Product Design Challenge: Discovery Challenge:
Managing Partner, Blume Ventures
challenges. The risks may be huge but the efforts are not without hope, assomeinvestorsputit.“Mostsmall and medium businesses are outside the metros and that is a huge wave. (Small cities and towns) will be the next huge market that needs to be targeted.Butboththechallengeand the opportunity in this is that it is execution-heavy,” said Sanjay Nath, managingpartner,BlumeVentures, which has invested in m.paani, a marketing platform for local retailers to connect with consumers.
“There is definitely willingness to invest in such models,” said Vinod Murali, managing partner at Alteria Capital, India’s biggest venture debt fund with a corpus of Rs 1,000 crore. “It is no longer feasibletoignoretier2andtier3locations as viable markets. Some of the companies that have been established in larger metros have to go out to these smaller markets because the metros are saturated… From an investor’s perspective, there is better holding capacity for these companies and better differentiation so it is definitely interesting.”
ET explores how startups are building business models around challenges posed by the smaller markets.
Product design can be arrived at only if one is able to understand well the intended audience, believes Farid Ahsan, CEO of regional-language social networking app ShareChat. “Once we got our (audience) hypothesis in place, instead of building a full-fledged app we constantly tried to iterate. From January 2015 to October 2015, we made three pivots. We kept it lean and kept digging deeper,” he said. Almost 85% of ShareChat’s 3.5 million active users are from tier 2 and 3 regions and beyond.
Any technology product needs to fulfil a core need, becoming a ‘must-have’ for small town users than a ‘nice-to-have’ proposition. “We were very clear that a product designed for the metros cannot be used (in small towns),” said Kumar Abhishek, CEO of contactless payments solutions pro-
Ovider ToneTag. “This segment has limited resource. Do they have enough reason to switch to your product? The audience might as well say, I have a feature phone... I am happy paying in cash. The product has to be designed for that market.”
The trick is to think and live like the user you are serving, said Ahsan. “If you try accessing the internet from a tier 3 town, you won’t get seamless internet. We had to build a tech stack as good as WhatsApp—extremely reliable. The idea is to trust data over gut. Be the user yourself.” Akanksha Hazari did that and came up a progressive web app—a mobile web page similar to an app and consuming very less space and bandwidth. “With PWA, (we have an) opportunity to offer a much better experience than (interactive voice response),” said the CEO of m.paani. “Any brand has to go wherever the consumer is.” ptimisation of cost structures for smaller markets, especially on marketing, comes from identifying a ‘Below-The-Line’ marketing approach that avoids mass media. “Metro urban product service offerings focus on Above-The-Line (marketing via television, radio, etc). But for companies that are going inside smaller geographies, their focus is (Below-The-Line), where you do offline marketing, you go door-to-door, eventdriven marketing, which is not expensive,” said Murali of Alteria Capital. Another key approach in small markets is use of word-of-mouth to create awareness. “You need to have feet on the street to make this ecosystem audience more socially aware. Different hybrid campaigns including townhalls, leaflets and seminars to market the offerings are important. There is a certain cost structure and one has to invest in that. It’s not the same as taking an ad on TV or print,” said Blume Ventures’ Nath. “But the fact is that once you get into that, it is likely to be stickier because it has a tendency to get viral there. Word of mouth has better recall value and ensures more customer stickiness.”
Kannan’s brainwave to tie up with telcos to enable payments on Docsapp is just one of several ideas to tap into ‘habitual’ methods.
“Two things in India that have the maximum penetration are cigarettes and mobile phone recharge shops. We have this belief that people in small towns will not pay but at least 40 % of my paying customer base on a daily or monthly basis come from tier 3 towns and below,” said Kannan.
Testbook developed a scratch card-enabled payment system for its courses. Just like with the good old Airtel or Vodafone prepaid cards with concealed codes, Testbook’s students have to buy cards and text the code in it to ac-
Company: Testbook Investors: Matrix Partners India