How to build Digital-first Brands: The Flipkart Story

June 27, 2020
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Trishul, Kumaon range in Himalayas [credit: link]

Everyone in the startup ecosystem has heard about the main Flipkart story… and it is a fascinating story because it had many interesting characters, a lot of suspense and many sub-plots. Flipkart’s efforts to build a brand that was accessible to all Indians — not just to consumers in metros but also to consumers in Tier 2, 3, 4 cities across India — was a wonderful sub-plot. Shoumyan Biswas spent six fruitful years with Flipkart between 2013 and 2019 and was the Chief Marketing Officer (CMO) for Flipkart starting 2017 and CMO and Business Head of Loyalty, Partnerships & Advertising for Flipkart towards the end. We requested Shoumyan to share details about this aspect of Flipkart’s journey.

The insightful conversation in its entirety can be view below:

Or, you can scan through the main points from the conversation below.

At a high-level, Flipkart’s pre-Walmart acquisition journey can be divided into three phases:

  • Phase 1 was the foundational phase between 2008 and 2014. Flipkart initially focused on selling books, building India-wide distribution network, and providing great customer experience to early adopters of the service. After cracking that, Flipkart expanded to electronics in 2011 and acquired Myntra in 2014. Flipkart held its first Big Billion Day sale in 2014.
  • Phase 2 was the intense competition phase: Amazon launched its marketplace in India in 2013 and, in 2014, announced that it will invest at least $2B to grow its footprint in India. So, the race to dominate Indian e-commerce started in earnest in 2014. Between 2015 and 2017, there was an intense fight between Flipkart and Amazon.
  • Phase 3: By early 2018, it was becoming clear that Flipkart would be able to hold its ground against the much larger and much stronger competitor. This led to the consolidation phase for Flipkart. In this phase, it was important for Flipkart to strengthen its lead and to ensure that the advantage does not slip away.

Phase 1

In the first phase, Flipkart had laid for building a strong brand by focusing on providing great customer experience. Flipkart also used Cash-on-Delivery (CoD) to build trust with customers.

Shoumyan mentioned three lessons and guidelines from these early efforts:

[1]

For digital-first brands (and increasing for all brands), “brand” is what one consumer tells another about the company (as opposed to pre-social media days when “brand” used to be what companies proclaimed themselves to be).

What used to be one-way communication from brands to consumers two decades ago has evolved into two-way communication between brands and consumers. Social media has not only provided a voice to the consumers but have also increased their circle of influence. This implies that brands need to consciously shape consumer narrative around the brand.

Based on this understanding, Flipkart’s marketing team had dual charter:

1. Make people transact with the brand

2. Make people to talk about the brand

Flipkart consciously worked to drive conversations about Flipkart amongst consumers.

[2] Brands — just like two human beings — go through stages of evolution. These stages are:

Unknown → Known → Known for something → Trusted → Loved

While building brands, marketers should not use marketing activities only for tactical reasons (e.g., using TV commercials to build awareness or leveraging discounts to get volumes). A strategic approach is to align the actions with the stage of the brand.

How did Flipkart move across these stages?

  • Unknown → Known: Flipkart relied on superior quality of service and concomitant word-of-mouth in the initial stages. In the next stage, Flipkart leveraged performance marketing and communication channels (including advertising). This is when Flipkart identified the “kidult” theme (kids shown as grownup adults).
  • Known → Known for something: Flipkart worked on making itself a destination for online shopping that was as easy as a child’s play. It also promoted itself as the destination for buying the latest and the coolest smartphones.
  • Known for something → Trusted: Flipkart worked to communicate that consumers can’t go wrong with Flipkart. In order to make itself as a trusted destination for e-commerce across the whole country, Flipkart emphasized cash-on-delivery, original products, etc. This was reiterated by the “Flipkart Assured” program and supported by the “Flipkart matlab bilkul pakka” campaign.
  • Trusted → Loved: It is important to move beyond the transactional value for this phase. Flipkart did this by thoughtfully identifying the “purpose” context that was aligned with its mission. Flipkart emphasized that it was an Indian brand that stood for everything that makes India progressive. For example, Flipkart embraced diversity of India. Shoumyan mentioned that one of his favorite themes of this phase were the “Penguin dad” campaign that celebrated fathers helping out their wives by sharing the parenting responsibilities.

How can a brand measure whether or not it is making progress across these stages? Shoumyan mentioned the following metrics:

  • Unknown → Known: search volume, top-of-mind recall, and spontaneous recall (brand should be amongst the top 3–4 most aware players in the chosen category).
  • Known → Known for something: consumer perception on key attributes (in order to measure that Flipkart as the destination for the coolest/latest smartphones, the scores should be the highest amongst all players), social NPS (to reflect that consumer voice is building up), acquisition funnel measures (for example, CAC and cost-of-installs should decrease).
  • Known for something → Trusted: measurement about trust attributes and levers (whether they are going up or not; for example, what percentage of sales come from “Flipkart assured”, “original products”, etc. anchors). Also, in this stage, spontaneous recall should be in mid- to late-90s and almost everyone should knows what the brand stands for. In addition, the brand should get higher repeats leading to higher LTV (life-time value) of customers.
  • Trusted → Loved: customers should become more forgiving of mistakes and less price sensitive.

[3] Non-digital (“traditional”) brands operate with the think-do-think model; however, digital-first brands need to adopt do-think-do model of execution. This is because, unlike traditional brands (say, FMCG brands), launch of a product can take 18 months. Digital world moves much faster and, therefore, digital-first brands need to “fail fast and learn faster”.

Phase 2

In 2015, Flipkart had ~45% marketshare while Amazon had ~10% marketshare. This changed dramatically in 2016: Flipkart’s share reduced to ~35%, Amazon grew to ~25%. Flipkart was rapidly losing the marketshare to Amazon… and, from the outside, it looked like Amazon might win the war. But then something changed. Flipkart was not only able to hold on to its marketshare and but slowly increase it. What triggered this turnaround?

Shoumyan pointed out that Flipkart started by turnaround by fixing the mistakes that had crept into its consumer strategy. In order to improve unit economics (to move quicker towards profitability) and to enhance its reach, Flipkart had adopted the marketplace strategy for expansion. However, the marketplace strategy (due to lack of oversight and control) caused the user experience to degrade and for consumer trust to get eroded (to an extent). This is what provided a foothold to the competitors.

Flipkart recognized these mistakes and adopted three-pronged strategy to fix this and move forward:

  1. Getting focus back
  2. Get more out of less
  3. Relentless execution

[1] Getting focus back

First and foremost, Flipkart decided to focus on value-seeking, middle India consumers. As a result of this focus, Flipkart changed its focus on categories, products, etc. Shoumyan pointed out that any strategy has two parts: what you will do and what you will not do. As a consequence of focus on middle India consumers, Flipkart consciously decided to not fight the battle for experience-seeking affluent consumers in Tier 1 cities.

Even more importantly, Flipkart really understood what value meant: it meant more benefits for a given price. And, importantly, it didn’t mean the lowest price and it didn’t mean the biggest discount. As a result, Flipkart explore how to provide more benefits for a given price-point (instead of working towards reducing the price points).

This influenced not only the Flipkart product user experience but also helped identify the right promotional model. It also helped Flipkart prioritize entry into consumer finance and other Fintech products.

As an example, Shoumayn’s talked about “Itne mein itna” campaign during this phase, which emphasized more benefits for a given price point.

[2] Getting more out of less

To get more out of less, Flipkart used a 2x2 matrix with effectiveness and efficiency. This helped Flipkart track the effectiveness and efficiency of marketing spends across social media (engagement rate vs cost of engagement), performance marketing (cost-per install vs average revenue per install over 14 day period), etc.

Flipkart used this matrix to double-down on channels and activities that were yielding results while eliminating those that were not. It helped to figure out which sources maximized effectiveness while increasing efficiency.

It was also used for allocating marketing (Search Engine Marketing) budget across different categories. For each category, SEM spends were plotted against RPC (revenue per click). Flipkart found that for each category, there are specific levels of SEM spends for which RPC gets maximized; beyond this threshold, the marketing spends yield diminishing returns.

Flipkart used this mechanism to optimize its SEM spends. During this intense competition period, Flipkart found that the competitors — despite spending four times more advertising money — had got only 20% additional boost in revenue.

[3] Relentless execution

Core values in the marketing team: Creative excellence, Frugality, and Marketing Innovation.

For brand marketing perspective, creative excellence is critical because if creative is good, it helps the company to achieve its goal by spend less money. If the message is sharp, brand can get the same effect with lower budget. The other way to eliminate misattribution is to pick a unique “device” or theme. For Flipkart, kidadults device helped it to cut through all the clutter.

Frugality has two aspects: how to “get more out of less” and how to reduce ineffective spends. Frugality also meant being data-driven about measuring effectiveness of the marketing activities.

Flipkart really pushed the boundaries in marketing innovation and continuously experimented with new things. Shoumyan pointed out that, at one point, almost half of new innovations done by Google and Facebook were done in collaboration with Flipkart. As an example, Flipkart took personalization to the next level by creating more than 3 million personalized video assets. This helped to improve conversion by 45%!

Phase 3

After establishing and retaining lead over Amazon, it would have been tempting to take the foot off the pedal. But Flipkart didn’t do this. Flipkart, instead, consolidated its lead and ensured that its advantage didn’t slip away. What did Flipkart do to become more efficient and more effective during this period?

Flipkart ensured that the — though the victory was celebrated — it didn’t make Flipkart lose the focus or to let complacency set in.

First, Flipkart worked to strengthen the customer funnel and explored how it can engage users better to increase customer LTV.

This was done after segmenting the users and developing a clear understanding of customer requirements. Flipkart used behavioral customer segmentation process. Shoumyan pointed out that any customer segmentation mechanism (based on demographics, psychographics, etc.) can be used as long as it provides Mutually Exclusive and Collectively Exhaustive (MECE) segments. Another important requirement is that the segments should be targetable and actionable.

Flipkart used the behavioral segmentation to divide consumers into 5 segments:

1. Browsers,

2. Lapsers,

3. Light users,

4. Heavy users, and

5. Super-heavy users.

Behavioral segments were created on the basis of Frequency and AOV (Average Order Value). Shoumyan pointed out that it would be create behavioral segments using contribution margin (in addition to AOV) in order to assess whether the customers were value building or value eroding.

Based on customer segments, Flipkart knew how to engage with the customers and what were the key tasks they wanted to achieve. For example:

  • Browsers and lapsers: acquire more new users or re-acquire old users (and engage them to deliver the initial value)
  • Light users and Heavy users: drive more usage by increasing frequency of purchases
  • Heavy user and Super-heavy users: make them upgrade to higher order products and make them buy across categories

For each of these segments, Flipkart created separate marketing programs and defined the relevant metrics. For the browsers and lapsers, Flipkart marketing team designed acquisition programs and reactivation programs. For the light users and heavy users, Flipkart designed upsell/cross-sell program and created loyalty program. And so on. Overall, the goal was to make it easier for Flipkart to acquire users and then move them faster across the customer journey (from light to heavy to super-heavy users). In parallel, the goals was to make the customer bucket less leaky and to reduce the number of lapsers.

Second, Flipkart looked at vertical businesses to leverage them to complement the horizontal e-commerce platform. As part of this, Flipkart expanded to launch fashion, household goods, small and large appliances, baby, grocery, etc. verticals. The goal was to expand beyond the smartphones and electronics, apparel (esp. sarees), and branded goods (such as shoes) verticals.

Flipkart also forayed into non-ecommerce categories such as travel bookings, phone recharges, Flipkart videos, etc. The goal was to either maximize transactions or to maximize time spent with Flipkart. In other words, either more units sold or more DAU (Daily Active Users). Appliances, baby, grocery, etc. verticals were geared towards more units while videos, recharges, etc. were geared toward more DAUs.

Flipkart’s brand journey provides a good template for digital-first brands to chart out their journey. In addition to sharing the frameworks and principles for building digital-first brands, Shoumyan also answered a number of questions from the community members. We will share a summary of some of those in a separate post. In the mean time, if you have any comments and questions about Flipkart’s brand journey or the journey of any other digital-first brand, please do let us know.

Speakers
Shoumyan Biswas
Head of Strategic Initiatives, Rebel Foods (Formerly Faasos)
Dr. Ajay Sethi
Venture Partner @ Accel India

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June 27, 2020

How to build Digital-first Brands: The Flipkart Story

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