ATAR – Why you should focus on this for Customer Acquisition

Usually I am the kind of guy who thinks that as far as Business based Models go

These

Make far more sense than this

 And the fact that most of you are still looking at the Victoria’s Secret picture (both men and women) should be enough to prove my point.

Now if you may be so kind, so as to tear your eyes off the picture on top, I want to talk to you about ATAR.

As a Model for Customer Acquisition and Revenue Projection, ATAR is very simple to understand. Theoretically is makes sense, its easy to describe, fairly easy to follow and makes financial projections really easy for fictitious business plans.

 

In short its too simple to work… or is it?

Most B-Schools I know of, don’t really teach this model for customer acquisition and revenue projection. Well the problem may lie with the fact that ATAR is just common sense. Then again if they taught a course on Common Sense it would probably make MBAs far better equipped to deal with the world.

ATAR, as per me, for aspiring and real entrepreneurs should be considered a way of looking at ‘critical’ issues related to Customer Acquisition. I know of a few successful guys who use this ‘way of looking at stuff’ to make things work for them.

 

What is ATAR?

ATAR stands for Awareness, Trial, Availability and Retrial. Essentially the four stages of converting a customer.

This is what it looks like.

The idea behind this model is simple and this is my take on how an entrepreneur could look at it.

Universe (U) is the total (TMS) Target Market Segment for your Product/Service

Awareness (A) is the total number of people out of (U) who are or should be aware of your Product/Service

Trial (T) is the total number of people from (A) who have or should try your Product/Service

Availability (V) is the total number of people to whom our Product/Service is or may be accessible

Retrial (R) is the total number of people who have or may retry the Product/Service

 

How Does it Work?

For those who know how ATAR works, you might as well go to the next section.

Now for projections one can make educated guesses regarding the total market size for a year which is (U)

Lets take (U) = 400 People

As an entrepreneur you target that for the year 2012, you will make atleast 30% of these aware of your product

[So (A) = 30% of (U)] & (A) = 12o People

You plan to have atleast 50% of these people try your product

[So (T) = 50% of (A)] & (T) = 60 People

You now plan that 30% of these people will have your product readily available

[(V) = 30% of (T)] & (V)  = 18 People

You finally feel that out of these, atleast 50% will retry your product

[(R) = 50% of (V)] & (R) = 9 People

Lets say that the price of this Product is Rs. 100

So you plan to achieve (R)X100 = Rs. 900 for the year of 2012 (Considering that all product trials were at 100% discount/promotion)

What it also means is that the Total Market Potential (U) is 400 X 100 = Rs. 40,000

So your startup has been able to achieve (A%) X (T%) X (V%) X (R%) = 30% X 50% X 30% X 50% = 2.25% of the Total Market Potential in 2012

Please Note – In actual projections a number of issues come into play, but one may treat this as a BASIC model for revenue projection.

 

Thanks for the Maths – Not Interested

The brief and simple example was to just warm you up for what my real (non-mathematical) point was.

When you create an ATAR for your startup, don’t look at it for revenue projections but as a tool for Customer Acquisition.

And most importantly ask yourself and your team

What steps are we taking to move from (A) to (T) to (V) to (R) so that we MAXIMIZE the conversion?

 

So how can an Entrepreneur use ATAR?

Lets say you are running a Cafe.

Then the ATAR model should make you ask the below questions for every stage.

Now these questions could form the basis behind you Customer Acquisition or Sales & Marketing efforts.

(U) – How many people, specific to your TMS, exist?

1. How many households exist in the localities around your cafe?

2. How many schools, colleges, offices etc exist?

3. What is the general age of people living in various localities?

4. What are the kind of jobs, incomes, businesses etc these people are involved in?

5. How many newspapers are delivered in the localities around?

6. How many cable connections are there in the localities around?

The above questions will give you and your team a fair idea about the number of people who exist in your TMS universe

(A) – How many people are aware of the cafe and its offerings?

1. How many people talk or engage with you on Social Media?

2. How many people have called your cafe up for enquiries?

3. How many people have your marketing efforts been directed at?

4. How many people have been met by you or contacted through cold calling?

5. How many people have been sent newspaper pamphlets about your cafe?

The above questions will give you a good idea about awareness

Similarly for 

(T) – How many people came to our cafe due to promotions and discounts?

1. How many people came on special promotional days and nights?

2. What is the change in new traffic on cafe festivals or theme nights?

(V) – To how many people is our Cafe easily available and convenient?

1. How many households are at walking distance?

2. How many schools, offices, institutions, businesses etc are at walking distance?

3. How many buses, autos, cars etc ply near or on the road of the cafe?

4. How many F&B businesses are based around the cafe for spill-over effect?

(R) – How many people have come back to the Cafe?

1. How many people have utilized offers on loyalty cards?

2. How many credit or debit cards have been used multiple times?

3. How many people does the Cafe staff recognize as regulars?

4. How many businesses have credit agreements with us?

The above questions are simple questions an entrepreneur can ask himself and his team while trying to determine Customer Acquisition or Sales and Marketing success of this cafe.

 

Furthermore….

Because he now knows that (U) X (A)% X (T)% X (A)% X (R)% = Total customer acquisition.

So now he can get PROACTIVE and in a sense, he can get empowered by these numbers.

 

How?

Because now he knows which part of the ATAR model he needs to improve at in order to increase customer acquisition.

If he sees that for his cafe, the below is the state of affairs

100 X 20% X 50% X 50% X 10% = 5

(U) X (A)% X (T)% X (A)% X (R)% = Total customer acquisition

Then he needs to really look at why his Awareness and Retrial numbers are so low!

Digging deeper he might find that he isn’t sending out enough paper pamphlets or that his banners are put up at the wrong places, his social media efforts are not really that good or maybe his cafe location hides it from incoming traffic. He now needs to remedy the above to get his Awareness (A)% up to acceptable levels.

His retrial numbers maybe low because the prices are too high, the loos are not clean enough, the staff doesn’t do a good job at recognizing people and servicing them or just simply, his coffee is really shitty.

 

The trick here is to always have this model in front of you and your team. To keep measuring these numbers. Keep communicating these numbers to your team and keep finding solutions to them.

Like they say – “A big part of the problem is usually the lack of realization of it” – Startup Yapper.

5 Things that Startups can learn from the Business of Bollywood!

I want to start by thanking all of you who have taken the time to read my blog. This week Startup Yapper got over 2000 hits, its highest ever and a corresponding number of comments, emails and messages.

Today a friend asked me to write about movies, Bollywood in particular. And even though I told him that my blog was Startups centric, I decided to write on Bollywood, simply because finding connections and parallels for startups, is at the core of this blog.

Unlike other news and reviews, which concern themselves with scandals, stories, leaked footage, special effects and item numbers, I am not really writing about the ‘Magic’ of the movies but about their Business Model.

After all, Bollywood has been a thriving entertainment industry for over 100+ years. I am sure there are a ton of lessons that Startups can learn from it.

As a business model, Bollywood has been like the mirror image of Indian Societal Dynamics. It has changed a lot and yet remained the same in may ways. It is amazing, not only for the number of movies which are churned out (unfortunately 90% are sub-standard) but also for the amazing reach and cultural influence these movies have on the rest of the world, without really trying too hard.

Most of us know that behind the silver screen, there is a complex, fairly unorganized, nimble set of organizations and businesses which are responsible for the biggest Entertainment Industry in the world (by influence). This blog is dedicated to understanding 5 lessons which Startups, of any hue and color, would to well to learn.

1. The Kind of Investor is Important – Till 2000, by Government Rules, Bollywood wasn’t considered an industry and hence could not look for bank credit, private equity, and other means of legitimate commercial financing. Movies are extremely capital intensive and involve up-front payments. So, producers used other sources of funds, namely that of the real estate businessmen, jewellery industry, underworld dons and politicians who were looking for avenues to launder their black money. Not only did they charge up to 60% to 100% interest on the money, at times music rights and distribution also was included in the deal. But the real blow was dealt to the quality of movies made. If you were around during the 80s and 90s and wondered why movies suddenly turned so shitty and similar to each other, it was because the “investors” only ended up backing those scripts which appealed to them or which followed the ‘formula’ of successful movies before or were copies of successful Hollywood releases. The absence of a script, proliferation of songs, bad quality of production and un-professionalism were all part of and parcel of this era.

So the next time you go looking for funding to a VC or an Angel Investor,please check their track record, the startups they have invested in, the profile of Venture Capitalists themselves and their investment philosophy. Take some time out and speak to the startups themselves, who have received investments by them, to get a better idea of how their investors operate and support them. Because once they fund you, they too will have a stake in product/service decisions and strategy.

2. Hedge your Risk – Every venture, especially the kind which involves the amount of uncertainty associated with movies, must incorporate hedging of risks within the business model. Movies do this by, by making few capital investments, taking most of their equipment on rent, shooting at exotic locales by tying up with tourism boards, selling off music rights, satellite and TV rights for high up-front payments, giving profit share to lead actors/directors etc in lieu of a their fee and take some upfront payment by selling distribution rights. 

Big Budget movies, like Rajnikanth’s last movie, Robot (Endhiran), had New India Assurance providing cover for the production and cast of the movie for Rs 40 crore with a premium of Rs 25 lakh, while United India Insurance covered the exhibitor’s liability for the film for around Rs 50 crore.

The trick is then to create a business where your upfront costs, capital costs are low, most of your high cost items are on lease/rent and there is a certain amount of hedging when it comes to risky projects. For startups this is essential, as running out of cash is an ever present headache, especially since it takes a long time for them to breakeven and report profits. Renting, leasing and working out profit share agreements with your partners and stakeholders can help you get through more days and mistakes than otherwise possible.

3. Customers can’t always predict what they want – If Apple hasn’t already proved this point (with the ipad, ipod and i-whatever) then Movies most certainly will. Movies, in fact entertainment in general, are based on a business model which works because one must exceed the expectations of customers and/or bring new elements, experiences and content. I don’t see how people would watch the next Avengers , Krrish 2, Dhoom 3, Agent Vinod, Munnabhai etc if they knew exactly what to expect. I am not even so sure if one could do a Customer Focus Group Discussion to figure out elements for the next story. This is probably where Crowd Sourcing for movie scripts and movies has failed as of now.

Though getting customer feedback is important, I feel that in a few cases (like Bollywood), one must throw out the notion that customers know best about what they want and create something original, substantial, content oriented and most importantly, mind-blowing.

Startups would do well to remember that.

4. Staying in the News – If there is one thing that truly impresses me about Bollywood, it is its relentless pursuit of staying in the news. Have no doubt, many stars, directors, producers do well without hogging the limelight, but they are exceptions. Sure, creating fake fights, scandals, affairs, sleazy pictures and mud slinging is something no self respecting startup should ever have to resort to. But the advantages of letting out bits of trivia, like leaked pictures, a sinppet of a story, the fact that someone is doing their own stunts, that the set is the most expensive ever, the budget is over 100 Cr., some actor is being paid over 30 Cr., a Chinese stunt director is involved in the action scenes, leaked footage etc helps keep the excitement up for the general public and creates fans even before the movie is out. 

For a Startup, staying in the news for present and potential customers, employees and investors is also very important. Part of Flipkart’s alleged $1 Billion valuation is because they get interviewed like superstars and certain mind-blowing numbers keep appearing in the right places. 

Warning: If your product/service is bad then this exercise is futile. Sooner or later people will know that you are full of it.

5. Know your Target Market Segment (TMS) – Every superstar knows which demographic is their main base of viewers. Shahrukh Khan knows his viewership base is the urban middle classes of India and the NRI community, hence his movies are made and distributed accordingly. Salman Khan knows he does extremely well in B and C towns and in certain communities. Hence Dabangg, Wanted and Bodyguard were all released on Eid. Ek Tha Tiger, his next movie, will also release then.  Movies like ZNMD were promoted in magazines, newspapers and ads targeted at the aspiration, urban, upper middle classes. Even when scripts for certain theme based movies are being drafted, movie makers already have a fair idea of where the movie is to be distributed and how it should be promoted.

Far too many startups I know, make the fundamental mistake of  considering ‘Everyone’ as their TMS. They should take their cue from movie makers, who have burnt their hands while making movies with all the elements and masala to appeal to everyone, only to loose money in the long run. 

While many of you may or may not agree with the lessons (or analogies) from above, the reality is that Bollywood is a thriving and vibrant Industry which has been able to change and adapt in a major way over the last decade. It has passed from the era of the first silent short film in 1899 to today and seen wars, independence, civil unrest, economic slowdown, underworld dons and frightful competition. My respect usually lies with long distance runner and not the sprinter.

“You can borrow a big bag of tricks from a young man but learn a timeless lesson from an old one” – Startup Yapper

20 ways in which Indian Companies and Startups don’t get Social Media

I remember walking into a swanky office, one of those glass and concrete edifices created to reflect a company’s (alleged) status. I had been called for a chat by one of the deputies of the Sales and Marketing Head. He thought I knew a little bit about an issue he had been trying to wrestle around with and felt some outside insight might make his final presentation to the Sales and Marketing Head, razzle & dazzle.

As we started with small talk, I could see him set up his laptop and projector, to present something to me. Naturally I was filled with (vain) pride that a guy 20 years senior to me, wanted to show the draft presentation of Marketing Strategies of his company and take my view on them.

He said that he wanted me to have a look at the Social Media (SM) section of the Presentation and tell him what I thought about it.

It was, to put it mildly, horrendous. Their strategy was based on bad understanding, old paradigms and a total disconnect with their TMS. As I started rattling out about 10 points a minute of mostly criticism, the Marketing Deputy kept nodding his head with pursed lips and rising impatience.

Slowly I realised that I might have been bruising a rather large and well experienced professional sitting across me and I decided to let it be after the 56^th point or so.

After a couple of minutes of silence the Marketing Deputy said “Thanks for the feedback but I just wanted to know if the ‘Presentation’ looks good. Not the content”.

Luckily, he smiled after that.

I spent the next 3 hours explaining various facets of SM, as I understood them, based on like a million questions that were asked of me. I was later told that the presentation to the Sales and Marketing Head was postponed and a new one was given once the marketing deputy got a handle on SM.

The above anecdote is mostly representative of the state of SM understanding by Indian Companies and Brands. While there are a number of notable exceptions and things are getting better, what troubles me most is that even startups end up being bamboozled by the basics. If I had a dime for every aspiring entrepreneur whose ‘low-cost high-impact’ marketing plan included SM (like it was a band-aid), I would probably be able to fund some of them.

 

Here is a list of 20 ways in which Indian Companies and Startups don’t get Social Media (SM)

Disclaimer: I am not a SM Expert (just like 99% of SM experts). I am just a conscientious objector to stupidity, an upholder of common sense and a keen observer.

1. People Online are different Offline – The moment you understand this, you will start looking to answer the question. How? This is very important because no definitative or exhaustive model of customer behaviour exists for the SM space. At least for India.

2. The Online and Offline are connected – Most of us treat these two realms as separate and mutually exclusive. But that is just not true. What happens online affects the offline environment of a business and vice versa. So one should plan offline events to seamlessly flow online and online events to have offline rewards or results.

3. SM is not a Low/No-Cost Alternative – Yes, its costs way lesser than TV, Radio and Newspaper. But if you go in thinking that this is going to be low cost stuff, then fugged-aboud-it. To make SM work a number of resources have to be put to work and while it may cost lesser, it will take up more of your time to maintain and develop. So go in knowing that you will need a dedicated person, if not a team, to handle SM.

4. SM is NOT equal to Virality – Just because you put it up on Facebook does not mean that a million people will instantly get engaged. Virality is created by amazing content (video, pictures, material, games etc), people who pass this on and some other stuff which we haven’t been able to pin down. Not by the medium. The medium just supports and promotes virality. And with millions of others pushing the same buttons, fantastic stuff no longer makes it viral, it has to be mind-blowing.

5. Content made for Print and TV can’t be CCP’d to SM – CCP (Cut copy paste) worked in college and even in the company you worked for. But with SM, people interact with content in a very different way. More Videos will be opened on FB than using twitter. More news flash info will be shared on twitter than on Facebook. If your TMS is generally Smartphone totting, the proportion of people responding to your tweets will increase as will the number of blog reads.

6. There is NOT only Twitter and Facebook – This one is usually a surprise for most. If you have decided to be active online and are serious about it, then presence on other platforms like youtube, wordpress, linkedin, pinterest, foursquare, flickr, Google+, myspace, tumblr etc is important. While you may not have the ability to be present on all, figure out where your TMS is and be there.

7. Content for all Social Networks can’t be the same – If their formats, purpose and communities are different. So should your content.

8. SM is 24/7/365 – Yup, it never sleeps. If someone posts Happy New Year on your wall on the 30th and you reply back on the 2nd (because your team is too drunk to care) then believe me, you arn’t making him or the others very happy. Pushing content when most people are active makes a lot of sense but having conversations at your convenience (and not theirs) makes no sense.

9. You won’t make a sale anytime soon – It’s like a dinner party or a sponsored event. You are on SM because you want to engage existing customers to be loyal and convert potentials. SM helps you get this done. But the final sale will probably be made by your existing sales process. Unless your SM activities are ingrained into ecommerce.

10. SM is not the same as traditional media, it’s more like a customer service centre – You are there to talk to people and to engage them. Make sure your SM team knows how to do both.

11. No one wants to only talk/know about your company and your products – Big folly by most brands and companies. People don’t follow or like FB pages because you will tell them about every small detail of your product and will inundate them with company happenings. There is Google for that. You customers will appreciate it, if you engage them and let them know about stuff that matters to them, while still staying true to your brand position. Like a kitchen appliances brand talking about food recipes and offering cooking class discounts to followers.

12. SM is a small important part to a 360^o approach to Marketing and Sales – SM is only a part of your S&M activities. Hence each process and activity must flow into the other to ensure that everyone talks the same language, communicates the same message and creates a concerted brand image/position.

13. You HAVE to measure you SM impact – This is a major sticking point, where most SM purists feel that you should not or can not measure the impact of SM and the Traditionalists say that if you can’t measure something, then it doesn’t exist. It’s worth noting that while both are extreme (and hence wrong) views, they also have some truth in them. No one has been able to offer definitative metrics for SM let alone measure it effectively. But just because the system isn’t perfect doesn’t mean that you should not measure its impact. This helps keep your SM goals and teams in line. Oh and please do measure your ROI as a part of your SM impact.

14. SM involves a big element of “Word of Mouth’ – It does. The old offline rules still apply to this one.

15. SM should Engage – Not just Talk – Engaging through conversations, games, quizzes, polls, offers etc makes sure your customers keep coming back for more and hence create greater attachment to your brand/products. Only talking makes them feel nice, but doesn’t stick. Just like when we discovered Yahoo Chat Rooms.

16. Management needs to be as connected to SM as they are to PR – SM has in a way, taken up a PR role, just that it doesn’t speak to the media as much as it speaks to people individually while others listen in. This means that management must understand the ramifications of decisions and information being communicated. Especially since, chances are that if something makes a mark on SM it will become a PR issue soon enough.

17. You Need an SM plan that fits into the overall corporate plan – You need a plan. With goals, objectives and execution plan. This has to be in line with you corporate plan or very soon, your company, brand and SM positioning may be out of line. For SM activities to be effective not only do you need great ideas but you need good timely execution. A defined plan goes a long way in ensuring that.

18. You Need to be good at listening – Till now companies have gotten away with not listening to their customers due to a variety of reasons. On SM you can no longer run or hide. Doing so is just going to blow up in your face. If you don’t listen you can’t create conversations or give relevant feedback. Engagement then, becomes a real issue.

19. Taking your time – Take your time in developing your SM presence. Most people jump in and then enthusiasm or content tapers off. Developing SM presence is a to &  fro activity based on feedback from stakeholders and customers. That doesn’t mean you reveal your FB page with nothing written on it. It means that introducing 100 games on day one without knowing how your customers will behave to them, is probably a bad idea and a waste of resources.

20. Not having the ability to manage a crisis – Now that you are online, do you know how you will deal with a PR crisis? Have you set up a team to defuse the situation? Are there enough people talking between PR and Marketing to make sure that there is a coherent response during a crisis? Even a small crisis, whether online or offline can unravel years of carefully cultivated online presence and brand management.