Lessons Marketers can Learn from Donald J Trump’s Ascent to the White House

Marketing is one of the core branches of business. Now, I’m guessing all of you must be aware of the fact that no business can survive in the long run without marketing and branding its products and/or services in the right manner. What marketing does is that it creates an image of the product in the minds of its target audience with which they identify themselves and that leads them to buy the company’s product or avail its services. So in simple terms, marketing directly brings sales and eventually, profits.

Every marketing campaign focuses on its desired set of target audience. It’s all about creating a niche market and ensuring that your customers stay loyal to you. A marketing campaign can be used to sell anything ranging from products and services to people and their skills. One of the most successful marketing campaigns that we have witnessed in the recent times ensured that Donald Trump becomes the President of the United States of America. When you think about it, it was all about selling the reality TV star to the voters and convincing them that he is capable enough to “Make America Great Again.” The Trump brand slogan effectively outdid some of the most prominent brand slogans in terms of popularity and brand recall.

So, let’s have a look at some of the valuable lessons we can learn from Donald Trump’s marketing playbook:

#1) A Call to Action: All powerfully placed brands call on customers to do something. ThumsUp’s “Aaj Kuch Toofani Karte Hain” and Nike’s “Just Do it” are some of the finest examples of this. On the same lines, Trump gave the US citizens an idea to believe in, in the form of “Make America Great Again!” This was a highly impressive call to action with a majestic goal with which each voter could have identified himself. It’s about clear positioning of the brand that all marketers must do.

#2) Remind the customers of good old days: Promising the consumers of an uncertain future (however good you make them believe it will be) generally doesn’t work with the majority as most of the people are not early adopters and also if your brand is new to the arena dominated by other brands. Trump, however, who has never served in any kind of a public office, made his way into the mother of all public offices by reminding the citizens (consumers) of a glorious past and promising a better tomorrow. The addition of the word “Again” was no accident to his slogan. The voters were made to believe that America is not what it was in the past, but the good old days can return if Trump was made the president. And this worked like a charm for his campaign.

#3) Get your old and forgotten customers back: Have you ever noticed how banks and financial firms always chase their high-value customers while ignoring their less financially endowed customers. Trump did not make that mistake. He used the Democrats’ highly appreciated policy of embracing diversity against them and got blue collar democrats (who were being ignored by their party) to support him. All the Republican supporters came to vote for their champion and by winning the hearts of the forgotten blue collar democrats, Trump ensured his win. Similarly, good marketers always know how to balance customer retention with customer acquisition.

#4) Fiction > Facts: There was no doubt about the fact that Clinton would have demolished Trump with her experience and knowledge of politics. However, that didn’t come out to be true. Did it? Trump knew it could be tough for him to win against an established brand in a fair fight. Therefore, he offered US citizens a painting of a greater tomorrow and the painting was nothing short of a Da-Vinci or a Van Gogh. He showed them dreams of goals and outcomes while not elaborating on the means and policies to achieve those dreams. Just like what all the fairness cream brands do in India. However, now that he is the POTUS, he’ll also have to deliver on those dreams. If he doesn’t, the consumers will lose their trust in the brand and won’t re-purchase the product after four years.

#5) Be passionate and make people believe in that passion: Every marketer and sales person know the power of ‘word of mouth.’ In the time of social media, having a better campaign team and spending a fortune on advertising weren’t enough for Clinton. Trump’s determination to win was evident by his passion. Giving five speeches in a day and the sea of supporters during those speeches impressed average voters who were watching on television and that turned the tide in favour of Trump.

#6) Confidence: Whoever said that “Confidence is the key to success,” couldn’t have been more right. In every speech, Trump told his supporters with utmost confidence, “we are going to win.” Customers like to back up a brand which is not only a winner but also sees itself as a winner. And they also want to back a brand which people like them see as a winner. That’s when a brand becomes a BRAND. Unlike brand Clinton, brand Trump confidently promised a future that looks like the glorious yesterday. He exuded confidence and a drive to win. He was the underdog and the outsider we all root for in movies. And eventually, this confident persona is what paved his way to the Pride Rock.

Conclusion

Although the election/marketing campaign of Trump provides marketers with many valuable lessons which they can incorporate in the dynamic business world, one thing they must never forget – Effective branding and campaigning can make the customer buy a product, but if the product turns out to be faulty or does not deliver on what it promised, then its time on the shelves is short-lived.

Brand Trump is the next big thing or a revolutionary new product in the market, but if it fails to deliver on its promises, it will fade out by the next election.

 

Author: Saksham Gaur

Great Lakes, Gurgaon

Analytics v/s Content in Marketing

Stephen Covey in his highly acclaimed book wrote the following,

“But shortly after World War I the basic view of success shifted from the character ethic to what we might call the personality ethic. Success became more a function of personality, of public image, of attitudes and behaviours, skills and techniques, which lubricate the processes of human interaction.”

To a great extent, marketing is also fighting a similar character v/s personality syndrome; of course, in its own flavour. For example, the founder of Stayzilla stated the following during the time of its closure, “During the last three to four years, though, I can honestly state that somewhere I lost my path. I started treasuring GMV, room-nights and other ‘vanity’ metrics instead of the fundamentals of cash flow and working capital.”

He further adds, “In one of my digital marketing campaigns, I got the chance to work with a renowned CMO directly. In one conversation, he stated that nowadays there’s a lot of fuss around analytics. It seems that analytics tend to drive everything but in reality, it’s the other way round. Analytics provide you with the insights of your campaigns and give you more intuitive understanding of SWOT elements of your marketing campaigns. But if you are first deciding the metrics and then, deciding the rest, you are playing a very risky business.”

In recent job description of marketing, you will easily find responsibilities parts as:

  • Drive online traffic
  • Track conversion rates
  • Utilise range of techniques like paid search, SEO and PPC
  • Social media strategy

In only one JD of digital marketing, have I found the following words:

  • Content development
  • Email marketing
  • Excellent writing abilities
  • Creative/consultative slide ware/content creation
  • Creativity, passion to innovate

The point I am trying to make is that marketing is a creative work. When a prospect visits your website, he/she will only become hooked when he/she comes across remarkable things, which in turn is driven by content. If your content has high engagement potential, metrics such as bounce rate, time spent on a webpage will definitely be rewarded. Take, for example, YouTube viral videos. Kevin Alloca in his TED talk mentioned that a viral video comprises humorous and surprising elements with a point to get across to its audience. Can we see any analytics-based approach? It’s pure human emotions that are defining such viral videos’ success, not Google analytics or super computer algorithm. Yes, such insights will help you in deciding what to publish on YouTube to make it more productive. But again, it will be content that will decide the success of the upcoming video.

In conclusion, I would like to end with the following quote by Seth Godin,

“Content marketing is the only marketing left “.

 

Author: Rupam Lathwal

PGPM Class of 2017, Great Lakes, Gurgaon

Purple Cow

Destructive marketing is built in products

Traditional ways of marketing are gone. The old virtuous cycle of ‘buy ads – get distribution –sell product – buy ads’ is now gone for good. So, what is the new way to cut the hyper-clutter and stand out in marketing and sell your product?

Stop advertising and start innovating.

Seth Godin, the marketing guru and bestselling author, explains the new era marketing strategy in a unique manner of a purple cow. Suppose you are travelling to someplace and you see the normal black and white cows that you encounter almost every day. Would you look at them twice? Would you talk to your friends about them? No, right? But, what if it’s a purple cow? The chances of discussing a purple cow are definitely much higher. In the same manner, any product which is remarkably different than the ones existing in the industry will raise curiosity among the potential customers.

Remarkable Product

It comes from people who are making something for themselves.  From here, they are able to project the same for multiple audiences. Here are a few examples:

  • Howard Schultz spent months in Italy, drinking coffee and learning. He was in love with coffee. Thus, Starbucks evolved.
  • Rony Abovitz, CEO Magic Leap, drew inspiration from his childhood fascination with scientific fiction in Star Wars. Later, he started working on augmented reality in his garage in Miami and went on to becoming the fastest Unicorn after first equity round.
  • Ray Kroc, coming from the sales background, fell in love with McDonald’s on his very first visit. Later, during the opening of his first store in Chicago, he emphasised on creating the exact taste of French fries and went on to contact research fellows in many universities to replicate the same Californian taste.
  • At around late 2007, roommates Chesky and Gebbia could not afford the rent for their apartment in San Francisco.They decided to put their loft on rent online(on their own website) with beds for three guests and homemade morning breakfast. They named this concept as Air bed and breakfast which is now known as Airbnb.
  • On a snowy Paris evening in 2008, Travis Kalanick and Garrett Camp had trouble hailing a cab. In order to solve this very obvious and every day modern human problem, they started Uber – tap a button, get a ride. How simple can it get!

Sneezers

Zespri had a daunting task to launch a new kind of kiwi which is golden in colour with an edible peel. Instead of mass marketing the new food in U.S., Zespri took a risk and introduced it in an upscale Latino community. This community is a regular eater of mangoes and papaya which closely resembles the new kiwi but tastes very different. Such niche Latino community had both the time and the inclination to try something new and different. Over a period of time, this Kiwi grew in popularity among Latinos that Zespri (back in 2001) made a business of $100 million worth.

Sneezers are the first category of people on earth who will, willingly, learn about your product, take the risk to try a product, and bear the pain of introducing it to their friends. This way, marketing strategy becomes much more productive and cheaper. Another benefit in targeting such genre of potential customers is that they are always on the lookout for new stuff. This requires minimum advertisements and marketing expenditure. All you need is to be creative enough to come in their eyesight and, automatically, the rest of the story unfolds.

In case, if you are short of ideas,

  • Find the niche market
  • Create the remarkable product in the right way 

Law of Diffusion

Today, even with narrowing down your potential customers through digital means, your marketing efforts can still fail. The reason being you are one of the 50 marketers who is targeting the same individual for the same set of products and services.

Hence, rather than a push marketing, marketers should devise a pull strategy.

 

law-of-diffusion

  1. Left to Right

Most of us are already aware of ‘Crossing the Chasm’ by Geoff Moore. How can’t it be given a serious thought over here? An idea spreads from innovators to early adopters to the early/late majority (sneezers comes before these). The company should target the innovators and early adopters and strategically build the initial marketing efforts around these two categories. Using the typical mass media strategies would not be of much help at this stage.

  1. Marketing Budget Offloading

The maximum sales and profits come from early and late majority people. Only when your product is being accepted by these people, then only you should offload your maximum budget. Many great astonishing products spent most of its capital on mass marketing. Such marketing efforts came too soon before the idea spreads.

Take-aways:

  1. The message that Tiffany’s blue box and Leaning Tower of Pisa delivers, Pantheon in Rome does not. The marketing is not done for a product. It’s built right in.
  2. Greatest remarkable products and companies such as Starbucks, Apple, Disney, Reliance Industries have been started and successfully ran by marketers. From product development, manufacturing to communicating the value proposition, such passionate marketers have their heads involved in the entire product cycle.
  3. When the company becomes big, it loses its entrepreneurial charm and focuses on profitability. Hence, pick the right maverick in your company for product development and get out of his way.
  4. Work with sneezers. Get Permission from them. Alert them beforehand on upcoming products. Work with them to sell your idea to a wider Audience. (Donald Trump utilised such ‘Stakeholder Driven Media’ internet platforms like breitbart.com to spread his ideology to significant yet unique Americans).
  5. If your company has reached a stage, where nothing seems to be working and marketing department is facing the major brunt, talk to your engineers or product developers and customers. Rather than selling what they wanted to sell, new Best Buy CEO, Brad Anderson, listened to customers and realigned the entire strategy based on their inputs. Often, it was hard and longer in approach but produced more results (and, cheaper too), than typical boring ads and staying that way.
  6. Learn from people who have a track record of launching such remarkable products. Dive deep into the fans’ magazines, trade shows, design reviews – do whatever it takes to feel what your fans feel.

 

Author: Rupam Lathwal

PGPM Class of 2017, Great Lakes, Gurgaon

Corporate bonds and their indispensability in the Indian Economy

Corporations raise funds either through debt or equity or a mix of both using different instruments available. Securities (tradable financial assets) are a kind of instruments that are a different arrangement/alternative for equity or loan. For example, owner’s equity is the money put in the business by a proprietor, whereas stocks/share equity is the security through which a company raises money by making every shareholder a partner up to the extent of the shares held by an individual/organization. Similarly a bank loan is a simple form of debt, whereas a corporate bond is a security through which company raises loaned-money and owes the principal and interest to its bond holders. Bank loans are non-standard, negotiable and are non-transferable whereas corporate bonds are standardized and are exchangeable. A corporate bond repo (or repurchases) is where a company or a bank pledges corporate bonds with another company or bank to raise money. The pledger agrees to repurchase the bonds at a specified price. To discuss the topic taken up in this article we shall follow a step by step approach to answer the following questions – “Why do we need corporate bonds?”, “Why corporate bond market has not seen success in India?”, “Nature of corporate bonds and the setup in which they are executed”, and “What is RBI doing?” The detailed-discussions pertaining to the rates of interest/returns on bonds and other financial instruments and their implications and attractiveness will be discussed in another article.

Why do we need Corporate Bonds?

Let’s talk about the need of corporate bonds in the context of Indian Economy.

To put things into perspective we start with the banking sector, where the flow (as in distribution) of money starts from, in an economy, as per the needs of individuals and businesses. Central bank of a nation (RBI) controls the money supply and the monetary policy, whereas the Commercial/Retail banks and Development Banks etc. distribute the money in the economy to the public and businesses. If we had to categorize it simply, there are three kinds of lending activities (as per the scale of loans) loans to large businesses, priority sector lending (like Agriculture, Education, SMEs etc) and micro-financing.

The real problem in Indian context is the loans to large businesses can have huge ramifications on the economy. Large companies accounted to Rs. 65.47 Trillion (58%) of the total Bank Credit till March 2016 when the NPAs (Non-Performing assets or Bad Loans) stood at roughly the Rs. 6 Trillion mark. By this estimate if 10% of the loans to the large scale companies were to become NPAs, then the lending banks will soon be out of business.  That’s a huge setback to the economy and would sabotage it. However there are mechanisms like restructuring of loans, writing off the assets etc. for practical purposes. The overall effect is less credit offtake in the economy due to poor confidence level in the business-environment.

FACTS: If we look at the size of corporate bond market in India, it is about Rs. 19 Trillion (14% of the GDP), whereas the bank assets amount to 77% of the GDP and market cap to the GDP ratio is roughly around 70%. At present the corporate bonds are largely issued by financial firms and PSU-corporations and their supply vanishes as soon as it is up for issuance.

 

How corporations might deal with Debt-shortage?

  • Corporations can issue corporate bonds to raise money for their finances in the scenario wherein banks have a limited capacity and confidence.
  • Corporate bonds are similar (not identical) in nature to that of bank loans. These pay regular (yearly/half-yearly) interests (except for zero coupon bonds) and the principal at the end of the maturity period.
  • Like in case of bank loans, the taxation (on corporations) has a different treatment for corporate bonds than equity i.e. corporate bonds are treated as liabilities and the returns made to the investors are treated as interests and hence are not taxable. While returns made to the investors (for money raised) in the case of equity are taxable because investors hold a share of the company’s assets. In case of bonds an investor is investing as a lender. This is further explained using a small caselet wherein a company finances its assets of $10 million using Bonds and stocks with two different capital structures of 40/60 in one and only stocks in another case. The rate of return to investors are found to be 12% and 9.81 % respectively
Capital Structure Bonds/Stocks: 40/60 Only Stocks
Assets               10,000,000.00    10,000,000.00
Sales                 5,000,000.00      5,000,000.00
Operating costs                 3,500,000      3,500,000
Earnings before interest and taxes (EBIT)                 1,500,000.00      1,500,000.00
Interest (10% coupon rate)                 400,000.00 0
Taxable income                 1,100,000.00      1,500,000.00
Taxes (34.61%)                 380,710.00       519,150.00
After-tax income to investors                  719,290.00       980,850.00
Rate of return to investors                  12.0%        9.8%

 

How does this benefit anybody?

  • The impact on the economy is that the liquidity and financial health of its banking system improves with lesser credit-default risk on its account.
  • This arrangement would make corporations more responsible for their actions as their performances are apparently known to the market.
  • If we talk about the investors they get better guarantee of the payments as loans (corporate bonds in this case) are payed back first and then only companies proceed to pay out the dividends. However this is an obvious option for safe investors or HNIs rather than high return seeking investors.
  • As for corporations it can be an effective way to raise long term/short term funds without having to dilute the company control (unlike share equity). It is an effective way to deal with the debt-shortage and the corporations also receive tax benefit.
  • Investors, whether HNIs, pension funds or insurance companies, can have more opportunities for diversification of their investment portfolio with corporate bonds.

Nature of Corporate bonds and the setup in which they are executed

In any exchange based mechanism there are three parties involved:

Buyers: Who buy a particular instrument with certain return expectation in a time-frame.

Sellers (Issuer): Who sells an instrument for monetary exchange in current time with some rate of return in the future.

Dealers: are the brokers/Banks who facilitate the sale and purchase of an instrument; bonds in this case (both seller and buyer are investors). As per Mr. Matt Levine (columnist) from Bloomberg, the dealers although are there just to facilitate or smoothen the process of exchange of the bonds, provide natural hedge to the volatility that could have existed if it was not for these dealers. Why? Simply because a dealer who purchases an instrument might take some time to sell it to a potential buyer. However if it was not for the dealer, a seller would have to bring down prices to get rid of the bonds and vice-versa for a buyer (Dealers provide with immediacy). However a dealer cannot just keep buying when everyone is selling (the contrarian approach). So a dealer would deal between fundamental buyers and fundamental sellers and hence you need fundamental investors for the system to exist and work. Banks are the entities that deal in corporate bonds and their appetite for risk involved in selling and buying of the bonds is limited.

For quick information, various bodies involved are security market regulator, the banking regulator, the credit rating agencies, clearing houses, stock exchanges. Then there are rules and regulations prescribed by each of these institutions.

Why has the corporate bonds market not seen the success in India?

While trying to find out reasons behind this, I discovered a host of reasons in which the whole system (from corporations and government to the banks) is involved.  I referred experts’ opinions available on business newspapers as these sources bring out answers not available in text books and theories and are vociferous about the bitter truth.

Banks: Suppose a bank has a set of poor loans that were issued to the companies performing badly or disastrously. In this situation if the bank has to deal in corporate bonds of such companies and has to participate in price discovery of these bonds, it is in catch-22 situation. On one side they have to trade it at a good price on the other hand they know themselves that the bonds are not really that worth or are too risky. Banks would tend to hide the fact that they have been sitting on large set of poor loans. They are better off giving loans rather than trading in bonds as otherwise they will have to provide this crucial information to the market as per the regulations. This will further bring down the value of these bonds.

Corporations: Corporations performing poorly are already laden with loans and would avoid issuing more debt securities that they cannot sustain. Also they like to keep this information from going public.

Government: The better price discovery resulting from an efficient bond market will expose the full-extent of NPAs (non-performing assets) lying with the banks in the form of over-leveraged corporate loans and securities. This may cause serious problems to both corporates and banks in the short term. Given the short-cyclic nature of elections in India, governments would not want a dent in their ruling tenure.

What is the RBI doing?

Simply put, what RBI is doing is that it is trying to reduce frivolous loan sanctions and pass on the responsibility to the corporations on one hand making the credit offtake much stringent and on the other hand paving way to develop the corporate bonds market.

RBI plans to come up with a category of borrowers called “Specified Borrowers”, who will have total fund-based exposure of the banking system (ASCL-Aggregate fund based Credit limits) of Rs. 25000Cr at the end March 2017. This limit will be brought down to Rs. 15000 Cr. in 2018-19 and to Rs. 10000Cr from the start of 2020. Over and above this limit, something called as NPLL (Normally permitted lending limit) defined as 50% over and above the ASCL will have to be set aside and an additional 3% provision beyond NPLL. The risk weightage to be assigned would be as high as 75%. This means banks would have to set aside large capital for such borrowers, increasing the cost of funds from banks to the companies. Companies that already have bank exposure much beyond ASCL will have to pay a premium for more funds (coming under the “Specified borrowers” category). This would curb the tendency of excess leveraging by corporates and safe-guarding the banking system. However if there was an efficient corporate bonds market, the need for more funds could be fulfilled through raising funds with exchangeable bonds.

RBI has announced its plans to help develop corporate bonds market and we are just a legislation-away from seeing it in effect. Central banks would accept non-sovereign bonds as collateral. Brokers shall be allowed to deal in corporate repos and foreign investors will also be allowed to trade directly. Till now RBI allowed only the bilateral repurchases of corporate bonds making them illiquid whereas it allowed the repurchases (trading) of government (sovereign) bonds.

Liquidity of corporate bonds has been an issue of debate and this is what we discuss next.

The step taken by RBI to categorize borrowers as “specified borrowers” as seen above would direct the corporates to raise funds using corporate bonds. The supply side may shape up but there has to be enough takers who are typically HNIs (High Net worth Individuals), mutual funds, national pension systems and pension funds looking for certain yields. In current times when Rs. 6 Trillion (approx.) of assets with banks are stressed, there has to be a mechanism to ensure the safety of investments. For this, RBI is trying to pool in rating agencies and form a group of credit information companies. RBI is trying to amend laws to avail more information to these rating agencies. As per Ms. Latha Venkatesh (columnist for MINT) this would improve the confidence of investors. Also the bank should underwrite some part of the bond and RBI should progress from accepting AAA rated bonds to A rated bonds to improve the liquidity. While the journey to an operational corporate bond market is a long one, RBI is trying it’s best to create a conducive environment.

Conclusion:  The idea of having a corporate bond market (with good liquidity) in Indian economy is a moot point. It is the need of the time though. This would de-risk banks from accumulating NPAs. Transferring the ownership to corporates and the fundamental investors will make the whole system less frivolous and would avail capital to the responsible companies. The risk gets shared between the investors and brings down the risk of banks that are already laden with NPAs. Effective changes in regulations to remove information asymmetries in market and political-will can only help the situation.

References:

  1. IIM Bangalore, Working paper no: 450. “Corporate Bond markets in India: A study and policy recommendations
  2. Corporate Finance, Stephen A. Ross, Randolf W. Westerfield, Jeffrey jaffe, Ram kumar kakani
  3. http://www.thehindubusinessline.com/portfolio/beyond-stocks/when-ppf-scores-over-taxfree-bonds/article5822812.ece
  4. http://www.livemint.com/Opinion/64IOr9Q0A1GTu7AVGchHqK/Why-no-corporate-bond-market.html

Disclaimer: This study is based on use of information from text books, newspaper articles, internet-trends and observations in general. The data collated through different sources like World Bank, RBI has been duly credited to and are indicative in nature. The author doesn’t claim any ownership or the veracity of figures mentioned. The ideas that have been borrowed have been duly credited to and other self-proposed ideas are inconsequential and meant only for the academic-engagements of the institute.”

Author : Gaurav Chauhan

Senior Research Fellow, Great Lakes

UPI and its Impact on the Mobile Wallet Industry

What is a UPI? How is it different from mobile wallets? Does it have the potential to eat away the market share of mobile wallets?

upi

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UPI (Unified Payments Interface) is an advanced version of IMPS (Immediate Payments System) which do bank to bank money transfer, just by using a Virtual Id/ Virtual Payments Address.

UPI or Unified Payment Interface is a payment architecture with a set of standard app APIs by the Reserve Bank of India in order to facilitate the next generation online immediate payments leveraging trends like increased smartphone adoption, increased app downloads and universal access to data and internet.

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Any smartphone user having a savings or current account with a UPI-partnered bank can download the app to make P2P (peer to peer) and P2M (peer-to-merchant) payments with the use of VPA (Virtual Payment Address).

Thus, in this case, the customer doesn’t need to disclose any sensitive information like bank account number or IFSC code for completing a financial transaction. It eliminates the requirement of entering one’s card details like number, CVV code, expiry date or OTP.

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Virtual Payment Address is just like an Email ID, something of the form yourname@xyzbank, like sonal@sbi or rashmi@citi. No more hassle of entering the account number, IFSC and other beneficiary/payee details. On entering just this VPA and authenticating the transaction with your MPIN, one will be able to complete the transaction successfully in less than 10 seconds.

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UPI’s two-factor authentication makes it safe and only shares the Virtual Payment Address. It doesn’t provide any other sensitive information.

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How can we download the UPI app?

Steps to download the UPI App are as follows:

  • Download the UPI app from 19 participating banks on the below link

https://play.google.com/store/search?q=upi&c=apps&docType=1&sp=CAFiBQoDdXBpegUYAMABAooBAggB%3AS%3AANO1ljJBaXc

 

  • Let’s say we are using Axis Bank’s UPI app. Here’s the welcome screen. SMS will be sent for authentication

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  • Add bank account: you’ll just need to select your Bank & your A/c will show up automatically (based on your mobile number linked with your bank a/c)

 

  • Create a Virtual Payment Address (VPA) which can be sonal@pnb or 123@ubi or pkc@icici or any other name. The suffix will be based on the app you are using. You can create different VPA with different banks pointing to the same account i.e sonal@axis, sonal@ubi or sonal@vijaya can point to one bank a/c, say from PNB

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  • You can even collect money by requesting it from the other person’s VPA

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UPI v/s Mobile Wallets

Currently, there are more than 25 mobile wallets available in market today.

  • Mobile wallets cannot access the UPI Technology on their own because UPI is a cross banking transfer medium and hence can only be accessed by the banks themselves. For mobile wallets to access UPI Technology, they need to partner with some or the other bank. So, in a way for banks which were suffering from the onslaught of mobile wallets, UPI has come as a boon to them that has turned the tables in favour of the banks.

Now, let’s discuss whether UPI has the potential to make mobile wallets redundant in India. Below are some of the characteristics on which UPI and mobile wallets can be compared.

Characteristics UPI Mobile Wallets Conclusion
Transfer Limit Rs 1,00,000/Transaction Rs 10,000 for non-KYC

 

Note: It can be increased upto Rs 1,00,000 post doing a KYC, which very few customers do

UPI will be more advantageous in this case
Transfer to individual and companies Definitely yes In case of wallets, not all wallets can do transfer but yes the major ones like Paytm, Mobikwik, Oxigen etc. allow the transfer to individuals and companies Majorly, both score well in it
Payment at physical stores Any physical store can make arrangements for accepting UPI Transactions In case of the wallet industry, they have to do a personal tie-up with those physical stores like Paytm has done tie-ups with Pizza

Hut, KFC and payments via Paytm wallet is accepted at

their outlets. Similarly, Mobikwik has exclusive tie- ups with Big-Bazaar and CCD

UPI can easily capture this market
Online Payments UPI Can do very well in this Mobile wallets showed their excellence in online payments No Clear Winner here
Cash Back/ Discounts UPI cannot provide any cash back or discounts In case of Mobile wallets, since they have merchant specific tie-ups, they do provide a lot of cash backs and merchant specific discounts Mobile wallets definitely have a great advantage here
Request for payment In UPI, one can ask for money from any person who is registered on UPI network In mobile wallets, few companies are asking allowing request for payment or asking for payment but in their own network UPI has bit of an advantage here
Transaction Cost There is charge of 0.45 paisa on each transaction through UPI No charge is there on transaction in case of mobile wallets Mobile Wallets are the clear winners here
Outreach Possible outreach is larger due to GoI’s Digital India support. Awareness programs and implementation, if executed well, will encourage cashless transactions even in rural and remote places depending on the government initiatives Restricited to marketing and branding strategy of the mobile wallet company and customer segments made aware. However if Mobile wallets work with UPI network they can use it to their advantage. Usually reaching rural places is more difficult for private businesses as it does not make commercial sense UPI has more advantage here

 

There are some Pros and Cons of UPI and Mobile Wallets which have been discussed below:

  UPI Mobile Wallets
Pros ·         Easier to set up and lesser time to execute the transaction.

 

·         No waiting for OTP

 

·         Device independent and form independent. One can use any bank’s app to transfer money in any other bank

 

·         Money gets transferred directly from bank account. We do not required to recharge any wallet or card in UPI

 

·         Marketing might of cash rich banks

 

·         Wallet companies are technology companies

 

 

·         Wallet companies are experts in user interface

·         Strategic tie-ups are increasing day by day and many of them are part of big- ecommerce companies, such as Freecharge is a part of Snapdeal. These help them in extra benefits which they pass on to customers in a way of cash backs, loyalty points etc.

 

·         Other benefits- mobile recharge, Bill Split, micro credit facilities etc which may not be possible for UPI to provide.

Cons ·         Lack of technology prowess

·         No Strategic tie-ups

·         Company dependent

·         Extra KYC for higher transactions

·         Fraud Concerns

·         Too much competition

UPI certainly has more advantages over Mobile wallets but as per the current scenario in India, it doesn’t mean that mobile wallets will become redundant.

In India, which is majorly a cash run economy both can co-exist as of for now. Mobile wallets have to do some tweaking in their business model and they are in a process of doing it. Some examples are listed below:

  • Paytm will soon get their own Payment Bank license through which they can enter in the main stream of UPI and can launch a UPI based Paytm app
  • Free Charge has tied –up with Axis Bank and will provide UPI based transaction on their platform
  • Phone Pe, which is owned by Flipkart, has launched a new app in collaboration with Yes Bank where both the UPI transactions and wallet benefits are there
  • ICICI pockets, which was a wallet by ICICI Bank but wasn’t doing well, has now been integrated with UPI. So, one can have the benefits of both in their Pockets app

We can have these apps integrated with the benefits of both UPI and Mobile Wallets.

 

Author : Sonal Gupta

PGDM Class of 2018, Great Lakes

What’s with the old people and the new currency?

What’s with the old people and the new currency?

“Money is an idea, Backed by confidence” 

~ L. Ron Hubbard ~

currencydemonetization

While the social networking sites and the media were busy debating the good and the bad of demonetizing the Rs.500 and Rs.1000 denominated notes and the introduction of new currency notes, I was noticing the behaviour of general public and the regular transactions. Here are some interesting things that I noticed:

  1. First obvious behaviour that could be seen in the urban public was finding ways to go completely cashless. Now this had some interesting behavioural patterns like more and more people using Uber (Paytm) and Ola (Ola money) to travel cashless; people who were not using these apps earlier have also started using them overnight for making online payments. Paytm transactions seem to have increased. Credit/Debit card payments will now obviously become the most common ways of purchasing goods in restaurants, malls, marts etc.
  2. To meet the daily cash needs and to exchange demonetized currency, people were crowding at ATMs and Bank branches.
  3. Now the question arises that why do you need cash if you can go cashless in the urban setups? Well for most of the needs it’s fine but what if you feel like having coffee at home and you run out of milk? You cannot order just the milk from your grocery app as it will cost you an extra Rs.50 for delivery (The total purchase value has to be at least Rs.500 for a free delivery). You might go to a mall and need to pay for the parking tickets; you feel thirsty all of a sudden and need to buy a bottle of water and so on. Either you need more of perishable goods than other less perishable grocery or food items or you can’t avoid other small token purchases. That’s where it gets difficult to go cashless. You need cash in small denominations for your day-to-day needs as majority of the small vendors that do not accept cards.
  4. How do people manage then? Especially small vendors who sell perishable goods like fruits and vegetables. From what I keenly observed off-late was that the vegetable vendors allow you to have a line of credit …… I was like, what? Why? Then I thought again and the answer was the very nature of vegetables being perishable. So, if a vendor does not let you purchase them on credit and you are all out of cash, all his stock will eventually go to waste. Some people started using paper-money i.e. your own currency. Wow…. Can you do that? Yes, of course. Why not? When people can use black money and unaccounted currency notes for their transactions, why can they not use these fragile and pseudo-currencies like paper-money (the vendor gives you a handwritten note that he owes you money or the other way round). Now some of you will ask what this pseudo-currency is backed with. The answer is trust & confidence – the most valuable thing in this world. Also, some small vendors eventually purchased the mobile payment machines or downloaded Paytm on their phones to do cashless transactions.
  5. Now, if I talk about the regular trade, it was low. Shops were operational for a lesser number of hours due to cash problems and some were shut. I have seen them remain closed from 2-3 days now. But why? While some shopkeepers might be having problems transacting, some might even be avoiding raids or maybe the loss from not operating is smaller than that of not converting all their black money into White. And that is going to take a while given the limits of transactions imposed on various modalities per day and per week basis. So, maybe that is keeping them busy off-site. However, other than people with black money, the folks who have suffered the most are illiterate or semi-literate people and small vendors dealing in small denomination and changes, having no bank accounts.
  6. One more important and amusing observation, in general, was landlords and relatives becoming all-too-friendly all of a sudden in expectation that you would allow them to convert some of their Bad money (not black money… don’t blame the colour … it compliments style …Black deserves better) to white money. Well, Sorry Boss!! Give me my rent-agreement first, that is long overdue.
  7. Amidst all of this, there were rumours of salt prices rising all of a sudden. Thankfully that turned out be a rumour only. However, it could have been true in some pockets of the country where people could have actually exploited the situation to hoard up the “essential goods”.
  8. Fuss about Paytm using PMO’s image to gain business. I don’t know why people had to make a fuss about that when one of the best ways to go cashless is Paytm. How? Well, even a small vendor has a smart phone in his/her hands nowadays. They can just download the Paytm app and be ready to make even small token transactions in a cashless way. In fact, Mother Dairy is allowing its customers to buy products using Paytm.

Fundamentally all these activities have yet again proved that money is not the currency note that you hold but it is “the liquid-capacity (or liquid asset) that you have to settle accounts for the products, commodities and services exchanged”. What you do it with is just a modality not money. 

Mobile banking can be a big enabler of cashless and legitimate transactions given its growth rate of 212% in terms of value (February 2016) and 131% in volume. At present we have 12% of our GDP floating as cash in the economy (one of the highest around the world). According to World Bank only 53% of Indian population i.e. 636 million people have bank accounts, whereas over a billion have mobile phones. The percentage of internet users in India is roughly around 35% of the total population and is still growing strong. With stricter KYC procedures for mobile phone service subscription and bank accounts, the introduction of the new UPI (Unified payment system- across banks, introduced by RBI) can revolutionize our regular transactions as there are already legitimate users and bank accounts in the system. Under this system you can link your multiple bank accounts to the app and make transactions under Rs.1 Lakh from bank accounts to bank accounts (Individuals and merchants) just by sending a message to the app. It is quite simple and efficient.

 

References:

  1. http://www.financialexpress.com/fe-columnist/payment-banks-a-mobile-wallet-is-a-depreciating-currency/321088/
  2. Centrum broking report titled- ‘Banking Transactions – Technological Disruption

Disclaimer: This study is based on use of information from government database, newspaper articles and internet-trends and observations in general. The data collated through different sources like RBI, World Bank have been duly credited to and are indicative in nature. The author doesn’t claim any ownership or the veracity of figures mentioned. The ideas that have been borrowed have been duly credited to and other self-proposed ideas are inconsequential and meant only for the academic-engagements of the institute.”

Author : Gaurav Chauhan

Senior Research Fellow, Great Lakes

B2B Marketing – Changing the framework

b2b-marketing

 

 

 

 

 

 

 

 

Business-to-Business Marketing (B2B Marketing) directly involves the sale of a product/services from a company to another company.

B2B marketing techniques rely on the same fundamentals as consumer marketing, the difference lies in the execution of strategies and techniques. In consumer markets, the decision to purchase a product/service lays not just on the price, but also on its popularity, status and/or any other emotional trigger. While in the case of B2B, purchase decisions are made primarily on the basis of price and profit potential.

Core fundamentals of B2B marketing revolve around building relationships that guarantee lasting customers, which is the primary goal (other than having a larger customer base) for any company irrespective of its size of operations. It is a domain which is less focused upon but is the frontier for any business to grow and sustain in any industry. It has been the focus of many organizations, where the sharpest of business minds had the untapped potential which could be brought to use not just to generate revenues, but for making enormous profits from their business activities.

A lot of focus has been directed and emphasis has been laid upon different horizons surrounding the B2B marketing that ranges from market structures and drivers to growth, customer categorization and buyer types to decision aspects, etc.

The main attraction of B2B marketing lies in the evolution of its framework, i.e. from product oriented approach to a solution based model. The product oriented model is well known as 4Ps of marketing (Product, Price, Promotion and Place) and it has been used by marketers for decades. With the ever evolving technologies and the presence of web services has made the classic principles appear archaic as modern buyers learn almost everything about the business, the 4Ps of marketing are increasingly at odds with the imperative to how B2B marketing functions in this modern age. Hence, retooling the 4Ps has become a necessity for today’s B2B reality.

It is not that the 4Ps have become irrelevant, but there is a dire need to reinterpret them to serve B2B markets. The model shifts the emphasis from Product to Solution, Place to Access, Price to Value and Promotion to Education/Educate, i.e. SAVE.

SAVE

Solution: Instead of marketing the products, the focus needs to be shifted to a solution based approach. Basically, it means selling of benefits instead of just features.

Access: The idea here is not to disseminate the base location, but to create a cross-channel presence that considers a customer’s entire purchasing cycle/process and not just the place to seal the deal.

Customers want the business to be accessible and available as per their time of requirement, suitability, and a mutual assurance that you (the business) have their backs if something goes wrong.

Value: Compelling and convincing communication about the benefits rather than features is something that helps businesses gain pricing power. Thus, value based pricing holds a distinct advantage and has a better approach over competitive pricing.

Education: Educating prospects as to what the solution is and how it meets their unforeseen needs/requirements by interacting with the customers and evaluating their needs. Thus, providing information and advice to create a sense of familiarity and trust even before the purchase is made. In other words, educating prospects about the business solution attracts more than just promoting the product or service.

In a nutshell, the organizations that continue to embrace the fading model of 4Ps, run the potential risk of involving their business into a repetitive and increasingly unproductive competition.

As the customer has more say in the business-customer relation, embracing a framework that would reflect the actual concerns of the customers should possibly help marketers create and provide better value for the people and meet their needs.

Author : Kinshuk Chaturvedi

PGPM Class of 2017, Great Lakes