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The Futility of being Freecharge!!

14/12/2016

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What's in a name you ask

A rose by any other name would anyway be a rose. 

But imagine if the rose was called the "Deathbed Farewell". Because the first guy used it on a coffin.

Now how many college kids would want to use the deathbed farewell to make that all important proposal on Valentine's day.

That was extreme but there is a flower which looks a lot like the rose, and is called the Ranunculus. Have you ever heard of the Ranunculus?

There is a concept called name extendability. A concept very few startups or even VCs understand. 

Let me take an example, in a forum of 50 entrepreneurs I asked if a product was available at the same price on Snapdeal, Flipkart and Amazon, who would you choose?
Hands Raised: Snapdeal - 0, Flipkart - 7, Amazon - 43

If it isn't available on Snapdeal at a better "Deal", there is no longer any reason to buy...

The objective of long term brand building is to leverage trust in your brand name, to charge a higher price & command a better margin for the same product, one that Snapdeal will never be able to do. 

And in a competitive world, in the absence of clear network effects, the brand eventually catches up. It becomes the only thing that matters

But this is not about Snapdeal...

Let's look at the recent demonetisation wave & who benefited the most. 

Here are google trends on Search for PayTM & Freecharge. You see searches on PayTM takeoff the same week as de-moetisation, that surge is hardly present in Freecharge. Why?

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This is the digitisation wave, and the consumer's mindspace is occupied by "How to pay" and "How to receive payment". And Freecharge does enable digital payments. But no significant surge at all. Why?

Freecharge, sounds like prepaid recharge, which is what they were & they gave back freebees/coupons back then. But then they thought, why not become a wallet, but let's not change the name, because there are so many users already. Unfortunately no one told them that their name was not extendable into the category of general payments. PayTM on the other hand has connotations of Pay Bills, Pay People, Pay for Products, and generally Pay for anything.

So when demonetisation caused a need, PayTM occupied consumer mindspace way more than Freecharge, and therefore grew way more. Battling mindspace is indeed difficult

On android, The 50 million + downloads of PayTM to the 10mn+ downloads of Freecharge, will cause untold network effects, more peers you can pay, more merchants accept PayTM, more consumers jump on. This gap will only widen. Because battling network effects is even harder

And a combination of mindspace and network effects, is disaster for competition.

Gradually Freecharge will be all but left behind.

Lessons
When naming a startup, many choose a name that indicates the category. Once VC's invest, startups invest so much of the raise in advertising, that changing the brand name at a later stage becomes almost impossible. 

Surprisingly VC's don't protect their downside from a business model change, and effectively a name change. Considering the dollars spent in marketing, a name change is a big deal!!

If the business model changes tomorrow, which VC's know it will for most startups, and if they want to extend or pivot, they should have a name that is extendable.

A name that means nothing is way better for early stage startups and VC's who invest in them, rather than a name that means one specific thing.

Ola doesn't mean anything and is way less risky than saying taxiforsure, because if you lapse once on the surety, you are in deepshit with the consumer. But Ola could be high end taxis, cheap taxis, taxis for sure, or any other positioning in the space that they want to be

Another case in point is Helpchat's rebranding to Tapzo. They realised chat doesn't work and had to pivot. But that's a lot of money in advertising & brand building gone poof

Do you still think a rose is a rose is a rose...

* Opinions here are personal and has no connection with my startup.Another case in point is Helpchat's rebranding to Tapzo. They realised chat doesn't work and had to pivot. But that's a lot of money in advertising & brand building gone poof
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    Ishwar S

    Chief Amnesiac

    Co-Founder & CEO - Furdo.com


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