Monthly Archives: June 2020

Re-strategizing Commerce for a Post-Covid-19 World

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Almost six months into the global coronavirus pandemic and retailers across the globe continue to be severely impacted. Even countries that are no longer under lockdown orders are still witnessing a steep drop in footfall in retail outlets. In a recent webinar organised by Trust for Retailers & Retail Associates of India (TRRAIN), major associations anticipated a 25-30% impact on business, with a multiplier effect on subsidiary industries and lasting job losses. Since the outbreak of COVID-19, retailers are facing challenges around health & safety, supply chain management, labour shortages, consumer demands, disruption in cash flow, and pricing.

 

Interestingly, the overwhelming opinion from research firms is that global consumer behaviour will evolve due to the coronavirus for the foreseeable future. One reason for this is that new mindsets and habits are being created as life goes on in lockdown-induced quarantine. And for many consumers, the continued fear and apprehension for their health and safety will push them to find innovative new ways to make purchases and create a ‘new normal’.

 

While consumer demand continues to be volatile, new commerce trends are emerging in countries reporting a slow uptick in the economy; trends like store reopenings with increased social distancing measures, increase in online grocery shopping, social commerce (according to emarketer.com, up to 51% of U.S. adults have been using social media more), live-streaming commerce (most prominently in China and Southeast Asian markets), and other trends. Although it would be difficult for businesses to make accurate long-term strategic decisions during this volatile period, it is imperative for CXOs to revisit current business and operating models in the face of the new normal.

 

We believe the businesses who emerge as leaders from this crisis will be businesses that adapt swiftly. Capillary has been analysing the impact of Covid-19 on retailers across the globe and evolving our solutions to help retailers quicken their pace towards recovery. 

 

Taking your store to your best customers: Introducing Store2Door+

 

Although online commerce has been on an upward trend in the last decade, the coronavirus pandemic has accelerated the growth of ecommerce like never before. This change can be witnessed across all demographics; even the senior citizen demographic has demonstrated a 195% increase in ecommerce activity from January to March, and there has been a spike of more than 130% in online shopping across all demographics. Consumers are buying products online and picking them up in stores at +500% greater volume than prior to the pandemic, according to research from Kibo Commerce. 

 

However, this leaves us with a big question: are traditional retailers doomed to end up last in the post-COVID-19 world? 

 

We don’t think so; rather this is an incredible opportunity for traditional retailers to pivot to an omnichannel retail strategy.  Based on our conversations with traditional retailers in SEA, China & the Middle East, the major resistance to ecommerce adoption centred around initial investment costs, lack of in-house tech experts, implementation timelines and ROI. That’s why we set out to launch Store2Door+–  a new module in our Anywhere Commerce suite that:  has minimal setup cost, requires zero in-house tech expertise or coding, can go live in less than 7 days and ensures highest ROI through an outcome-linked pricing model.

 

Here’s how Store2Door+ helps traditional retailers adapt swiftly to the new normal : 

 

  • Leverage existing CRM data to personally connect with customers through Whatsapp Business, and empower store staff to close sales over Whatsapp. With Store2Door+, retailers can take their business online in just 7 days.
  • Store2Door+ allows sending personal recommendations and communication to customers through Whatsapp messaging, a platform that boasts of high message open rates (over 90%). Store2Door+ helps retailers drive greater store sales, especially in disruptive times when customers are apprehensive about visiting stores
  • Targeting the right customers: With the Store2Door+ app, store staff can view a list of customers who are most likely to respond to a particular product recommendation based on their past purchasing history and other CRM data
  • Assisted shopping experience:  By creating a personal connection, and sending customized recommendations and real-time videos, the store stylists provide a very compelling shopping experience for their customers (far better than the online shopping with chatbot assistance)
  • Connecting remotely: Store2Door+ allows store staff to sell products to their best customers 1:1 over WhatsApp business, and keep in touch with loyal customers even remotely.
  • Streamline communication: For multi-store retailers that already have marketplace or ecommerce presence, or for retailers who want to drive store sales separate from regular ecommerce, Store2Door+ can enable a streamlined flow for sending daily communications to the top customers
  • Leverage existing resources: Store2Door+ integrates CRM data and leverages your existing loyalty member base to drive sales, and reducing customer acquisition costs. Leverage offline stores as fulfilment centers, and fulfil orders from the nearest store with a minimal delivery timeline.

 

 

Based on results from pilot programs, Store2Door+ contributed 19% of loyalty sales in best performing stores, and 5% on average in remaining stores.

 

Driving greater conversions through contactless interactions

 

With the rampant rise of Covid-19 cases globally, consumers are plagued by fear of infection. Since physical experiences are no longer possible, ‘no-touch’ or contactless interactions have become the new standard expectation. Various retail leaders are adapting by creating contactless transaction processes. For example, Walmart is testing a store without any cashiers or conveyer belts at checkout lines, with the intent of speeding up checkout times and preventing the spread of coronavirus by limiting human interaction.

 

Here are some recommendations from Capillary to improve in-store safety, and increase customer confidence:

 

  • Brands must improve in-store purchase experiences during the pandemic through contactless payment, digitizing receipts, as well as digitizing personalized promotions. Retailers can do this via an app, SMS, email, QR codes for payment, and other options.
  • When customers visit stores, retailers should cross-sell, up-sell, and drive greater conversions with real-time, rule-based dynamic vouchers. The dynamic voucher must be digitally rolled out to customers upon an in-store purchase, based on the loyalty-tier of the customer, product purchased, or other factors like churn probability, Customer Lifetime Value (CLV) etc.

 

Optimizing Costs with Targeted Promotions

 

Companies today are facing major cash-flow shortages. It becomes imperative for brands to strike the right balance in spends across the marketing, sales and service functions, in order to maintain the right customer experience. Although customer engagement, marketing and support become more difficult during economic downturns and turbulent times, they become all the more important to drive strong customer experience, trust, and more revenue in the long-run. In a recent analysis of retail and online brands, Digital Commerce 360 found that brands that pulled back on marketing spend during COVID-19 are now seeing their online sales struggle. Similarly, according to KPMG, it’s even more vital during these unprecedented circumstances for companies to have a single view of the customer, shared by the Marketing, Sales and Service functions, so they can react quickly to their fast-changing needs and expectations. 

 

Capillary’s solutions allow brands to do that and more:

 

  • Channel-based promotions: Omnichannel marketing and engagement can improve noise to signal ratio for customers, especially in times where they are being bombarded by communication and promotions from multiple brands. The key is to optimize your costs by targeting customers on only their favourite channel of communication to improve response rates. For instance, a user might have higher response rates to Instagram ads when compared to Facebook, and this behaviour might change based on whether he’s on a mobile device or a desktop. X-Engage lets you control communications and engagement based on these specific criteria and conditions.
  • Capping discount amount: Capillary’s Anywhere Commerce platform now allows brands to create promotions specifically for discounted or undiscounted products, and even cap the Percentage Discount Amount on the product.
  • Focus on your “Top X%” customers: Although the personalization fabric is typically woven with months or years of customer data, the new normal has shifted customer behaviour and user preferences beyond anyone’s imagination. To avoid irrelevant recommendations and wasteful spends, a key method is to use smart segmentation to focus on your “Top X%” customers and have a dynamic campaign based on real-time user behaviour.
  • Wishlist communication: The pandemic has resulted in retailers facing challenges around stock shortages. On the other hand, lockdown relaxation is seeing a release in the pent up demand around non-essential goods. Capitalize on this trend by triggering wishlist notifications for items when they’re back in stock based on real-time inventory levels of the product.
  • Optimizing order allocation: The ability to predict and manage demand has never been more important. With smart order allocation, optimize costs by allocating orders based on the store nearest to customers, or improve the customer’s experience by directing them to promotion-specific stores

 

In these turbulent times, business leaders should align their financial sustainability with the core elements of operational excellence and customer experience. Brands that can pivot and seamlessly adapt their customer experience in these times of crises will certainly come out stronger.

Why Customer Loyalty is Waning in the Middle East

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Even before the COVID pandemic, consumers and businesses in the Middle East were reeling from the socio-economic impact of tumbling oil prices, digitization and geopolitical instability.

 

Consumer sentiments around job and financial security in the region have been steadily declining in the last 2-3 years. A 2018 report by Mckinsey that surveyed Saudi Arabia and Egypt and UAE found that more than half of the consumers (55%) now look to spend less and save money. This trend will be further amplified by the ongoing COVID crisis, but supplemented with higher adoption of digital channels.

 

The Winds of Change 

 

The pre-existing purchase power fluctuations and the recent apprehensions around health/hygiene have heavily impacted the shopping behaviour of consumers in the Middle East. And more importantly, it has fundamentally shaken long-standing customer-brand relationships and led to a large number of customers migrating to cheaper, better-value alternatives.

 

The McKinsey report also reveals that more than half (54%) of those who have chosen lower-priced alternatives were satisfied with their decision; which is an indication that the trend is likely to be sustained in the future.

 

These shifts in consumer behaviour are especially interesting in the Middle East context – it’s often perceived as a bastion for luxury shopping and where the large majority of the populace prefer to purchase from a narrow and select set of brands. The rise of ecommerce in the Middle East led to consumers searching out lower prices and offers on their preferred brands. The current zeitgeist seems to be a cost-conscious hunt for cheaper alternatives.

What’s Eroding Customer Loyalty in the Middle East 

 

Consumer behaviour shifts usually don’t hinge on a single entity and are typically driven by a collective system of change factors. Here are the major ones impacting customer loyalty in the Middle East.

Rapid Rise of Ecommerce

 

While ecommerce had a slow start in the region, it has steadily picked up pace in the last 2 years. Saudi Arabia’s ecommerce market is expected to hit 9 billion USD by 2025, rendering it one of the fastest-growing ecommerce landscapes in the world. The COVID crisis further accelerated ecommerce adoption in the region, especially for the grocery and personal care segment.

 

The ecommerce shift will surface new-age brands and expose consumers to high-value, cost-effective alternatives to their preferred brands. For instance, the rise of ecommerce in India has led to traditional companies in the personal care, FMCG and electronics space losing wallet share to digital-first consumer brands like BoAt, WoW Skin Sciences and MamaEarth. Consumer affinity towards these brands is highlighted by the fact that most of them have crossed  INR 100 crore in revenue within 24-36 months of launch, a feat which used to take 5+ years earlier.

 

The Middle East also enjoys a high smartphone, internet and social media penetration which has connected the digitally-savvy population with global brands and digital-first labels. The integration of native commerce by social networks like Facebook, Instagram and Pinterest is further likely to entice consumers towards newer brands that are more cost-effective and promise higher value.

The COVID Pandemic

 

The pandemic contributed to declining customer loyalty in two ways: by accelerating ecommerce adoption and shrinking the consumer wallet share. The closure of shopping malls and stores as part of lockdowns imposed to curb the spread of the virus has compelled a large segment of consumers to shop online.

 

This shift in consumer behaviour is particularly visible in GCC, according to research by Ernst & Young (EY). The firm conducted a survey in the first week of May that revealed that  92% of consumers in the UAE and Saudi Arabia had changed their shopping habits, with 52% terming the change “significant.” While Carrefour’s online grocery platform in Saudi Arabia saw an 800% spike during the COVID pandemic, Majid Al-Futtaim Retail witnessed a 400% YoY growth in orders and a 300% YoY growth in online sales between March-May 2020.

 

The COVID-induced job losses and salary cuts have also led consumers to tighten their purse strings and look for ways to save money. According to a report by Inmobi, 19% of users in Saudi Arabia said they had seen salary cuts or a loss in business, while 15% said they were laid off or had to shut down their business. The impact has been more severe in the UAE where   28% of people polled in the survey said that they have already dealt with salary cuts or a loss in business. According to a Mckinsey report, 92% of consumers in the UAE have tried a new shopping behaviour in the post-COVID world (in terms of new store, brand, product or channel)

The Large Millennial Population 

 

he Middle East is home to around 108 million millennials and they account for about 60% of the population. Globally, millennials are notorious for their fickle brand loyalty and only 7% of millennials identify themselves as brand loyalists. However, millennials in the Middle East are an outlier here – a Google Consumer Barometer study found that millennials in the region demonstrate more brand loyalty than their peers in the US, the UK, Japan or Australia.

 

A significant number of millennials in Saudi Arabia and the UAE considered just one brand before a purchase  But there is a flip side to this narrative. However, higher millennial loyalty has a price tag attached to it in the form of higher expectations. 

 

The Google report also mentions that Arab millennials have a shorter supply of patience and are less forgiving when it comes to encountering bad user experience, especially on mobile devices. It mentions that 43% of millennials in Saudi Arabia will switch to a  mobile-optimized site if they experience any problems.

 

While this trend will not directly lead to a decline in brand loyalty, the lack of focus on customer experience and user experience – especially by newer entrants who rushed their ecommerce launch- will cause a significant number of consumers to switch loyalties.

How Brands Can Adapt to the New Loyalty Narrative

 

Adapting to these rapid changes and fluctuations in customer behaviour and brand loyalty can be tricky. But it’s not impossible. Based on our experience with 400+ global retailers and insights from millions of customer interactions, here’s what works :

 

  • Create Digital-first, Omnichannel Loyalty Programs

 

With a large segment of consumers migrating to ecommerce,  retailers should ensure that their loyalty programs seamlessly adapt to digital channels like websites, mobile sites and apps. More importantly, they should maintain a unified platform for storing user data, purchase history and other membership details to enable a great omnichannel experience, regardless of whether the customer shops online or in-store.

 

  • Offer Adaptive & Personalized Rewards

 

With consumer behaviour in constant flux, it’s vital for brands to offer a highly personalized loyalty rewards and schemes that adapts quickly to these behavioural changes. Personalized loyalty programs powered by advanced analytics lets you predict the probability of a customer to redeem an offer, target specific segments at the right moment in the purchase cycle or dynamically change offers/promotions/points based on recent purchase behaviour of a specific customer.

 

  • Drive Deeper Engagement through Emotional Loyalty

 

In a crisis situation where the purchase intent tends to be low and there is higher friction towards spending, it’s important for brands to shift away from the traditional earn/burn loyalty program models. Emotional loyalty programs that are built around communication and engagement rather than transaction has been proven to be especially effective in these circumstances. For instance, retailers can leverage the higher social media and digital usage to reward customers for writing reviews, liking/sharing brand posts or taking part in contests.

 

  • Double Down on Customer Experience

 

Perhaps the single biggest factor that influences customer loyalty is Customer Experience.  Ecommerce brands in the Middle East and everywhere in the globe should prepare for higher traffic, orders, returns/cancellations etc in a strategic way. The first thing to consider is your ideal customer segment and their immediate shopping list (eg:- grocery, personal care, safety/hygiene products etc). Next up, fix disrupted supply chains, and have clear communications with manufacturers about production capacities. And finally, make sure you communicate supply chain issues, delay in delivery or fast selling products on your product pages. This honest and open communication allows you to manage customer expectations and prevent negative experiences later.

Way Forward

 

The COVID crisis and the digitization policies by GCC governments will make the fight for customer wallet a whole lot fiercer in the coming days. Brands and businesses in the Middle East seeking to gain a competitive edge should leverage smarter analytics, engagement-based loyalty programs and new-age customer experience platforms to ensure they stay ahead of the competition.

Can Ecommerce Save Singapore’s Post Covid Retail Bloodbath

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Singapore has been hailed in the global community for the quick and effective steps taken to contain the spread of Covid-19. Apart from airport health checks, the country state carried out extensive testing of suspected cases; conducted rapid contact tracing of every confirmed case; confined infected contacts to their homes with strict monitoring and tracking until they recovered from the infection.

 

Unfortunately, the circuit breaker measures taken to contain the pandemic severely impacted Singapore’s retail sector  – sales were down to 40% in April and 52% in May 2020< (compared to April-May 2019).  This has been the steepest decline in Singapore’s retail sales since 1986 when the data was first recorded.

 

A poll conducted by Singapore Tenants United For Fairness revealed that around are “likely” or “very likely” to close down at least one store and lay-off staff in the next six months.

 

While lockdown restrictions were eased in June, sales didn’t see much of a revival, mostly due to safety & hygiene apprehensions and the absence of high-spending tourists. Unsurprisingly, retail outlets in prime areas like Jewel, Marina Bay Sands and VivoCity were among the worst hit.

 

The Silver Linings in Singapore’s Post-COVID Retail Landscape 

 

The solace amidst this collective downward spiral is the 56% growth in sales for supermarkets/hypermarkets and a 9% sales spike for convenience stores and minimarts. Shares of Singapore’s third-largest supermarket chain Sheng Siong rose 39% and RedMart, the Lazada-owned online grocery service, registered 11X more unique visitors on a daily basis during the pandemic.

 

Grocery and hypermarkets aren’t the only sectors thriving in Singapore’s bleak, post-COVID retail landscape.  Ecommerce registered a blistering growth of 125% in May and accounted for a record high of 25% of $1.8 billion in total retail sales for the month.

 

In a nutshell, the COVID pandemic supercharged what was already one of the fastest-growing ecommerce markets in Southeast Asia. At its current rate, Singapore’s ecommerce sales is expected to hit a staggering US$10 billion in 2020.

 

Government Initiatives for Boosting  Ecommerce

 

Like its SEA counterpart Malaysia (we had previously covered the Malaysia ecommerce landscape), the Singaporean Government has been supportive of the ecommerce sector and was striving to help traditional retailers adopt digital channels for selling even before the crisis.

 

The government recently updated its Ecommerce Booster Package to include SME retailers. For those unfamiliar about the program, here’s a brief summary 

 

The Ecommerce Booster Package

 

Ecommerce Booster Package is a government initiative to help brick and mortar retailers in Singapore to use ecommerce platforms and find ways to reach customers through digital channels.  

 

Here’s what the package includes :

 

  • The program makes it easier for domestic retailers to partner with ecommerce giants like Amazon, Lazada Singapore, Qoo10 and Shopee to expand their reach in the local market.
  • Retailers in Singapore seeking to expand overseas can apply for the Multichannel E-Commerce Platform (MEP) Programme. This enables retailers with little or no prior experience in exporting products overseas to do so using digital channels.
  • Retailers can also opt for the Digital Marketing Programme to learn strategies to optimize their digital campaigns and increase brand awareness and sales across multiple digital channels.

 

Even the famed The Great Singapore Sale (GSS) will be an online affair this year, featuring online deals, virtual workshops, live-streaming experiences and emerging technology like VR and AR to create a “new norm” shopping amid the pandemic.  The annual sale, which will be called “eGSS: Shop. Win. Experience” this year,  is set to run from Sep 9th to Oct 10th. 

 

Can Ecommerce Redeem Singapore’s Retailers 

 

Honestly, it depends on how retailers react to this crisis and identify ways to capture the opportunity in the digital space. A traditional retailer who is jumping on the ecommerce bandwagon for the first time will most likely be overwhelmed by the cost, resources and technology involved in setting up an online store.

 

An executive from Singapore’s custom flip-flop brand Fickle Store summed it up pretty well – “Everybody says it’s quite easy, but being able to do it is another thing,”

 

Based on our learnings in partnering with 400+ global retail brands and first-hand experience in helping large brick and mortar retailers to transition into the online space, here’s how Singapore retailers can make the ecommerce plunge easier, smoother and cost-effective.

 

Test the waters with social commerce  – About 4.9 million Singaporeans access the internet and out of which, 3.6 million are active social media users, which accounts for a 64% penetration rate. This created a perfect substrate for social commerce to thrive. For retailers, selling through social platforms like Facebook, Instagram and Pinterest are great for gauging consumer demand and product affinity with minimal investments and risk. Social commerce selling is also cost-effective as these platforms typically charge 4-5% commissions on a sale compared to 15-30% by ecommerce marketplaces.

 

Do a hands-off approach with a full-stack ecommerce solution provider – As mentioned earlier, traditional retailers will need to make significant investments to set up an online store – mostly in the form of platform costs, in-house team and logistics. Rather than diving head-first into these unchartered waters and risk making bad decisions, we recommend choosing full-stack ecommerce vendors that take care of all aspects of running your ecommerce business – from setting up the platform, to sales, handling payments, customer service, warehouse management and logistics. This minimizes failure rates and is cost-effective since the vendor is usually paid as a percentage of each sale. 

 

Sell through WhatsApp and ship from store – WhatsApp is the most popular messaging app in Singapore and is used by 73% of the population. Retailers can use WhatsApp Commerce to empower store staff to interact with customers using personalized product catalogues, engage them with real-time videos and complete the payments through a link. The delivery can be done either by a store executive or through last-mile delivery services like SingPost, Pickupp, Lalamove or Go-Go Van.

 

Way Forward

 

There exists no playbook to predict the long term economic and social impact of COVID-19.  Smart retailers should closely analyze the landscape to identify opportunities and obstacles. The global response to this pandemic has fundamentally altered the reality for retailers. This is a fact all retailers should face and start adapting to.

The Flip side of Turning Cash Positive

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COVID Reflections is a series by Capillary CEO & Co-founder Aneesh Reddy where he shares the challenges faced by the company during the COVID pandemic and how Capillary dealt with them. We hope the learnings will give other founders and businesses the courage, hope and resilience to navigate this crisis.

 

A bit of context on Capillary for those who might not know about us: We are an Asia focused SaaS company. More than 90% of our revenues come from retail customers and with the lockdowns, retail has been one of the most badly hit sectors, probably next only to travel, hospitality, real-estate and restaurants. As a derivative business to retail, we were badly affected as well. So here is a detailed blog on how it has played out for us till now and how did we circumnavigate through the crisis.

 

To start off, I think Covid19 has hit cash positive/ profitable businesses hardest because when you are cash positive and profitable, your cash reserves would typically never be planned for zero cash flow scenarios. For startups that guzzle cash, most expenses get paid from investor funding so business cash flows aren’t very material, and they typically have a lot of cash reserves. FY20 (April 2019 – March 2020) has been a monumental year for us. We went from a ~40% EBITDA loss/ Negative cash flows in Q4FY19 to our first ever EBITDA and Cash Positive Quarter in Q4FY20 (JFM). We were cash positive even after paying Venture debt principal and interest and working capital costs as well – cash positive to the dot.

 

We actually celebrated being cash positive on March 15th after we crossed that milestone. Given we were turning cash positive, we were comfortable with our cash reserves as our burn rate was consistently coming down. We were also working with our banking partners to extend our India working capital limits to cover our international receivables. 

 

Apart from this, we were in the process of raising another $10mn of debt to further create a cash buffer. We had received term sheets for both and were a week away from a big four auditor team putting the final touches to their diligence report. I want to highlight the fact that this was not venture debt which was coming as an extension to an equity funding round. This was debt coming on the back of a strong P&L. It was a great feeling that we had finally come to the stage of being a ‘going concern’ and we’re seeing acceptance from stringent risk-averse folks like banks and debt investors.

 

And then the lockdowns started 

 

Things were going well for us until the mid of March, and then Covid-19 happened and one country after another went into lockdown. We thought we had a small advantage in that a part of our business came from China. But data for the month of Feb indicated a ~75% reduction in cash flows. And China wasn’t showing any great signs of recovery even by mid-March.

 

In the middle of March, when India and a bunch of other countries in the Middle East and SEA announced lockdowns, we knew that the worst was upon us. We prepared for a crunch in cash flow without any visibility on the kind of churn we would see. Would some of our customers go bankrupt? Would we have big write-offs? We spoke to many people but no one had seen a nosedive like this ever.

 

When you make a plan, you keep a 10% – 15% buffer to compensate for the misses and plan for that much extra cash. However, in the worst case when the 10% cash burn climbs to 75%, it spells disaster for the business. For instance, if you had a runway of 12 months at 10% burn, you would have less than 2 months at 75% burn! (Looking back now, our cash flows in the 6 weeks from March 15th to May 1st fell by ~75%). 

 

So we had just 2 months of runway in the new 75% burn world, and I pinned my hopes on the working capital extension and the $10mn debt coming in as both were a week away from closure. I called Rajan (Rajan has been an angel and a board member in Capillary and his experience has almost always translated to good advice), and he advised against assuming any of that debt coming in and put sense in me to take the hard calls and take them in one go. As you would have guessed by now – after dragging the decision to mid-April –  neither the working capital extension nor the $10mn of debt came through.

 

In moments of crisis, it’s important for businesses to assume the worst and take hard calls rather than hold onto false hopes.
A sure way to take a company down (besides running out of money), is to run out of energy. And one thing which would have definitely depleted energy and team morale is taking small cuts every week as bad news trickled in. We definitely didn’t want this to happen and hence decided to take the hard calls in one go. I will talk more about this in my next post – Taking the Hard Calls.
Click here to read the next post 

Taking the Hard Calls

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COVID Reflections is a series by Capillary’s CEO & Co-founder Aneesh Reddy where he shares the challenges faced by the company during the COVID pandemic and how Capillary dealt with them. We hope the learnings will give other founders and businesses the courage, hope and resilience to navigate this crisis. This is the 2nd post in the series, read Part 1 and Part 3.

 

In my previous post, I spoke about how being cash positive can become a double-edged sword for businesses during crisis situations and how the lockdowns meant low cash flows, which in turn drastically reduced our runway. In this blog, I wanted to share what we did to deal with this situation and the aftermath of it.

 

Once we decided to reset costs to a worst-case scenario, the first thing was to create a plan around it. We got help from Saiki at xto10x to put together a worst-case plan. Even after delaying the usual bonus pay-outs and vendor payments, we needed to cut costs by a large percentage to bring our cash burn to a point where we could extend the runway to 3-4 quarters with our existing cash reserves. We had three options :

 

  1. Take an outsized salary cut – ask vendors to take an outsized cut, and wait for things to recover
  2. Take a sustainable ~25% salary cut, put a large percentage of the team on furlough/ leave without pay and take them back when things recovered
  3. Take the hard calls now – take salary cuts to a level that is reversible if business recovered to 75%+ levels, and get the rest of the savings from letting go of employees and vendors you couldn’t afford.

 

After some serious thinking, we decided to go with Option 3, which meant we needed to take the hard calls now. Our decision was made based on the analysis of current market scenarios and probable recovery period :
  1.  Our higher exposure to offline retail and to markets like India and the Middle East which weren’t in the pink of health even before Covid-19 hit. Early recovery in these markets seemed highly unlikely.
  2.  If we had gone with Option 1 or 2, this delayed recovery would have resulted in a lot of employees going without pay or having deep pay cuts for an extended period of time without any clarity on when things will get back to normal.
  3.   If we choose Option 3 and retrenched early, it would give our affected team members the highest chance to get placed in other companies and access to any remaining jobs, before other companies reacted and started laying off. I had a hunch that we could leverage the goodwill Capillary had in the B2B SaaS ecosystem and run a successful outplacement process to help the affected folks.

 

Luckily for us, we had the support of our existing investors Warburg Pincus, Sequoia Capital, Avataar Venture Partners, Qualcomm Ventures along with some of our early angels Venkat Tadanki and Steffen Naumann. They set aside all other fund life considerations and decided to back us up with an interim funding round – all committed in 1 week. Our Venture debt backers Innoven also agreed to our request to reduce our principal repayments by half for the next few months, until things recovered. I must say we have been very blessed on the investor front.

 

With a 17% average salary cut (no cuts for the entry salary tier, 15% for the mid-tier, 25% for the management tier and me going on no pay) and with a low double-digit percentage of team retrenchment, we would be able to tide through a worst-case scenario and have money for at least the next 12-18 months. We decided to act and took the cuts on March 27th.

 

The Retrenchment

 

Given the lockdown, we had to do the retrenching remotely through video calls. There was a lot playing on our minds. Most of the impacted folks would have been confined to their homes, nowhere to vent, no friends to meet, and face the discomfort of telling their parents or families that they were let go. We had to let go of quite a few folks – some of them who have been with us for more than 10 years  – and we had to do this over a video call during a lockdown.

 

I would not have signed up to be a founder or starting up if I had the foreknowledge of a day where I’ll have to do something like this. Those four weeks have been the hardest of my life, and I have woken up with nightmares on several days during that month. We decided to do this in the most humane way possible and leave no stone unturned in supporting the affected folks. Here is what we did :

 

    1. For the employees being retrenched,  we decided to make sure they would be financially supported at least in the near term.  We paid the annual bonus,  encashed leaves and gave a minimum notice of 2 months, even for contractors. The average employee got a 4-month notice pay and folks who were with us longer got 7 months of pay. We actually didn’t have the cash so we decided to pay the notice as 4 months of salary over 4 months. Some of the folks we retained complained that the folks being let go were being treated better!
    2. We extended insurance till the end of H1 (September for everyone) and set aside INR 1Cr for any medical emergencies which the insurance might not fully cover.
    3. We brought on board YourDOST to coach the 30 teams that were going to run the exit process. The script for the exit meeting, the wording and the FAQs were closely scrutinized by them to make sure there was no word which was used that would make it harder for the impacted folks than it already was. YourDOST further trained the 30 teams on how to look for any clues of emotional vulnerability. We created a WhatsApp group where a panel member could send out a message if a conversation wasn’t going as expected and we would have the YourDOST team and someone from the senior management reach out to the employee immediately. The respective team manager would then be asked to keep in constant touch with these employees for the next few weeks, we also fast-tracked their outplacement.
    4. We further retained YourDOST to call up each impacted employee at least 2 – 3 times over the next few weeks. The impacted employees could reach out to the YourDOST team and get counselling sessions in case they were feeling low. A lot of impacted employees later wrote back to us acknowledging the support they got from YourDOST. I think the YourDOST team did a fantastic job over the next few weeks and I am very proud of being an angel in the firm. I am sure they have positively impacted the lives of many people.

    I must thank all the panel members for their patience and sensitivity in handling the retrenchment; it was a long dark day and everyone gave everything they had to make the entire process as humane as possible. 

  • We then had the hard task of running an outplacement service. We chose 6 folks to form a dedicated team to run an outplacement service. Every leadership team member contributed by getting companies to participate. I personally wrote to over 50 founders, basically anyone who has ever reached out for advice on participating in the outplacement.
  • Although I wouldn’t want to name anyone here, I am very thankful to all the support I got from the startup ecosystem and other founders who helped us out by hiring our folks. The Leadership Team and the Outplacement Team probably spent the next 8 weeks and weekends doing all they could to make this project successful. It was nothing less than running a well-oiled campus placement cell. We got 102 companies to participate, sourced 600+ open positions, and enabled over 2500 interviews.
  • We matched profiles and sent CVs for 99% of impacted employees; 80% of the folks had at least one interview opportunity and more than 60% had at least two interview opportunities, a few had 35 interview opportunities. But it’s been tough, and there has been less than 10% interview-to-job offer conversion. And quite a few good folks are yet to be placed. A large percentage of the openings froze halfway, where the companies would suddenly stop hiring at the last stage of the process, many even at the salary negotiation stage.

    By end-April – mid-May, new openings/ pace of hiring really slowed down. Thankfully, we had a head start, and as of mid-June, more than 60% of the impacted folks have already joined new companies. In hindsight, I think our hunch of moving early definitely worked out. For folks who are yet to be placed, we have offered to fund 75% of the fee for any online upskilling courses they want to take up.

    This entire episode took an emotional toll on all of us. It hit us especially hard since we have always strived to nurture a great culture at Capillary – one that is as employee-focussed as it is customer-focussed. In times like these, it’s vital to be humane in your dealings, over-communicate, and do the right thing for everyone involved with your company. I have written more on this in the next post – Doing the Right Thing for all Stakeholders

Doing the Right Thing for all Stakeholders

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COVID Reflections is a series by Capillary’s CEO & Co-founder Aneesh Reddy where he shares the challenges faced by the company during the COVID pandemic and how Capillary dealt with them. We hope the learnings will give other founders and businesses the courage, hope and resilience to navigate this crisis successfully. This is the 3rd post in the series, read Part 1 and Part 2

 

I previously spoke about the downside of being a cash positive business during a crisis, the impact of Covid-19 on Capillary, and the hard calls we had to take to stay afloat. This will be the last post of the series and I wanted to wrap this up by sharing some of the things that leaders can do to ensure everyone involved with the business is treated well.

Keeping your team going

A pay cut and a deferred bonus after what was a pretty transformative year is not what you expect as a team. I felt it was really important to have constant communication with the folks and give them updates about the company and the overall business outlook. We have run 50+ all hands, one every week for the whole company and an all-hands with me in smaller groups of 15 – 20 Captains over the last 3 months. On Zoom, we have had a 75%+ attendance on an average for the all-hands, we never saw such high attendance even during the physical town halls! We have had the pleasure of having Rajan, Alok and KK addressing the teams over the weeks and sharing their experiences from past recessions and what the breakout companies did differently. We did an employee NPS survey in Jan and another one at the end of April – to our surprise, our rating was better in April than in Jan! It’s been amazing to see everyone rally together to navigate these tough times. We had to enforce a no-meeting lunch hour, remind people they can take leaves and decline meetings during WFH. We are now announcing a 4-day company-wide shut down from July 2nd to July 5th to give everyone some forced downtime!

 

 Doing the right thing for your customers

 

Given that our customers have been badly hit by the Covid-19 crisis, the first response could have been to avoid any communications for the fear of dealing with discount/renegotiation requests. But we chose to do the exact opposite and offered a 4-week fee waiver spread over the year to all customers who were impacted by the lockdowns. We have spoken to every customer at least twice a month, shared data on our learnings from China and built a WhatApp CRM-Commerce product similar to WeChat CRM-Commerce that worked in China even during the lockdowns. We are currently charging for this solution on an outcome linked basis. We have extended payment terms for every customer. We have also offered some of our other products (especially our ecommerce stack) on an outcome linked pricing and are helping customers to go-live with an online store in about 4 weeks. 

 

Treating vendors well

 

Unfortunately in India, vendors get squeezed the hardest during an economic crisis, and being a B2B company ourselves we felt the pinch here as well. All finance folks feel they have an unsaid KRA of holding money for as long as they can, I wish this changed in India. When the crisis started in March, our first response was to hold back payments and we did; it’s not something I am happy about but I don’t think we had an option. In April we prioritized clearing the payments for all our smaller vendors. The larger vendors were paid in May and June as our cash flows improved and the funding also came in. We are now at a normal to slightly stretched 60-day cycle. I must thank our cloud providers, system integration partners and SMS providers for being patient with us. Again, I think it’s important to have honest and transparent conversations with vendors and give them clarity on whether you can pay or not. The worst thing to do is give wrong payment dates and upset their cash flow planning or worse, just avoid taking their calls. I still think Capillary needs to improve in this aspect.

 

Where are we now?

 

It’s been good to see things coming back to normal. On an average most of our customers are at ~50% YoY, our Chinese customers are at 95%+ YoY. While the data is optimistic, I still believe that the new normal on an average across Asia is probably going to be 85%. Our May and June cash flows have been at 80% of normal, and we have decided to pay out the FY20 employee bonuses with the June salaries. We hope to reverse the pay-cuts in the July quarter as well. We are likely to sign-up as much new business in this quarter as we signed up in OND 2019, and we are taking as many customers live as we normally did. Considering the ground we have covered, I also feel Capillary stands a good chance at being cash positive for the remaining three quarters of FY21 as well.

 

I think it would be prudent to wait for another quarter before saying that we are out of the woods, but I think we can all safely say the worst of Covid-19 is behind Capillary. I definitely think we have been fortunate to have avoided descending into the downward spiral of doom, but as the adage goes – fortune favours the brave. Also, one post facto realization – it’s better to take the hard calls early and prepare for a worst-case scenario in unpredictable times, rather than living in constant stress and uncertainty and reacting to every negative news. I feel you think with more clarity when you have a reset and not stressed about every negative trend that comes out. I think we moved fast and moved hard and it helped us to channelize our efforts in doing the best we could for our past and current employees as well as our customers.

Customer Engagement Trends in Indonesia 2020

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Indonesia is by a fair margin the largest country in Southeast Asia and is home to nearly 270 million people. The country has attracted the attention of major brands, business conglomerates and investors owing to multiple  factors :

  • A rapidly growing segment of Middle-class Affluent Consumers (MACs)
  • Young population – the median age in Indonesia is 30.2 years and 66.5%  of the population is between the age of 15 and 64 years.
  • Increase in internet & mobile penetration  – 80% of Indonesians prefer to use smartphones to access the internet
  • High Ecommerce adoption rates – 90% of Indonesia’s 152 million internet users have purchased online before.
  • Rapid Ecommerce growth – Indonesia’s ecommerce market stood at a whopping USD $21.0 billion in gross market value (GMV) in 2019

Customer Engagement & Brand Experience as a Competitive Advantage

The retail sector in Indonesia remains one of the most promising markets among Asian countries and is expected to grow to $42.34 billion by 2023. However, like many Southeast Asian markets, it’s highly competitive and fragmented with few dominant players like Indomaret and Alfamart.

According to a study by SurveySenum, ‘67% of customers in Indonesia switch brands not because of the price or the features, but because of the lack of good customer experience’.

Brands typically engage in price wars and discounts to stay afloat in these commoditized markets but it ends up making a huge dent in the bottom line. Retailers aiming at long term survival and success in the Indonesian market will need to invest in elevating the Customer Experience through personalized, omnichannel engagement, loyalty program enhancements like gamification, social commerce enablement and world-class after-sales support to capture the interest of the digitally-savvy consumers.

Indonesia is a Gold Mine for Omnichannel Marketers

With over 170 million internet and social media users, Indonesia is home to one of the largest digital audiences in the world. As of January 2020, online penetration in the country stood at a whopping 60%.  

For most Indonesians, social media is a convenient way to contact families in remote locations of the archipelago, allowing them to stay in touch with friends and also keep up-to-date with the daily news. The most popular social networks in Indonesia in terms of adoption rates are YouTube (88%), WhatsApp (83%), Facebook (81%), Instagram (80%) and Line (59%). However, Indonesia’s social media audience isn’t merely large, they are also very active. The average Indonesian spends 3 hours and 26 minutes on social media every day. This is a significant spike compared to the global average of 2 hours and 22 minutes.

Indonesians are also heavy mobile internet users. A Google Consumer Barometer survey found that 81% of Indonesians prefer to use a smartphone to access the internet, with only 3% preferring the desktop. A recent report by iPrice supports this, indicating that 87% of shopping in Indonesia is done on a mobile device. 

On the other hand, there is a steady stream of low-income consumers continually moving into the middle-income segment and they are becoming increasingly sophisticated in how they engage with brands and decide what to buy. This will fuel a further increase in tech-savvy consumers who are ‘channel-agnostic’ and expect to receive personalized experiences in real time across email, SMS, social media, website and mobile apps.

Top 5 Customer Engagement Trends in Indonesia

While discussing trends, it’s important to remember that brands should adopt new technology or platforms not because it’s the latest buzzword but rather critically evaluate how it contributes to a better experience for their customers. On that note, here are the top 5 customer engagement trends prevalent in Indonesia. 

  • The blurring lines between social media and commerce

Social commerce is gaining rapid momentum in Indonesia thanks to the higher social media penetration. Brands are finding it easier than ever before to start selling through Instagram and WhatsApp Commerce by engaging customers with real-time videos and personalized product catalogues.   

According to Indonesia’s Ministry of Finance, 64% of all ecommerce transactions in 2019  occurred through social media. The Covid-19 crisis provided a further boost to the adoption of social commerce in the region. While establishing a social commerce strategy, it’s important for brands to deliver a personalized customer experience by integrating it with their existing tech stack like loyalty platform, marketing automation and CRM.

  • Indonesians have a higher distaste for Ads

While there is a growing trend of ad blocker adoption across the globe, it has seen explosive growth in Indonesia. A staggering 58% of mobile users in Indonesia have enabled one or more types of adblocker.  In comparison, mobile ad blocker adoption rate is  28% in India, 13% in China and 1% in the US and UK.  It is apparent that consumers are not interested in generic advertising and it is crucial for brands to use highly personalized engagement to drive high-value conversations.

  • The rise in demand for personalized, real-time, cross-channel engagement 

On any given day, Indonesians use a plethora of digital platforms like WhatsApp, YouTube LINE, WeChat, Instagram, Facebook Messenger, Email, Mobile App, SMS etc. They are also increasingly judging brands based on how it interacts with them across these channels. Unfortunately, one of the key challenges that Indonesian marketers face is managing the sudden surge in data brought about by this rapid digital adoption by customers.

This often leads to disjointed and ineffective customer engagement, which ultimately leads to a negative Customer Experience. Our experience with retailers in other emerging economies like India, Saudi Arabia and Malaysia clearly indicates that a combination of Customer Data Platforms (CDP) and cross-channel engagement solutions like X-Engage can significantly improve customer engagement through unified data pools, hyperpersonalization besides delivering higher campaign ROIs.

  • Gamified loyalty programs will be key to drive deeper engagement

Gamified loyalty programs are simply engagement-oriented reward programs that focus more on the non-purchase aspects of customer engagement. Unlike traditional loyalty programs which are heavily focused on earn/burn aspects of a transaction, these new-age loyalty programs are geared towards the digital consumer who wants to be rewarded for social actions like reviews, comments, shares, retweets etc. 

  •   Location-based mobile interactions

Considering the high smartphone penetration in Indonesia, it’s no surprise that several brands are experimenting with wi-fi beacons and very granular IP addresses to deliver location-based promotions and offers. While the technology has been so far used by shopping malls to invite shoppers to download a proprietary app to get access to exclusive details and sale information, we expect this trend to be adopted by Single Brand Outlets (SBSs) and large department stores. For brands, there is also an exciting possibility to use location data to improve their social media strategy by engaging customers across Facebook, WhatsApp, Instagram etc.

Wrapping Up 

While Indonesia’s geography and fragmented topography render it unique, the audience shares similar behaviour and aspirations as other emerging markets in Asia. The winning playbook for brands is to understand their customers, invest in AI-powered digital/technologies and analytics, and seize the opportunity to engage customers in a highly personalized way to improve brand loyalty and sales.

A Deep Dive into Your Customer’s Mind

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COVID-19 has impacted businesses globally. From demand to supply, every aspect of commerce has been affected. With lockdown restrictions easing out, and customers getting back to the market, it is crucial for marketers to know how the lockdown has impacted consumer behavior. It is necessary for businesses to analyze, understand, and adapt to the shift in consumer mindset.

 

Primary research by The Hindu identified four segments of customers that are likely to emerge post lockdown : 

 

  • Revenge Shoppers: The ones expected to rush out to buy things that they had not been able to buy due to lockdown restrictions
  • Revelation Shoppers: Those driven by realization based on urgency.
  • Restricted Shoppers: The cautious buyers. Getting them to come and shop, will be the biggest challenge for marketers. 
  • Research Shoppers: Customers who are looking out for offers and discounts.

 

Neilson identified 6 Consumption-based consumer behavior thresholds based on their study across CPG, FMCG, and Retail markets further affirming the shift in consumer sentiments.

 

The lockdowns have put consumer sentiments on an elevated pedestal than ever before. For businesses to emerge as champions it has become important to understand their customers better than before.

 

After almost 6 months into the pandemic, businesses need to be more customer-centric and compassionate to earn their customers back. Knowing one’s customer will help in answering a few basic but essential business questions like – How should they attract the right customer? What is the right time to target them? Will they buy what they have to offer? What kind of campaigns to run? How should they revise their inventory to meet demands? etc.

 

Businesses can understand their customers by tracking their purchasing behavior, closely analyzing reviews collected from various social media platforms, monitoring web traffic, gathering insights from their loyalty program usage, analyzing data from the markets that have already opened, etc. 

 

But the best bet is to simply reach out directly to your customers as it eliminates a lot of variables and assumptions. That’s why Customer Survey Campaigns are one of the most powerful ways to get quick, reliable, and focused feedback.

 

Understanding Survey Campaigns

 

A Customer Survey Campaign is a survey sent out directly to customers, to their registered mail IDs or through a link to their registered mobile numbers. It is a repository of relevant questions aimed at collecting suggestions, feedback, and criticisms from responders in order to understand them better.

 

A Survey Campaign should incentivize respondents for filling out the surveys. Typically, the incentives can be a discount voucher or a cashback offer. And in that sense, a survey campaign is like any other marketing campaign.

 

Customer surveys are an antidote to fundamental biases, subjective assumptions and reasoning flaws that are inherent in human decision making. It helps brands and businesses to break organizational echo chambers to derive a critical and objective understanding of their brand from a consumer’s lens.

 

Given the times, it is very crucial for brands to emotionally connect with their customers; Customer Survey Campaigns should be complementary to sales-oriented marketing campaigns as they position the brand as someone who cares about their consumers and weighs their sentiments. They also help brands to be perceived as socially responsible and empathic.  

 

Best Practices to Plan a Survey Campaign:

 

  • The short and sweet survey: The survey should be simple, user-friendly, and focussed. The survey should be very specific and should answer the ‘whys’ and ‘hows’ of your business questions. Surveys are one of the best methods to dive deep into your consumer’s mind to not only understand them better but also build a closer relationship with them.
  • To the point questionnaire: Surveys to understand consumer behavior entails questions based on purchase
    preferences. A great example of this would be a survey that re-engages a specific demographic to understand their preference with regards to shopping digitally, or at a physical store. It can also uncover customer comfort levels around buy online/pickup from store, home delivery and what brands can do to improve the     in-store experience.
  • Frequency: While it’s important to include the right questions, it’s also vital to distribute surveys frequently and be consistent about when you send them.
  • A ‘Thank You!’ Note: Thanking your customers for their feedback and adding an incentive, is a humble way of closing the survey campaign loop. This allows a brand to – build closer relationships with its customers and propagates a perception of an empathetic brand that listens to and values customer opinions. Incentivizing customers with a discount coupon or a personalized offer can also help in increasing conversions during a crisis situation. This will help companies find new opportunities, increase the engagement rate, and stand out from their competition.
  • And, Action!: Much of the Survey Campaign’s success depends on how companies act on the responses. Survey results can be utilized and put-together in multiple ways: survey reports, infographics, podcasts, webcasts, blog posts, tweets, etc, ultimately improving SEO visibility and stronger brand credibility. The responses can further be correlated with historic data and with other KPIs like Churn Rate, Lifetime Value to get deeper insights. They can further utilize it to increase customer-brand engagement and drive their business motives through informed decisions.

In Conclusion 

 

Consumers are changing their purchasing behavior in response to the pandemic. The leisure time, changes in income levels and lockdown restrictions are expected to bring substantial changes in consumer’s attitudes and behaviors, which will, in turn, affect their buying-habit and purchase frequency.  While the crisis has resulted in massive losses to businesses around the globe, Customer Survey Campaigns can bridge the gap between customer’s expectations and what brands have to offer by reducing the uncertainty involved and helping brands to understand and serve their customers better than before! The businesses able to empathize and connect with their customers emotionally; and those driven by customer-centric sentiments are likely to evolve as Champions!

Engagement Strategies for Millennials in the Middle East

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The New Lost Generation, The Disruptive Generation,  The Loneliest Generation, The Burnout Generation….

 

The above monikers have been tagged to Millenials at various points in the last few years. The veracity of the above terms are subjective but one thing we can collectively agree on is that they are the ‘Most Researched Generation’.

 

But why are the millennials in the Middle East and around the world so intensely scrutinized?

 

On the surface, it’s easy to attach straightforward and templatized personas to this segment – they are born between 1981 and 1996, they don’t leave their homes without their smartphones, they’re obsessed with social platforms like Snapchat and Instagram, and they’re more vocal when it comes to issues like social inequality, climate change and oppression of freedom.

 

So why are brands and research agencies spending millions of dollars to study their psychographics and behaviors?

 

There are many, but these two are the biggest reasons :

 

First is their sheer spending potential – In 2018, the global millennial spending power was calculated at a whopping $2.5 trillion!

 

And secondly –  their familiarity with technology is at once disrupting and shaping the future of everything from media, manufacturing, education, retail and transportation. 

 

How are millennials in the Middle East different from their global peers?

Numbering around 108 million, millennials account for about 60% of the population in the Middle East. And while they share a lot of common behavioural and ideological traits with their counterparts in the rest of the world, there are certain areas where they deviate considerably from their peers.

 

Here are a few of them :

 

Higher Spending Power: According to Visa, when concerning travel-related spend, millennials in the Middle East are the highest spenders globally, typically spending twice as much as their European counterparts.  As the Middle East’s largest consumer base, brands need to be asking themselves: ‘How do we attract and engage this market?’

 

Wider Generation Gap:  Due to widespread online connectivity which has opened visibility to a diverse world, the gap between millennials and the previous Arab generation is considerably wider than is the generation gap in most other cultures. 

 

Juan Cole in his book  “The New Arabs: How the Millennial Generation is Changing the Middle East” shares that millennials in the Arab world are universally less religious and observant than generations that have preceded them. Cole adds that many millennials in the Arab world also tend to be more liberal than older generations.

 

Greater Brand Loyalty: According to a Google study, millennials in the Middle East have more brand loyalty than their peers in the US, UK and Japan. A significant number of millennials in Saudi Arabia and UAE considered only one brand when they buy.

 

More Entrepreneurial: A report by HSBC states that UAE and Saudi Arabia are home to the highest number of millennial entrepreneurs globally, outpacing China and Hong Kong. The average age of Middle Eastern entrepreneurs is around 26 years and they also seem to work the hardest – clocking 12.5 hours average workday which is 2.5 hours more than the global average.

 

Middle Eastern Millennials: Brand Preferences, Life Priorities & Personality Traits

 

  • Not Afraid to Challenge the Status Quo

Most of the Millenials in the Middle East were brought up with a strong sense of the region’s tradition and culture. This has fostered a strong sense of identity and pride amongst this segment which they intend to pass down to the next generation. However, they are not the ones to follow traditions blindly and being an increasingly global generation, they are open to change and question certain ideologies that are a hindrance to the progress of the country. In a nutshell, millennials in the region are an empowered generation who are vocal about their feelings and not afraid to express themselves even if it goes against societal norms.

 

  • Always Connected & Extremely Digital-savvy

According to the 11th annual Arab Youth Survey, 9 of every 10 millennials in the Middle East use at least one social media channel every day, and more often than before. The specific platforms usage differ greatly by country.  

 

Facebook continues to find a large, growing audience. With 38 million users each day, Egypt is the MENA region’s largest Facebook market. Visual social networks like YouTube and Instagram have seen rapid growth in the region. Instagram has 63 million users in the Middle East and Turkey is the sixth largest Instagram market in the world, while Kuwait, Bahrain and Israel also have a large percentage of Instagram users.

 

Saudi Arabia leads the pack when it comes to YouTube – the country contributes 90 million views every day, 50% of which comes from smartphones. The rise of video consumption and content creation via YouTube has made online video the weapon of choice for marketers targeting millennials in the region. Other popular social networks are WhatsApp (75% penetration), Snapchat (large user base in Saudi Arabia and Turkey) and Viber.

 

  • Aversion to Politics

Millennials in the Middle East are generally less interested in traditional forms of democracy and showed little to no interest in political parties. Only 36% of young people in the Middle East believe that the situation in Arab countries has improved after the Arab Spring. 

 

According to the Burson-Marsteller Arab Youth Survey, 53% of Arab millennials believe it’s more important to have stability than democracy and 67% think that Arab leaders must work harder to improve citizens’ human and privacy rights in the region, as well as women’s rights. Millennials in the Middle East are also generally less religious than previous generations with 52% stating that they believe religion plays too central a role in the Middle East.

 

  • Conscious Consumers

Millennials in the region care about the world they live in and want to make it a better place. The digital explosion has armed them with instant access to information and they keep a close tab on CSR initiatives undertaken by brands and the overall behaviour of a business.  48% of the millennials in the region said they only buy from socially responsible brands and 45% of them recognize and support local emerging brands as long as they resonate with their ideals. 

 

  • Anxious Yet Determined

This generation has a lot on their minds – increasing cost of living, unemployment, loans/financial burdens and a wide range of social and political issues within their country. A survey by IPSOS revealed that only 6 in 10 millennials are optimistic about their future, especially under the current economic conditions and they are spending even more cautiously than they have in the past. However, many of the millennials enter the workforce with high aspirations of climbing the career ladder or setting up their own business. 

 

Engagement Strategies for Connecting with Millennials in the Middle East

 

The key to being successful is to create engagement strategies for millennials that incorporates the above insights while being mindful of the socio-economic backdrop of the region. 

 

Here are a few tips to help you get started :

  • Personalized, Cross-channel Engagement across Social Media

As evident from the above stats, Arab millennials rely heavily on social media for their daily dose of news, entertainment, product discovery, and of course, catching up with friends and family. So it’s no surprise that getting social right can make or break your engagement strategy in the region. 

 

Brands will need to step away from creating siloed, disconnected and generic social media content and create a connected, holistic and personalized engagement across multiple channels like Facebook, Instagram, YouTube, Viber, WhatsApp and Snapchat. 

 

The key to achieving this is through investments in two emerging technologies: Customer Data Platforms to create a Single View of customers and intelligent customer engagement platforms with cross-channel capabilities, like X-Engage. 

 

  • Authentic, Story-driven Approach

In the Middle East, millennials have significantly more brand loyalty as compared to their global peers. A large majority of them believe that the brands and products they use reveal a lot about their lifestyle and personality. Therefore it becomes doubly important to clarify what your brand stands for and its core values.

 

Be authentic in your tone and try not to think of social media as another “sale-sy” advertising outlet. While this rings true for any audience, it is especially relevant when it comes to millennials. Make your content story-driven, especially when showcasing your products or how it positively impacts the lives of customers. According to an analysis conducted by the Institute of Practitioners in Advertising (IPA), emotional storytelling outperformed their rational counterparts with almost double effectiveness.

 

  • Video & Visual Content Focussed

It’s no surprise that brands with great visual and video content garner massive engagement in the region. Millennials in the Middle East spend over three hours per day on online video – that’s more than both messaging apps and games combined. They are also twice as likely as their global peers to post content online and show others how to do things online. We recommend a mix of educational, entertaining, engagement-provoking and promotional visual content across Facebook Live, Instagram stories, YouTube and TikTok to maximize your engagement in the region.

 

  • Mobile-first

Brands and marketers will need to think of mobile as more than just a medium or channel. It’s going to be a critical entity in almost all future digital experiences like AI, VR, AR, IoT etc.  Millennials in the Middle East have a higher propensity for smartphone usage compared to their global counterparts. More than a third of millennials in Saudi Arabia use ONLY mobile phones as their internet access device and 34% of youngsters in the UAE watch videos on their smartphones several times a day. This makes them less-forgiving while encountering accessibility issues and other rendering glitches on the mobile.

 

Wrapping Up

 

Millennials are fidgety, distracted and want to get a lot done in less time. They want digital experiences that revolve around their lifestyle. Brands will need to adopt agile marketing strategies and technology solutions to keep up with their constantly evolving interests, needs and behaviour. While it might seem like a whole lot of effort to capture the attention of this audience, their massive spending power and strong brand loyalty more than makes up for it in the long run.