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            19 / 01 / 17

            The cost of loyalty in a de-monetised India

            • The recent and sudden demonetisation in India has pushed several mobile-connected Indians to adopt digital currencies to soften the blow to their day-to-day activities. Post demonetisation, e-wallet companies like Paytm, MobiKwik and Freecharge have seen a hike in their daily transactions like never before.

              Going #cashless has become the call of the hour and app innovators appear to be leaping at the opportunity by aggressive marketing schemes such as cash-backs, deep discounting, cross-bundling multiple services, and rewards based memberships to increase digital-footfalls onto their platforms.

              Unraveling this ecosystem reveals some rather interesting developments. For instance, several lifestyle apps are developing platforms which create self-serving, micro digital economies powered by internal currencies. Goibibo the travel app has recently started incentivising usage by literally dolling out ‘handouts’ based on one’s phonebook contacts. Users can earn in ‘GoCash’ if sign-ups or spends on the app originate from within one’s social network. Users are gaining spendable pocket money without ever actually making a purchase – and they’re funding a lifestyle without ever actually paying for it!

              This bubble is bound to burst. There are also other downsides to subsidising a parallel consumer economy - primarily the lack of checks and balances to ensure ethical usage. Sign-ins from multiple email-accounts to make proxy purchases is one clear loophole that Indians are sure to make the most out of, resulting in irregular currency outflows and costly leakages for the firms.

              In the short term, these strategies successfully achieve higher spends and an increased number of unique visitors to the platforms. A deal is a deal, after all. Yet, in the longer run, gaining behavioural loyalty may require strategies that go beyond competitive costing. It is only a matter of time before competitor platforms copycat such schemes, and dilute the potential gains.

              Loyalty may have a price, but how much are companies willing to spend to retain it? In a price-sensitive market like India, it’s perhaps an effective tool to gain visibility, albeit an expensive one.

              Image source: Vice News

              • Article by Shivani Govind