DESIGNING E-MONEY PRODUCTS THAT MEETS CUSTOMER NEEDS

RAMANATHAN SUBRAMANIAN

TECHNICAL ANALYST

PFIP March 20th 2012

What you already know

about your customer

What you could know about your

customer

Flow Of Content

• Mobile Money Omnibus Survey Findings

• Why Should FSP’s /MNOs Adopt a Customer Centric Approach

• Need To Connect Customer’s Profile – Segmenting, Targeting

and Positioning (STP)

• What Drives Customer Behavior And Choices – Psychology of

Customers

• Who Is My Target Customer and How Do I Communicate That

I am Different – Awareness Interest Desire Action Approach

• Below The Line Marketing

• Strategies To Achieve Scale – Bank Integration

• How can Utility Cos and Others reduce Collections Costs?

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Mobile Money Omnibus Survey

• Analyze the factors that prevent people from using MM services

• Inform PFIP and stakeholders on how to overcome subscriber reluctance

Objective

• 1020 Households

• Suva, Nasinu, Lami and Nausori in the East, and Nadi, Lautoka and Ba in the Western parts of Fiji

• Stratified sampling – proportionate representation from ethnic, age and gender

Methodology

• Comparison of Demographic Profiles of Users and Prospects

• Limiting Factors – Factors that prevent people from using the service

• Motivating Factors – Factors that will persuade them to subscribe or use the service more

Types of Analysis Conducted

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Major source of awareness is –‘Television’

Gap between Awareness and Action

MM is a ‘Money Transfer’ Product I don’t have relatives to send

money, so I don’t need It

Need for appropriate STP strategies as people relate to products differently based on their age, gender and location

67% of the MM Prospects (716) are in the income range

of 0 to FJD$20,000

43% cite ‘Convenience’ and 37% cite ‘Saves Time’ as the

biggest advantage of using MM

FINDINGS

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FINDINGS

I prefer cash over MM – 80%, I trust MM – less than 50% MM is not expensive – 40%

I need to know how it works –31% rank training at

community centers as critical – Below the Line Marketing

How does it benefit me? Show it, I will use it! – 37% ranked information as persuading

factor to use MM more

Are agents at Western Division, providing better service, well

located than Grater Suva? – Yes

I don’t need it, not interested, waste of time -- 33% of MM

Prospects (716) I don’t have the information and

knowledge to use or subscribe for it etc. – 32%

Niche Marketing and Targeting is critical for success – MM

cannot be sold as a Mass Market product

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Where Is the Omnibus Leading Us?

• ‘Straightjacket’ approach that fits all segments – not

effective

• Understand the behavioral variance across consumer

segments and adopt a customer centric approach

• STP strategy is critical as MM cannot be sold as a Mass

Market product unlike airtime

• Understand what drives customer behavior and

choices

• Differentiate the product lines and target messages

• Active customer usage and retention is possible

through ‘positive demonstration effects’ by BTL

Marketing

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Gro

wth

Commodity Premium Price Positioning

Historical Demand

Emerging Demand

Pre-Paid Schemes

Single SIM Phones

One SIM/phone per household

Post-Paid Schemes

Smart Phones Touch Phones

Multiple Phones/SIMs

Per H.H

Behavioral Variance Across Consumer Segments

Example of Behavioral Variance - Two kinds of migrant workers with significantly different preferences: one higher-income group that cares primarily about speed and convenience (willing to pay for it) and a lower-income group that cares about price (and will sacrifice speed and convenience). In this situation, two groups with the same need have different preferences, which calls for sub-segmentation.

Source: IBM Institute For Business Value 7

Why should FSP’s Adopt a Customer Centric Approach?

• Classic mass market is diminished but still pursued

• Hunting for cheapest product is still a popular

sport – ‘Commodity’ end

• On the ‘Premium’ end -- consumers are willing to

pay for convenience and good service

• Consumers grow older, earn more their

expectations change leading to further division of

customer segments

• Segmentation and focus on customer preferences

is the reality as customer profile evolves!

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Need To Connect To Customer’s Profile

Positioning -- Selecting a target market helps operators communicate effectively with consumers and position the service based on their

preferences.

Targeting -- Identify the target groups of customers likely to use the service by aligning the customer needs to the benefits of MM

Segmentation -- Identify the Pros and Cons of the existing services that customers use as alternatives to MM and follow the four steps in segmentation

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Evaluate Alternatives

Money Transfer Paying Bills Storing Money or Making Payments to Merchants

Remittance Cos Paying Online Easy to Pay By Cash from Wallet

Bus Cos House Maid or Security making bulk payment for the entire Apartment Building

Money in M-wallet doesn’t earn any interest

Post Offices Prefer Standing in Queue – Time taken Away from Work

Cash is accepted in all stores

Airtime Transfer Facility Time taken for M transactions is too long in comparison to cash

Friends and Family carrying Cash

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All Client Segments Cannot Be Satisfied!

• Different customer segments have different needs and preferences, it is impossible to market MM that addresses everyone equally well

First Step – Identify segment of clients for your biggest revenue earner (Money Transfer Services)

Second Step –Identify the motivations behind those making money transfers like parents, migrants, traders, employers

Third Step – Offer products that meet customer preferences, and motivates them to choose the MM product features

Fourth Step -- it is important to consider attitudes and perception towards – trust, advice, risk, etc.

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Fourth Step of Segmentation – Understanding What Drives Customer Behavior And Choices

• Tendency to defer choice is greater when the difference in

attractiveness among alternatives is small than large

(paying utility bills standing in queue Vs. MM)

• Behave more impulsively when outcomes of decisions will

be realized in near future than distant future

• Willing to accept a dramatically smaller immediate payoff

rather than waiting for a larger later payoff

• Examples – Want Vs. Need dilemma for shoppers –

– we buy ice cream, chocolates, (want items first) and

vegetables, groceries (should) items later 12

Online Grocery Shoppers

‘Need’– Purchase Later

‘Wants’– Purchase Now

Time

Longer the delay between placing an order and delivery,

the less he spends and the greater % of it is allotted for healthier items than for junk

Research:- Katherine Milkman, Wharton, ‘Hold the Vegetables: How 'Now vs. Later' Affects Customer Choice’ 13

In Fiji, this could apply to spending on want items such as ‘Kava’, cigarettes and grog and deferring payments on ‘need’ or should items such

as school fees for a later date

Principal cognitive bias that prevent consumers from

using MM is Status Quo Bias

• Tendency for people to stick with their prior

choices

• Powerful influence of default options

• People feel safer when they follow others’

examples

• Change is expensive – transitions costs influence

people to follow non-productive conventions,

behaviors

• Examples – standing in line and paying utility

bills, using family and friends for money transfer,

paying wages by cash involving lots of paperwork

Source: David De Meza, Financial Capability: A Behavioral Economics Perspective, Prepared for FSA 14

Successful Example – To Overcome Status Quo Bias

1) Analyzed Pros and Cons of Existing Alternatives 2) Identified the segment which offers the biggest revenue earning potential for the product 3) Identified the Biggest

Pain Point for the customer 4) Offered First One Product That Met ‘Core Preference’ of Customer 5) Communicated The Core Benefit To Target Audience

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Who Is My Target Customer?

• Criteria for selecting a target market

includes

– Existing penetration of airtime in the

market

– Expected volume of transactions per

product line in MM

– Compare current alternatives to the

different product lines in MM (acute

‘pain points’ that MM can solve)

– Possibilities of integrating this target

group to a bank account

– Is this potential target group

comprised of early adopters?

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How Am I Different From Others?

• Positioning -- Lays foundation for a successful marketing

campaign

• Strategy –

– Define the main benefit of the FSP/MNO

– Focus on the ‘Customer’s preferences’

• Single primary benefit is promoted based on the customer’s

emphasis on convenience, security, speed etc…

• Single benefit is easy to identify and associate with the brand

than promoting multiple benefits

• Horses For Courses -- Different positioning statements for

different customer groups based on their preferences

• Do not promote all product lines and benefits in one message

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How Do I Communicate That I am Different?

• Adopt AIDA Approach for each product line

• Communicate clearly the user benefit that

aligns with customer’s preference

• Be ‘specific’ about the benefit and target

audience

• Brand the service, it should also fit

with ‘Core’ brand

• Don’t talk before you can service –

– Partner with agents in the client

locations

– Ensure agents are trained and informed

about the product

– Ensure there is adequate liquidity with

agents for withdrawals

Attract the attention of the

customer

Raise customer interest by focusing on

and demonstrating advantages and

benefits

Convince customers that they want and desire the

product or service and that it will satisfy their

needs

Lead customers towards taking action and/or

purchase

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How Do I Bring ‘Cultural Shift’ From Physical Cash To E-Money?

Below The Line Marketing

Barefoot Agents

• Effective for

behavior change

• Ensure sales pitch

is prepared by the

FSP/MNO

• Pay facilitators

based on

registrations and

active usage

Promotions

• Incentivize customer usage – Bill Pay

• Use promotions for products types where ‘Status Quo’ Bias is maximum

• Incentives work best for ‘Repeat customers’ than ‘first-time’ customers

SMS

• Effective Retention

tool

• Deliver targeted

messages based on

customer data and

transaction history

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Strategies for Reaching Scale -- Target Aggregators

• Small Cos / Factories paying wages

• Monetary exchange between farmers,

middlemen, traders, exporters for goods

• Government transferring monthly payments

to staff (salaries), regular vendor contracts

• Increase the basket of ‘Payment’ services

that can be made through phone – Courts,

Utilities, Taxes, etc.

• Integration with Bank Account is critical for

sustained client MM usage and retention

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Example of Integration With Bank Account

• Nationwide Microbank – 97,700 clients

• ‘Push and Pull’ directly from bank account

• No Virtual Wallet, so customers earn interest

• Tangible benefit to customers

• Focused on ‘Below the Line’ Marketing to drive home

benefits (Feet on Street Agents)

• Widened both the ‘Basket of services’ and ‘Transaction

Points’ by targeting agents at concentration areas closer to

Target Segments

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Why Should Utility Cos, Hire Purchase Cos, Courts and Others Sign Up With MNOs?

Existing Bill Payment Method Bill Payment Through MM

Printing Costs SMS cost

Postage Costs SMS cost

Staff Time and Costs (Service Centers) for receiving payments

Report in 24 hours is sent by MNO on customers paid

Cost of reconciling the book of accounts

Can be reconciled with no marginal cost as customer due report and collection report is reconciled on a daily basis by the system

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Concluding Thoughts • MM cannot be sold as a Mass Market Product

• Choose target segment based on ‘volume of transactions’ not size of

‘customer base’

• Market MM’s primary benefit that aligns with customer preferences

• Active customer usage and retention is possible through ‘positive

demonstration effects’ by BTL Marketing

• Bank integration with MNOs is critical for achieving scale in the long

run

• Create a ecosystem of retail network partners, utility service

providers, banks, MNOs and clients for e-payments and MM products

to flourish

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VINAKA VAKA LEVU!

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