How "Customer obsession" helped build a multi-million dollar company - The Story of Freo (MoneyTap)
Marketing starts before you design the product!
This is the story of "how customer obsession helped build a startup with a Gross Transaction Value of more than a billion dollars!". Like any other startup story, this also starts with understanding the problems that the audience was facing.
The founders were not from the fintech domain but wanted to help people somehow. So started the customer research, in-person meetings, and surveys. Before starting a startup, research is necessary to understand whether people will buy the product you will build.
And that's where marketing starts.
The founding team interviewed 150+ customers for hours with open-ended questions to understand them. Truly understand them. Understand their problems that no one had solved earlier.
They talked to people from different backgrounds, different mindsets about money, and different demography. Because to build a great product, you need clarity & in-depth understanding of consumer behavior.
The insight that came out often after assessing the credit needs of consumers was that credit cards and personal loans were the two most popular options.
But at the time of the interview, almost seven years ago, not many people owned a credit card in India (25M cards in a population of ~900M). The reasons for that are numerous -
Many didn't know how they worked (at least at that time),
Many didn't know how to get it,
Many didn't have the credit score to get it and,
Many who owned it highly misunderstood the terms and conditions, leaving a massive trail of debt and a perception of distaste behind them.
They worked for most needs (online shopping, travel, in-store purchases) but not all (paying rent to the landlord, hospital bills, school fees, etc.)
Personal loans help serve significant financial needs (medical emergencies, weddings, vehicle downpayment, school fees, house deposit, etc.) but not your daily needs. They were not readily available for a small ticket size of 10k-50k and involved a lot of paperwork and a long waiting period.
The perfect solution
The perfect solution to that? A credit line that offered the flexibility of a credit card and the affordability of a personal loan. Best of both worlds. Consumers could get something digitally for which they don't have to take a day off or travel to the nearest bank branch, something that's digital & doesn't use 50 sheets of photocopies. Freo's team launched India's first app-based credit line - MoneyTap, which set a precedent for many apps to follow over the years.
The Minimum Viable Product for Smallest Viable Market.
Even after months of consumer research, you don't go building a final product right away. You first need to test if you will make a solution for an existing problem. Will people pay for it? So the team created a dummy application to test out the nuances of UI-UX, content, flow & process, and pricing for various market segments with different mindsets and started testing.
Studying customers never stops.
The team reached out to various companies, displayed their standees in office cafeterias, invited consumers to try their app, and hoped for a full-house lunch hour. However, they were in for a surprise.
Have you ever been comfortable talking about your financials in front of other people? Your friends, colleagues, and neighbors? Probably not; Me neither. And that is what happened. During lunch, consumers came in groups to the standees and quickly bounced off. No one seemed to be interested while in a group where their colleagues could hear (and judge) that they needed money. However, after the lunch hour, many turned up all alone, enquiring about this new product that no one had heard of - credit line. As the team answered, they started validating multiple hypotheses. They understood that 'personal finance' is very personal and had an aha moment - customers need to have a 1:1 conversation with your app. The team decided to launch their app in a conversational chatbot (7 years ago).
Another challenge? Massive rejections!
Have you ever applied for a credit card or loan and got rejected? Let's take the party metaphor. Assume that one of your friends invited you to this kickass party. You are looking forward to going. But when you arrived at the party, you didn't get an entry because the seats were full. The point is, how would you feel if a company marketing about giving loans and credit cards rejected your application for the same? You will feel pretty bummed about it, won't you?
Same way, though MoneyTap was built to serve the masses and classes alike, not everyone got access to it. Many applied but didn't get through the approval process. This gave the team another insight: they should crack marketing channels that provide better targeting. The team consciously avoided ATL media (like Outdoor, Print, Radio, TV, etc.) and preferred BTL media.
Below-the-line marketing
Meaning? Talking to people one-on-one. There are ways of doing it. You can either speak to them directly one on one. Or you can use a tremendous advancement in the marketing of all time. It's called 'Digital Marketing".
Choosing the right channel
Let's call it experimenting with the proper marketing channels. For that, let's understand Push & Pull Marketing.
Google Search Ads is, for instance, a Pull Marketing Channel. You see the ads only if you are searching for something. It pulls users to take action (searching for the product/service). On the other hand, Facebook Ads is a Push Marketing Channel because the ads are pushed to you depending on your preferences and interests by Facebook and Instagram.
Traditionally, Push ads are not a go-to channel in the finance sector as people take time trusting something they see for the first time, primarily if it's money-related. With Pull marketing, on the other hand, people search for you and then stumble upon it. So there is a high intent to opt for the product & hence these ads work well for finances/money.
However, with Search ads, you only have a limited number of characters to tell your story. And when your product is new and requires a fair bit of explaining, it is hard to explain with little words. But with a visual-heavy format (like Facebook), you can experiment and improve your storytelling.
And hence Facebook ads became the first go-to channel for Freo as they were building a new category - a credit line. In parallel, they also created various Search campaigns and used Google UAC ads to scale up their mobile app installs.
How did they figure out their storytelling? They experimented scientifically on both channels by running numerous ads, consistently sharpening their digital selling pitch. And numbers don't lie.
Segments of segments
Hitarth and his team pushed the limits of A/B testing and customer research. They split-tested everything - header, sub-heading, landing page, video, and even video lengths. Hitarth, being in love with performance marketing, took a data-driven approach to every ad that went online, and his team pushed the limits on creative storytelling to find the right combination that works. They were messing with every necessary metric and iterating the ads accordingly to make them more and more perfect every week.
And the fun part of Facebook Ads is that you can target people segment by segment. People interested in Netflix will see different ads vs those interested in Hotstar. You can make segments of segments. People watching Stranger Things on Netflix will see a separate copy of your ad, and those watching FRIENDS will see a different copy.
Putting all eggs in different baskets.
Using just one channel of marketing is generally a bad idea. Do you remember how TikTok, which had millions of subscribers in India, was shut overnight? You never know; one slight change and your whole business are at risk.
So, Freo decided early on to diversify its acquisition channels. Besides the usual channels like Facebook, Instagram, and Google ads, the team tried Affiliate marketing.
The affiliates were bringing a lot of traffic and a deluge of installs. But the number of active users was not increasing much. Scaling affiliate marketing took time, primarily when the industry dealt with a considerable volume of ad fraud. The top of the funnel was massive, but the bottom was surprisingly small. Since a high number of website visits won't increase your company's revenue unless they get converted into actual paying customers, the team filtered affiliates that drove good quality traffic vs going after scale that doesn't convert.
Second stop - market-segmented chatbots. The chatbot was unique to the segment of the market it was talking to - generation-dependent. While talking to a person 18 years of age, it was programmed to respond with excellent replies. While talking to people of age 40+, it was talking formally. It spoke in a way the exact user or group with specific characteristics would talk. It helped them solve their financial problems by connecting them emotionally. As an extension, the team also implemented a hyper-segmented, hyper-personalized approach in their Email campaigns.
Expanding the horizon
From city to city, it was time for expansion. Again, the best way to expand to any city is to study the city firsthand - its people, how they talk, and what they talk about. And that's what Team Freo did. You can't use the same ad for the city of Bangalore vs the city of Delhi vs the city of Chennai and assume to get a good ROI. Freo used vernacular language marketing. They were talking to people exactly how those people spoke in their daily life - using different city-specific slang.
People love when someone speaks their language. And it worked like magic for Freo.
Benefits of recurring customers:
When covid hit, the new loan disbursement for the whole lending industry took a hit. MoneyTap was also impacted and paused its fresh loan sourcing for a while. However, since it already had a massive base of customers that had the power of a credit line, customers continued to take loans. With the power of recurring customers, Freo came out victorious and, within a year, bounced back stronger.
Covid:
During the whole period of the Lockdown, people were consuming content at that time more than ever. The team started focusing on organic marketing. Relevant content creation & its delivery and SEO were the team's main focus.
Meanwhile, the team also started working on creating more financial products that could help with many other problems. In just one year, they launched new apps totaling their count to 5, all in the fintech field.
Freo Pay (pay later)
Super Split (bill splitting)
Fit.Credit (credit score insights)
Freo Save (digital savings account)
MoneyTap (credit line product, existed pre-covid)
And with the help of a brand consulting agency, Landor and Fitch, they created an umbrella brand, which came to be known as Freo.
A NeoBank for every stage of your life
Earlier, with just MoneyTap, the Freo team was solving the credit needs of the consumers. But with the new apps ranging across pay later, savings, and financial utilities, it became the only neo bank In India that was truly full-stack, solving for all financial needs at every stage of the consumer's life - Save-Spend-Borrow.
New Customers, New Era
With the complete suite of financial products under Freo, their flywheel effect started kicking in. With an abundance of new customers, Freo now has the option to cross-sell and upsell its user base across various apps and products.
All these mobile apps have more than 20 million installs in total plus customers across the length & breadth of the country. And with features like referrals, personalization & vernacular content, they are increasing their customer base faster.
Conclusion and Pointers for Early Stage Founders:
The story of Freo sounds fascinating. It almost makes you believe that building a 1B$ startup is possible, but there were more failed experiments on their path than successful ones.
And to succeed the main, it is necessary that you are willing to experiment with growth.
As an early-stage Startup Founder, these are the points that you must never forget:
User Retention is as essential as User Acquisition; as you saw, the case of recurring users helped Freo achieve the heights where they are right now.
Continuously be in touch with your customers, and do as many surveys as possible to understand your audience's hopes and dreams.
Don't hesitate to pick up the phone and call your customers when you see even a slight change (increase or even decrease) in the metrics.
Visit your customer's home if you can. Understand them, and their life better. Continuously test your hypotheses.
Segmentation works and is better than carpet bombing. Once you crack segmentation, modify your approach for the segment. Personalize and see the magic.
Call the customers when you see one ad working better than the other and try to figure out the insight behind that.
As a thumb rule, put 5-7% of your marketing budget into growth experiments. And obsess over why it worked or why it didn't
Split testing and a scientific approach should be the DNA of your marketing. Things that you should split test:
Landing Page
Ad creative
Headline copy
Email subject lines
Video lengths, types, intro & outro
Design of your Ad Creative
Copy of your Ad creative
Marketing Channels
Offers specific to customer segments
Timing of delivery
I would really love to know what you learned from this.... And don't forget to share.