:

Indian Ecommerce is coming out of age now, its off to a great start. While challenges like operations, logistics and customer experience are being tackled with great enthusiasm to delight users, it is time to also look at getting product management principles right and ensure users have a right user-experience.

Something I missed completely is that not a single ecommerce site reminded me of their mobile apps, isn’t mobile supposed to be the next big thing? A simple feature like ‘Send this to Mobile’ will do wonders – there is a chance that I will further share the product on WhatsApp and ask friends & family.

Remember, users that come to ecommerce websites are not here to build relationship, they are merely here to transact. Some features like Add to Wishlist, Write a Review, Rate this Product, Comment on this Product, Showing Auto-Pop to ask Email (and later spamming with newsletter), etc are not the ones really care about when they are here to transact. They are passive features, completely optional. Don’t irritate your users!

“I’m not here to enter into a relationship. I just want to buy something.” from the famous post – The $300 Million Button by Usability Expert Jared Spoon.

Ending this post with one of my favorite quotes on this topic – “Every feature has some maintenance cost, and having fewer features lets us focus on the ones we care about and make sure they work very well.” – David Karp, Tumblr.

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The next post in this series will be Best Practices for Shopping Cart & Checkout Process.

2014 – India Startup Landscape

Overview of India Startup Landscape – 2014

Building Global Product? List of Technology Sites & Blogs for Global PR

When Wishberg got TechCrunch’ed and had its share of Global PR two months back, many people asked how did we manage to do that! I am not answering that here.

Getting featured on top technology sites “should not be considered success”, there are miles to go for us. If you are building a Global Product, getting tech coverage from around the World helps you get the word out for your product.

So below is the cheat sheet we built for this – its the list of the top technology sites & blogs you should consider.

Of course I have contacts of all these websites and reporters. Not sharing as I don’t want them to get spammed! If you still want them, send $10,000 🙂

If I missed any, please tweet them to me on @beingpractical or email to pj (at) beingpractical.com

#GOSF – The Great Online Shopping Failure

GOSF – What is not right about it!

The Great Google Online Shopping Festival (GOSF) is all over my timeline. To be honest, I also had my share of fun.

 

What went wrong with GOSF: 

1. GOSF was down.
The Official Site was down – gosf.in. That is ok, but just that we didn’t (No one did) expect this from Google. .

2. Everyone Got Invited to the Party.
Over 225+ partners were listed on GOSF.in. It looked like a directory of ecommerce sites. It should have been exclusive, invite only and curated.

.

3. Selection of Partners

What were Automobile sites, Property sites doing on Online Shopping. Some ridiculous offers included Rs. 10,000 off on your Dream Home (Really?)

GOSF-Deals0
.

4. Quality of Deals
Everything can be excused but not the quality of deals.
– Many partners (if not all) ran their regular promotions under GOSF.
– Deep discounting on Chinese & Unbranded products continued. Up to 90% off on such products.

GOSF-Deals
.

5. Efforts by Partners
– The participating partners (many of them) are marketing it just like any other event (Rakhi, Diwali, etc).
– Existing products & offers that were run for centuries got labelled under GOSF.
– Few sites had bugs (I reported couple of them – down side of knowing too many people).
– Many partners have not made any efforts to even put up even the GOSF banner on their sites or even deals.
.

 

GOSF will be still reported as Great Success. Why?

Post end of event, many Ecommerce partners will claim impressive numbers. I am sceptical of any numbers around the same attributed to GOSF or their own internal marketing efforts.

Because – This is how my inbox looks today:

GOSF-MailBox

Because – This is how my SEO & SEM looks today:

GOSF-SEOnSEM

Because – This is how on-site Marketing looks today:

GOSF-OnSite

 

Concluding Notes:

I am not against GOSF or Google or its Partners (Personally and also because I know too many friends / acquaintances who are associated with the industry). Its a great concept and if it manages to get ‘New People To Shop Online’ (those who never did it before) its a great win for everyone (all professionals) who has anything to do online.

I don’t want to end this note on post as a critic, so here are some suggestions for the next #GOSF:

  • Limit Partners under every category – Max 10 to 15. Limit Categories to 10.
  • Curated by Partners, Approved by Google – Real offers, real deals.
  • Limit number of products / offers by every partner to 100. Again real deals; feature them on GOSF.in
  • Instead making partners spend online (SEM) – It should direct all that traffic to GOSF.in and lets users choose what they want to buy. (Google did the same for Gmail launch).

Signing off. I was just being practical. And, One more thing…