A new venture from a leading Latin American financial services provider had recently launched their “mobile money” program (providing financial services through a mobile handset and an associated prepaid card). Their initial target was to reach 1 million registered users after two years, with the assumption that a Person-to-Person (P2P) transfer product, easily conducted through the mobile phone, would be a natural hit with its users. Also complimenting this program was implemented with the benefits of a prepaid card that could be used in existing ATMs and with card-accepting merchants.
Yet despite a well-thought through strategy, significant marketing budget, a suite of financial services, and improvements in its retail agent network, the venture had registered only a couple hundred thousand subscribers. Moreover, the percentage of registered users who were active was under 10% – well below what was needed for the venture to eventually reach profitability. We were brought it to determine the root cause of the low customer adoption and provide suggested remedies to boost usage.
Digital Disruptions’ Solution
Our initial assumption was that the organization had crafted a mass-market approach for its initial launch rather than a segmented one, and that it relied too much on the P2P product. We began by reviewing qualitative research on the needs of the target segment and conducted a thorough database analysis of current transactions. We also undertook a detailed financial analysis of profit margins by product and retail distribution costs. Two key insights stood out.
The first was that there was weak evidence that P2P was truly the “killer app” the organization assumed it would be; due to high levels of urbanization in the country, money transfers rarely were sent over long distances, reducing the selling proposition of the organization’s product. Instead, we suggested that bill-pay and salary disbursements – which constituted a large, existing market – were ripe for disruption through mobile, especially if targeted specially to those higher-income segments that were employed and paid multiple bills.
The second insight was that the organization was losing significant money by automatically issuing a card product to the mass-market. The lower-income segments used it infrequently, and when they did use it, did so for smaller purchases, yielding little revenue for the organization. Our analysis of card performance transactions further showed that consumers who were aggressively sold cards by promoters – the highest unit cost of all sales channels – more rapidly dropped off in usage, implying that those consumers never truly desired the product in the first place. We thus recommended to offer a “mobile-only” proposition for the lower-income consumer segments, both to reduce costs for the organization and to create a more consistent and understandable experience for the consumer.
These findings, among others, allowed us to devise a distinct “product-customer-channel” segmentation – in other words offering the right product, through the right channel, to the right customer – to help the organization have a more effective and cost-efficient approach to achieving customer adoption.