What the heck is "Wallet Marketing"?

Of course, I am not talking about the wallet you carry everyday. 

Suddenly, everyone around is talking about wallets. Paytm has a wallet, Jabong has one, Freecharge has one, Myntra and even Airtel and others have their own wallets. You might smile and say - Subhendu, I know this.

What we might not know is what are these wallets doing. They are bringing in a gradual change in our spending patterns, our mindset and the best part is we aren't even noticing. That is the beauty of wallet marketing. Let us understand what is wallet marketing all about.

Wallet Marketing

Few years back when ecommerce was in the early days, early movers used to refund money directly to your credit card or bank accounts in case you returned their products for reasons whatsoever. Slowly they realized, they were bleeding money to payment gateways twice and that too for no-sale no-gain transactions. And worse, customers never gave them a second chance but went straight to competition instead. The problem did not stop at that. With competition intensifying gradually and new players coming in with deep (or deeper) pockets, while cost of customer acquisition went up, revenues per customer started going down. The only way to maintain or improve the margins was to ensure enough spending by a customer once he was acquired.

And that is when Wallets came in. The core objective stayed firm - Get an upfront commitment from the customer, lock him for a longer period to extract maximum value from him, keep the acquisition costs in control and most importantly, change the behavioural pattern of the customers and increase their propensity to spend. But they could not tell you this, they sold the concepts of "convenience" (If you have money in your wallet - you can buy this in one-click) and "security" (Your money is safe in your wallet). And we bought it.

Wallets are bringing in a paradigm shift in customer behaviour by increasing their propensity to spend.

How does Wallet Marketing work?

Marketers started experimenting with diverse formats of wallet marketing. It was clear that customers had to be lured into putting money into their wallets and then spend, rather than spending directly by card for every transaction. Thus you were offered discounts to load your wallet. Why else would someone pay you (money) to move your money from one bucket (bank account) to the other (wallet) if not for the upfront commitment. If you return a product, no worries - money is safe in your wallet so that you can try to choose another product at a later time. If you are unhappy and the company wants to pacify you, they offered credits into your wallet. So far so good. People were getting used to wallets and no one complained. They knew their money is with them only - they could buy whatever they wanted anyway. And by this time, the behaviour change had already set in.

Customers (you and I) started forgetting that when we put money in the wallet, it does not grow as it would have been in a bank account. Second, we almost gave up on that money. Please don't raise your eyebrows - we gave up on the money because we knew we have to spend it anyhow in this website. Even if it meant adding some more money into wallet to buy another product beyond wallet balance.

But marketers don't stop at anything. The continued the experimentation further. They were tired of waiting for the customer to make the purchase and they wanted to shake it up a bit. They introduced expiry dates. If the wallet points are not used up by this date, they would lapse - sometimes in part, sometimes full. And customers obeyed.

Expiry dates in Wallets speed up buying decisions

The marketers achieved what they had wished for - locking the customer by their own money and also being able to make them stir into action, reduce the buying decision cycle. And then the different formats of wallet marketing started getting introduced.

Other Formats of Wallet Marketing

1. Paper Coupons (Sodexho and many others) - I believe most of the folks in India would know about Sodexho; it is a brilliant business model. You get Sodexho or any other meal pass paper coupon as part of your monthly salary from your employer and you get a tax benefit since that gets clubbed as a perk from the employer. The moment you opted for Sodexho instead of salary, that very same moment you gave up on the money. And Sodexho drives you to spend it - You can't store it because they would expire anyway. And you don't earn any interest on that either :) I say Sodexho is a brilliant business model because in all other cases VCs had to pay you the discounts so you loaded your wallet. Here Sodexho leveraged the income tax (you can save) as the bait.
2. Pre-Paid Cards & Loyalty Cards - Businesses who already had Loyalty cards were quick to adapt to this wallet marketing technique. All they had to do was to say you can top-up your card sometimes at a discount or sometimes with an upfront commitment to purchase. Big Bazaar retail chain in India did this when it launched the plan - You pay for groceries for 11 months and we pay for the 12th. The same scheme was adopted by leading jewellery chain - Tanishq and then many others followed suit. The only thing to acknowledge are two facts - you gave up on the money when you signed up for the offer and the brand gets a commitment and upfront payment.
3. Joint Branded Cards - Marketers take it to the next level. You don't have to commit to buying only one brand, we expand the choices. Payback is a classic example. You can spend it anywhere but you have to spend it. It is not necessarily a wallet (yet) because they do not allow you to load money into payback but you never know when they start allowing it. And when they do, you now know why they did. There are other cards such as RBL Bank credit card - You make a minimum transaction every month and then you get few Bookmyshow coupons, few KFC and few Pizza hut coupons. The deal is surely attractive but the company is smartly altering the spending patterns by forcing you to spend a fixed amount every month. And sometimes, you pay them to force you (By paying upfront card processing charges) That's smart marketing :)
4.  Cashbacks - Paytm uses this extensively. And it reaps rich dividends for that too because customers buy from Paytm since they know there are diverse options to choose from while spending their buyback credits.

I am a marketer. And Wallet Marketing is incredible. And the best part for marketers is that it is still evolving. The question marketers now need to ask - How do I leverage Wallet marketing into my marketing strategy? B2B Marketers might need to think on this a bit harder. 

What do you think? Are you a customer whose behaviour has been changed by wallet marketing or you are a marketer who has already started thinking how to leverage this?

As for me, I am both.

Cheers,
Subhendu