Startup Idea - Marketplace for Unconventional Advertising

The Problem – Limited advertising options and increasing advertising budgets have led to steep rises in advertising rates of these options. This has affected the return advertisers can get on their advertising spend, at times making it unreasonable for them to do so.

The Solution/Startup Idea – A marketplace connecting sources of unconventional advertising with potential advertisers. This includes adverts in places like gyms, hotels, salons, educational campuses, residential areas etc.

Rationale – A host of unconventional advertising sources exist which are largely untapped. Tapping these would tend to bring down the advertising costs of advertisers, help them target better and also generate additional revenue of vendors of these new advertisement options.

Target Market –

Customers – Advertisers (especially local businesses, SMEs etc.); New vendors of advertisements (local options like gyms, schools, hotels, salons, spas etc. and online options like blogs, personal websites).

Geography – Global (launch can be in a particular city/country)

Current Competition – This unconventional advertising market is still untapped.

Competitive Advantage – The market is largely untapped. A first mover advantage can prove to be a significant competitive advantage. Also the volume and quality of the data will create barriers to entry in the future.

‘The Brexit Effect’ in Business

A human tendency we often tend to ignore in business is what I call the “Brexit effect”. This is when some people find fault with a product/service and spread their discontent to their near and dear ones. This tends to spread quickly and eventually becomes a movement. This may be a difficult task as negative feelings spread much faster than positive ones. The mood in this group of people becomes one of “we want change”, without assessing clearly the alternate they may be changing to. This effect can prove to be a big risk for any established business and must be addressed before it gains significant traction.

This effect may sound unreasonable and trivial. However, I feel this is the effect which has had serious implications on public decisions in the recent past (some events which we all know about ;) and is a problem established businesses are always grappling with.

The 3 Ways to Source Anything

All business processes have multiple components. These components involve products and services which can either be produced by the business itself (i.e. in-house production), sourced from a few specialized entities (i.e. outsourcing) or can be sourced from a large number of outsiders (i.e. crowd-sourcing). The advantages and disadvantages of each are given below:

In-house Production

-          It generally tends to be cheaper as the margin on those products/services are kept inhouse. Also the business has better control over the process and quality and hence is less dependent on outside entities.

-          The downside is that this option has higher fixed costs and the required skills may be missing in the production. Also this option is operationally challenging.

Outsourcing

-          The biggest advantage of this option is lower fixed costs. This ensures that the business is in a better position to handle business cycles. Also outsourcing to specialized entities tends to ensures better quality of products and services.

-          The downside is that the business becomes dependent on outsiders. As a result, gaps in information flow and  communication can emerge.

Crowd-Sourcing

-          This option is highly scalable and provides the business with large and cheap operational capacity.

-          The biggest drawback in this option is that quality control is a big challenge.

All 3 options can be used by any business. The business must assess its priorities and make a decision accordingly.

Scope of Fintech Products & Services

source: McKinsey & Company

The Price of a Haircut

A haircut is a necessity (for most) and is a repeat activity which we get done periodically. I have moved to Tilburg and have found the price of a haircut to be quite high here. I paid EUR 29 which is a big amount for a student like myself. This got me thinking how a haircut should be priced and what factors determine the price.

Pricing of a haircut can be fixed in 2 ways:

Fixed Pricing: This is what most barbers follow. The price is fixed for a haircut and differences exist based on the gender of the customer. This pricing strategy has its pros and cons.

-     It guarantees a fixed revenue to the barber irrespective of the hair characteristics of the customer.

-     The problem is that some hair is longer and denser and hence more difficult and time taking to cut. Hence the ones with such hair are subsidized by the customers with shorter hair.

-     Also there is no choice for the customer. It is a take it or leave it strategy for the customer.

Variable Pricing: Here prices are set based on a time based rate. A price per minute can be set and based on the time taken to cut hair of a customer, the final price can be determined. A minimum final price can be set to ensure that atleast a minimum revenue is generated on every haircut.

-     The benefit of this strategy is that all customers pay based on the same rate and no cross subsidization takes place, as in the above case.

-     Also this pricing considers the value of the haircut to the customer in setting the final price. If a customer has longer hair or wants a more styled haircut which will take a longer time, he/she has to pay more.

-     The drawback of this strategy is that it based on trust and there can be a trust issue between the barber and the customer. A customer may feel that the barber is deliberately taking longer than required for the haircut.

-     Also understanding the customer’s requirements before the actual haircut takes time. This time needs to be somehow taken into account into the pricing. This will be tricky.

To summarise, a haircut pricing is also an interesting and important strategy for a barber and should be decided so as to create good value both for the barber and the customer.

Other than the pricing strategy, the level of pricing also matters. It depends on the following factors:

Brand: Big branded chain of barbers command a premium.

Facilities: The more facilities offered by a barber can justify a premium pricing for the outlet. Facilities can include a good waiting area, hygiene, latest equipment etc.

Positioning: A focused positioning or targeting a niche can also justify a premium price for a barber. An example is my barber here in Tilburg. This is a place called De MeesterBarbier which is a men’s only barber. All facilities and designs inside are structured to please their target market, i.e. men. There are men’s magazines, musical equipment, drinks etc. which create a great customer experience and hence they can charge the high price for the haircut.

How to Come Up With a New Product Idea?

Key Metrics in E-Invoicing

Key Metric – Network Effects

E-invoicing is conversion of manual invoices into electronic ones. Sending and receiving electronic invoices is great as it saves time and effort for businesses.

Sending and receiving invoices in the same format, automatic tracking of receivables and payables, reconciliation, alerts on bad debts etc. are some of the benefits for users. Hence, for a user to fully enjoy the benefits, stakeholders in the supply chain should also avail the e-invoicing option and hence network effects has a strong role to play.

Secondary Metric – Cost Savings

As mentioned above as well, electronic invoicing helps businesses save time, effort and cost and also tends reduce the risk of any errors in the invoicing process. However, there is an investment which a user must make in terms of time and effort to switch to the e-invoicing option. The long term cost and time savings will be the major factor which will push the user to do so.

Key Metric in Robo-Advisory

Key Metric – Roll Over Rate

Robo-advisors invest people’s money based on an algorithm. Getting users to try out the service may be achieved through marketing efforts, but getting users to stay invested is the key for building a sustainable business. Hence, the rolling over of investments is the key metric for any robo-advisory startup. 

Key Metrics in Crowdfunding

Key Metric – Number of Investors on the Platform

Crowdfunding connects projects and investors. Project owners would tend to list their ads on maximum number of platforms as it might increase their chances of raising money. However, what matters for a platform to be successful and result in conversions is the number of investors on the platform.

The greater the number of investors, more project owners would get lured to the platform, the higher would be the chances of conversion which would then result in positive spiral resulting in more investors and projects.

Secondary Metric – Ratio of Investors to Campaigns on the Platform

New projects tend to bring in new investors from their own network. However, for a project to be successfully funded, the investors existing on the platform should be sufficient to fund a large part of the project. Hence, for a platform to show a high campaign success rate, the ratio of investors to projects should be as high as possible. 

ADVISORY – Interesting Startup Trend for 2017

What is the winning formula for generating a business idea? Identify a problem and find a solution for it. Soon you see multiple startups in the rat race trying to offer better solutions to gain a share of the market. Now what this has led to is another problem, one which gets very little attention. For a user, there are so many options to choose from. Which one to go for?

This is where I feel an Advisor has a big role to play. An advisor, who should be the one in direct touch with user, has the responsibility of understanding the user’s exact requirement and suggesting products based on it. This decision making dilemma of users is the problem where the role of the advisor become useful. This, according to me, holds true for any industry, any requirement, B2B & B2C and so on.

Some issues I see with this model are:

Cost: An advisor needs to make money and this may add to the cost a user has to pay. However I feel finding a better solution for the problem might be more valuable than this cost for a user.

Conflict of Interest: This probably is a bigger problem and might lead to trust issues with the user. Some advisors might try to push those products where they get better commissions/make more money. This would be detrimental to the interest of the user. Giving independent and genuine advice is the need for a user and this must be the underlying premise for any advising service.

The OILS Framework for Growth Hacking

Growth Hacking is a now a commonly used term which basically involves generating growth in the most efficient and cost effective way. The idea is to come up with hacks which are focused and targeted to end users so as to get the best ROI on any resources spent.

The OILS Framework is a good way to come up with hacks which may aid growth of the business.

O – OLVP Definition: This involves defining the One Line Value Proposition of the company.

I – Identify Target Customer: Here based on the OLVP defined, the target customer is identified precisely.

L – Locate Customer: The above identified customer is analyzed and frequented locations and behavior is located.

S – Select Channels to Target: Based on the above locations identified, some channels are selected and targeted to reach out to these customers.

Hacks generated from the framework have to be tested and analyzed over time to judge the effectiveness and outcome of the same.

THE OLVP - One Line Value Proposition

An OLVP is a description of the offering of a startup in 1 sentence. If the OLVP is blur or cannot be written in 1 sentence, this tends to signal that there may be some ambiguity in what the startup has to offer to its customers.

An example of an OLVP is:



TransferWise: A money transfer service for immigrants to send money at cheaper rates.

Defining an Investor

Just like companies, investors are also different and have unique characteristics which define them. Companies looking to offer services or pitch to investors should understand the nature of the investor to have a better chance of being able to do so.

The following are the characteristics which define an investor:

Type of Investor: Individual or Institutional

If Institutional,

Structure of Firm: Type of firm, Organizational structure

Registration Details: Governing rules, Tax implications

Nature of Work: Personal investment or Investment company

Background of Team/Person: Skills, Experience

Risk Appetite: High/Medium/Low, Acceptable value at risk, Attitude towards loss (loss is bad, loss teaches you, its ok it happens)

Return Expectations: Any particular expectations, Goals in mind

Type of Investments: Ratio of investable amount to annual income (refer to Hierarchy of Personal Investments), Active or Passive investments, Time commitment, Term of investment

New Year Resolutions for Fintech for 2017

The year 2017 will play an important role in the growth of Fintech. Some of the resolutions which will drive growth in this area are:

Address security concerns & strengthen backend infrastructure – both in the transaction as well as the platform. Businesses involving online transfers of money such as e-payments, online money transfers and crowdfunding carry the most risk.

Scale to compete with incumbents – scale will lead to economies which will further drive competitiveness.

Adhere to new regulation – with the rise of Fintech, regulators are becoming active in order to stay ahead of the curve. Fintech startups must find the right balance between providing a value-added service and adhering to regulation.

Build a profitable business model – building a profitable business is a necessity as it is not possible to forceful tactics to drive incumbents out of the market.

Enhance customer experience by ensuring promises are delivered – to get a foot into this space, a very high standard of service is required.

Enhanced usage of the blockchain – the advantages of a distributed ledger must be utilized as a tool to deliver enhanced value and build differentiation.

The Hierarchy of Personal Investments

Just like we have Maslow’s Hierarchy when it comes to human needs and desires, I feel personal investments also follow a hierarchy based on the total amount of money available for investments.

The Base

When a person’s income starts exceeding expenses, that person may start looking for investing this surplus. At this stage, this person tends to be very cautious and invests with a motive of reducing risk on the capital invested.

Suggested Investments – Bonds, Fixed Deposits

The Shift

This is when the person’s surplus keeps growing and the person now starts thinking about being more aggressive with investments. A shift is seen in the investment approach of the person and investments with higher risk are typically looked at in this phase.

Suggested Investments – Mutual Funds, Real Estate

The Acceleration

Once the person starts saving more money, the risk appetite of the person starts going up at an increasing pace. The demand for greater returns drives the investing approach in this stage.

Suggested Investments – Stocks, Currencies, ETFs, REITs, Commodities, Indices, Bitcoin

The Peak

At this stage, the person starts looking at not only passive investing as above, but may actually start looking at active investments as well. The aim is to maximize returns using money and active participation in the asset operations and growth.

Suggested Investments – Crowd-Funding, Private Equity

My Strongest Addiction

Startups and Entrepreneurship have become an addiction for me. Looking for pain-points in daily life and thinking of how to do things better tends to keep me constantly occupied. I am hoping that the MBA I am pursuing now can help me look beyond, look at the broader picture, learn new and useful skills and give me a perspective which I am devoid of at present.

#startuplove #thinkbeyond

Key Metric – Landing Page Bounce Rate

The Landing Page Bounce Rate (LPBR) is a key metric in user conversions. This measures the percentage of people who leave soon after landing on your website. The only page the visitor interacts with is the landing page and that too for a short time.

Implications of a high landing page bounce rate can be:

Poor targeting of ad placements: If ad placements are not targeted well, visitors coming onto the portal may not be relevant and hence may decide to leave quickly.

Poor user experience: Visitors might be relevant but poor design may drive them away. This might be due to visitors not being able to completely understand the offering of the business. Another reason can be that these visitors may not want to trust the website due to this first experience.

Depends of landing page: A low landing page bounce rate may not be considered bad always. For example, if a user lands onto the contact us pages of a website, he/she might just want the number or email id and would leave upon getting the same.

The effect of a high LPBR is that it tends to reduce your ROAS, i.e. return on advertising spend. As a business, you should try to place your advertisements in relevant spots so that leads generated are relevant and useful for your business.

The best example for this is the Nigerian email scam. It is a fraud where a person gets an email such as below:

The aim of the fraud is that the person receiving the email gets interested in the ‘free money’ offered by the sender, replies back and after a few communications shares his/her bank details.

The email draft above is so direct and clearly smells of fraud. So I used to wonder why does the sender draft an email like this which looks so obvious? The reasoning behind this is ingenious. The sender of this email wants to target only those people who are very gullible and greedy and will even reply back to such an email. In a way, this email which clearly smells of fraud is a filter to weed out people who are highly gullible and will fall for something like this. Their aim is to reduce the bounce rate of people replying back so that they can concentrate only on the ones who potentially can fall for the fraud.

Robo Advisory – An opportunity which is here to stay

If you spoke about investing your money in stocks, bonds etc., you always had to read up to take calls or had to look for financial advisers to help you with the same. The first option was risky and time consuming as you had only limited knowledge and the second one was expensive.

In came the age of Robo-Advisors, i.e. online algorithms which understand your investment requirements and structure your portfolio accordingly. Robo-adviros were able to add value to the retail investing ecosystem in many ways.

Value created for Users

-     Cheaper & Less Prone to Errors: because of low human involvement in the process. Fees generally lie in between the 0.3-0.5% range, as compared to fees of financial advisors which tend to be over 1% depending on the portfolio size

-     User Control & Transparency: users are in control of their investments and can easily track their portfolio

-     User Experience: most platforms offer users a very ‘human-like’ interactive platform

Value created for the Platform

-     Scalable: scaling is easier with an automated platform. No (or very little) additional resources would be required when adding users

-     Incremental Improvements: an algorithm can be tried, tested and improved upon incrementally. Human advice has more subjectivity and is more difficult to do so

Now that we see that there is value created for users, we can work out some use cases for robo-advisory. Use cases can be based on end use or a potential user.

Use Cases based on End Use:

Event driven: users may want to save up for some future event such as a child’s wedding, a child’s education etc.

Future purchase driven: users may want to save money to buy something in the future like a house, assets like jewellery, assets to start a business and so on.

Personal goals driven: users may want to start saving and investing their money to grow personal wealth or save for retirement or saving for an emergency etc.

Use Cases based on Potential Customers:

Young people in a job: looking to grow personal savings, buying assets like house and jewellery

Parents: wanting to invest for their children’s education, marriage

Aging people: looking to plan their retirement

The User Acquisition Funnel for Crowd-Funding Platforms

A crowd-funding platform is a 2 sided platform requiring fund raisers and funders to function effectively. Hence users include people who are looking to raise funds and people who are looking to fund projects.

The User Acquisition Funnel comprises of 3 parts:

-          Inviting

-          Engaging

-          Acquiring

PHASE 1: INVITING

This is the first step of the funnel where the platform uses different advertising strategies to pull in traffic.

Goal for this Phase: To get ‘desired traffic’

Here desired refers to what you quantify as traffic. Some platforms may consider all traffic received desired traffic. Others may want users to fill in a small interest form (maybe just name, email id, whether investor or startup etc.) to qualify as a lead received.

Action for this Phase:

Platforms need to draw out various use cases and use different advertising media to reach out to them. 

For example, an equity crowd-funding may be interested in very early stage startups and may reach out to accountants who assist in company incorporation. To get investors, platforms can reach out to seed investors and HNIs through professional networks. Scraping data from other platforms is also a good strategy to collect data and leads.

Important Metrics:

Customer Acquisition Cost (CAC): As defined above, you start by defining what a conversion is. For example, a visitor to the platform may be a conversion or a visitor having filled out a form on the platform may be a conversion. Then CAC has to be worked out based on the following:

Advertising Strategy Wise: assess the marketing spend on different media like SEO, SEM, Social, Guest Blogging etc. and calculate the CAC figure for each separately

Target Market Wise: do the same for different users targeted. For instance in the case of rewards crowd-funding, calculate CAC for film producers, technology product creators etc. separately.

Handy Tools to Use: GoogleAnalytics, Kissmetrics

PHASE 2: ENGAGING

This phase is about engaging the conversions from Phase 1.

Goal for this Phase:  To engage conversion from above.

Action for this Phase:

The best way to engage visitors is to give good and relevant content to them.

The content should be structured based on the nature of the visitors. If they are informed about the product, i.e. they are better qualified leads, showing them projects live on the platform, success stories, customer testimonials, FAQs & terms and conditions of the platform (in a concise and visually appealing manner) should suffice.

For informed visitors, i.e. if leads are totally raw and not qualified, you should start off by defining what solution your platform is giving in very clear layman terms. An example for a potential investor can be ‘earn higher returns than stocks or bonds’ or for a fund-raiser can be ‘raise money in 24% of the time required to raise seed funding’. After this, you need to clearly explain the benefits of the platform with facts and statistics to back this. Thereafter, you show the other content, same as in the case of the informed visitors. Since these uninformed visitors generally tend to enter the platform without sharing any details. Their data should be captured so that push marketing techniques can be used to bring them back if they leave. Filling up forms to download ebooks, guides, webinars etc. is a common trick to do this.

Content is the best way to build trust and must highlight all the factors which affect trust building with the platform. Data and monetary security is a big factor and must be addressed clearly with no ambiguity for the user. Tools such as chat should be used to ensure a continuous interaction of the platform and the user.

Important Metrics:

User Behavior: User flow on the platform must be analysed to see how closely it resembles what the platform had thought it would be. Here different metrics of importance include

-          User flow (planned vs. actual)

-          Pages viewed per user

-          Time spent on different pages

-          Total time spent/invested by users on the platform

-          Drop off rate at different points of the user flow

Content Metrics: To assess the performance of the content offered to users, the following metrics can be used

-          Times accessed (as a percentage of total users reaching it)

-          Time spent on it (if it is an online read)

-          Shared through Social Media etc. (if sharing option exists)

Handy Tools to Use: Kissmetrics, Zendesk Chat

PHASE 3: ACQUIRING

Here the user makes the desired interaction with the website.

Goal for this Phase: Users makes the interaction desired.

For example in an equity crowd-funding platform, a startup starts a fund raising campaign or an investor makes a commitment to a project.

Action for this Phase:

This step is about customer onboarding. The platform needs to guide the user step by step as to what has to be done. Information and help must be provided and also tools like chat can prove useful to ensure successful onboarding. The platform should also integrate tools to get back any users who abandon the process half way. For example if a startup founder is filling up a new campaign form and leaves the process half way, a reminder email can be sent to bring back this user.

Important Metrics:

User Flow: Since the user acquisition funnel completes in this stage, the following metrics to be assessed based on different advertising strategies deployed and different potential users targeted

-          Final conversion rate for the whole funnel

-          Total time taken to convert for the whole funnel

-          Drop off points of users in the funnel

-          Pages viewed and time spent on them

-          Step at which final conversion happens. Users may skip certain parts and reach this final          step directly.

-          Usage of different tools used (like chat)

Complete vs. Partial Acquisition: Here user abandonment during the onboarding stage needs to be studied. High abandonment may imply a long or unclear form, confusing terms and conditions etc.

Handy Tools to Use: Kissmetrics, Zendesk Chat

Thin File Customers – Who are they?

A person having a thin credit file, i.e. insignificant or no credit history, is referred to as a thin file customer. Traditionally credit has been offered based on the credit history of a person. However, this has led to a large part of the population across the world not having access to credit. Credit scorers have now started using alternative criteria such as online social and professional networks, education, earning potential, mobile connections, utility connections etc. to bridge this gap and come up with a rating for thin file customers.

Some thin file customers can include the following:

Students – School and college students tend to have no previous credit history.

Young Graduates – People in their first job or looking for a job may not find it easy to get credit.

Immigrants – An immigrant to a country will not have a credit history in that country and may find it difficult getting a loan.

Older Generations – Credit was considered risky by the older generation and was avoided as much as possible. Hence a lot of the older people tend to have very thin credit files.

Housewives – In developing countries especially, housewives tend to have little credit history as most loans are taken by their fathers or husbands.

People in Small Cities &Rural Areas – People residing in smaller cities and rural areas get loans from local money lenders and friends & family in cash, which largely remains unaccounted for. Hence they are not able to build up their credit files.

Startups & SMEs – Even in the corporate sector, new companies tend to have lower credit histories and find it difficult to obtain loans from financial institutions. Additional security like a collateral is required in most cases.

The ‘6 Whats’ Problem Solving Framework

Having a framework for problem solving is important as often we wonder where and how to start. The '6 Whats' Framework is a a good one which helps you think through the problem and act accordingly.

What is the problem?

Stating the problem statement precisely is very important. Try to keep it as simple and straight forward as possible. Confused or unclear problem statements can lead to deviation from the core pain-point.

An example is “Conversion rate of free customers to paid customers is going down”

What does the problem mean?

Define all terms in the problem statement to ensure the problem is clearly defined and well understood. This is particularly important for the sake of all members of the team who are working on this problem.

In the above example, conversion rate needs to be defined very clearly. Also what going down means needs to be clearly defined.

What is the goal of a solution?

If you do not know the solution, you cannot work towards it. Again what is important is a clear definition of the solution. Clarity is key.

In the above example, a solution can be “Stopping the fall in the conversion rate and put it in an increasing trend”

What factors drive the solution?

This is where the analysis happens. You need to take the various terms of the problem statement and analyse them thoroughly. Different causal factors need to be identified and corrections need to be worked out. Analysis should be as microscopic and detailed to ensure that good causality and correlations are found. Once these factors are found, try to address them by offering different solutions.

In the above example, reasons for conversion rates need to be assessed. Data should be broken down and looked at in detail. The more detailed you get, the better would be the understanding of the problem.

What should you do now?

The implementation plan is the next step. Solutions worked out above need to be implemented with a plan in mind. Implementing incrementally is a good idea so that assessment can be made about the results of the same.

In the above example, if we analyze that making the free signup more detailed and changing the paid plans are 2 solutions, we should implement one first.

What are the developments?

The key is to implement and assess and then implement and then assess again. Implementing incrementally gives you the benefit of being able to assess each possible solution you implement. 

Quote About Decision Making