Winning Customer Trust Is the Key to Wallet Share
In Middle India, trust is often the difference between winning and losing. In metros, and for top of the pyramid consumers, trust is relevant but not a huge issue for most categories. These consumers are willing to purchase from sites they encounter for the first time, buy insurance online and make payment transfers to another person just using a mobile payment request. The reasons are fairly straight forward. There is, a) the experience of having gone through something similar before that engenders trust and b) the consequence of something going wrong is pretty minor from a financial exposure standpoint. Middle India is new to many of these online transactions that rely on implicit trust and the consumer has a much lower risk threshold from a financial perspective. Therefore, trust needs to be earned especially for new solutions that involve a different process, lack a human interface and require the use of new technology.
For example, Razorpay made it a goal to win trust by providing useful content to small businesses in the rapidly changing landscape of payments and banking. In the process, they became a trusted voice on not just banking and payments, but on other evolving areas like small business online presence. Razorpay became their conduit to leveraging the changes in technology and business models that were sweeping the landscape. Even if a small business did not become a customer immediately, they began to trust Razorpay as a credible entity. And when they were ready to transact, Razorpay would be the first port of call.
Smartstaff had to earn the trust of blue-collar workers who have historically worked in a very opaque and low trust environment with businesses and contractors. But to win trust they had to provide something of value that the existing process did not. To start with, Smartstaff simply started providing a lot more visibility for workers on their mobile phones — visibility to incomes, pay-out time frames, shift schedules and pension fund visibility. PF in particular was a high engagement data point as most blue-collar workers hardly knew they were getting a pension accrual and had no idea how to check the balance. There were also cases of contractors withholding these pay-outs. This became a sticky feature with the app from a trust perspective
Middle India is a low trust environment for a new interface. Free content greases the skids in terms of providing some value while exposing the consumer to a new option. One alternative is to find a local human interface for the new technology. Meesho, for example, leverages the connections and local recognition of its women entrepreneurs to introduce end consumers to the company’s marketplace technology platform.
Over a period of time, trust becomes a big moat that competitors find difficult to negotiate. Trust is the gateway to a greater share of the wallet. As a result, any spending on gaining the trust needs to be seen as an investment with a long payback period.
Customers Do Not Trade Risk for Potential Upside
Middle India consumers are unsurprisingly risk averse when it comes to solutions that impact income. This does not mean that they are unwilling to spend or try new solutions. It just means that their first instinct is to try and protect their existing income stream and they are therefore often reluctant to take on risk that may impact their capacity to care and provide for their families. As Shashank from Dehaat discovered, the farmer was worried about the risk to his Rs 200 a day income stream despite recognizing the opportunity for upside with a new crop. Dehaat had to design an offering that created better balance between risk and upside. Winning companies go to great lengths to understand the spectrum of choices for the Middle India customer. No matter how good or useful the solution may be, understanding how it fits in with the risk/upside decision making process is a critical component of the product-market fit and a key ingredient to discover.
However, there are nuances to how the same person views risk. Kirana store owners, for example, seem to view risk with multiple lenses. They often pledge their entire family wealth and fortune to borrow money and open a kirana store at an investment of nearly Rs 2-3 lakh. This is a lot of money. While they seem to take on risk effortlessly to start the business, they are often unwilling to take transaction risks. This is not very surprising though. They do not necessarily see starting a kirana store as a lot of risk since they are familiar with the business and have seen many close relatives engaged in this. However, when it comes to transactions that require them to step out of their comfort zone and experiment with new technology and trade-off mechanisms that they are unfamiliar with, they tend to be conservative. For example, with a new product introduction, a kirana store owner may turn down the opportunity to carry a new noodles brand with 25–30 per cent higher margin over Nestle Maggi noodles, which offers 5 per cent. They will not take inventory risk on a new brand and the only way to make it work to give return guarantees. In contrast, modern trade (large retailers) happily takes this risk and work to market the product (end aisle display, instore ads etc.). Modern trade would see this as an opportunity for enhancing their margin structure and profitability. So, while there are millions of kirana stores for smaller brands to view as a channel, they need to factor this behaviour of returns risk exposure if they seek to leverage the kirana channel.
Transacting or Earning Frequency Tends to be Daily/ Weekly Versus Monthly/Annually
One of the key differences between the consumers at the top of the pyramid versus those from Middle India is the frequency of transactions. The Middle India consumer rarely buys in bulk. Probably food grains could be the only exception where they may buy provisions for the month; but all other categories like health and hygiene etc., are bought in limited quantity at different times of the month and never in excess quantities of what may they possibly consume in the next one week. If you go down the pyramid further, even food grains purchase is more at a weekly rather than monthly frequency. The frequency of buying clearly mirrors the frequency of their own earnings. In addition, it also points to the fact that savings are limited, and they would rather not dip into their savings to buy in bulk. Most of these consumers are on tight budgets where even a minor escalation in financial needs in a given month can trigger the need for borrowing at outrageously crippling rates or eat into their limited savings. As a result, the consumer is used to thinking about a daily and weekly consumption pattern rather than locking up cash to purchase, and hold, anything in excess of what they need immediately.
This manifests itself everywhere—pre-paid mobile phone time, sachets of CPG goods from shampoos to pickles, daily wages for cab drivers, weekly wages as factory workers etc. As such, a Middle India that earns between Rs 3 lakhs to Rs 8 lakhs, thinks of consumption in shorter cycles and smaller lot sizes. In addition, utility value rather than brand drives purchase decisions and hence the price points they expect are also very aggressive. Even if the underlying technology to deliver the product is the same, one needs to understand the consumption pattern of the Middle India consumer to get a sense for the type of product that will work.
Krazybee’s understanding of this dynamic played a big part in their success and growth momentum. They designed their product based on a clear understanding of their Middle India consumer’s need for monthly cash flow. By providing simple and fast small ticket loans (within 30 minutes in most cases) via their mobile platform, they solved cash flow issues for many consumers arising from lack of a consistent monthly salaried income.
Smartstaff realized that one of the main drivers of high attrition and absenteeism in manufacturing environments was just the lack of visibility into pay-outs and lack of confidence in contractors. Using their platform, Smartstaff has been able to convince employers to shift to weekly pay-outs for blue collar workers with strong results. Both attrition and absenteeism dropped significantly as workers began to see consistent income flow on a weekly basis. This was further bolstered by gamification and weekly bonuses.
(This extract is from ‘Winning Middle India: The Story of India’s New-Age Entrepreneurs’, by Bala Srinivasa and T.N. Hari. Published with permission from Penguin Random House India)
