Introduction-:
Freecharge.In (Company) a subsidiary of Accelyst Solutions Pvt. Ltd commenced its business th operations on 15 August 2010. The Company has a unique business model wherein on a prepaid mobile talk time recharge of amount starting from Rs 10 to Rs 1000 the users get discount coupons of equivalent amount of various brands. Freecharge is conceptualized strategic marketing company which has tie- ups with India’s top retail and telecom companies. Freecharge is seed funded by Tandon Group, members of the Mumbai Angels. Freecharge has applied for a patent on their business model, the status of which is currently ‘pending’. Freecharge works on the model of getting into MOUs with leading chains like McDonalds, Barista, PVR, Shoppers Stop, ibibo and many more where, upon recharging, user gets a free coupon equal to the amount recharged; which can be redeemed in the respective retail outlets. This attracts many prepaid mobile users, as a perception of free-credit transfer is created in the minds of consumers. SWOT Analysis of Freecharge.in Strengths:
Low investment since no major capital costs
High Awareness through social networking sites (1 l akh+ face book users)
Has customer database of over 1 million users
Potential of providing analytics as solutions to many companies
Tie-ups with all major telecom companies
Tie ups with various apparel, entertainment and hospitality chains
Easy and only 3-step 3- step process of customer transaction
Complete value for money for consumers
Since, consumers get coupons of entire recharge free, they consider their recharge to be free which attracts more eyeballs
Without major advertising spends, Freecharge.in still manages to achieve 20,000 couriers a day
Weakness:
Limited Target group
Only targets prepaid account users
Credit and debit card users only
Requires internet connectivity
Risk of theft or loss during transit of coupons
Logistic Costs of physical coupon transfer is i s high.
Relies on external source for physical coupon delivery
Opportunities
Internet displays a huge penetration potential in the Indian market
Digitalisation of various mediums of communication and transaction
High usage of ‘data’ on mobile phones shows increased internet usage on mobile phones as
well as high propensity to spend which results in large and / or frequent recharges
Indian mobile penetration currently around 50% expected to reach 70% by 2015. More than 95% of these customers are prepaid users.
With low ARPUs (Avg. revenue Per User), high MOUs (Minutes of Usage) & falling tariffs, the propensity to spend is ever increasing and thus huge potential exists to tap online recharge market
Increased secure internet transactions could boost business further
Mobile Wallet – relatively new & untried concept in Indian markets, with huge upside
Freecharge could consider sending mobile coupons rather than physical coupons
This would minimise operational costs and reduce delivery delays
Emerging retail chains which could be targeted for tie-ups
Threats:
Low entry barrier to business could increase future competition
Since, many competitors could get into similar agreements without major barriers, threat of new entrant is high.
Various forms of recharge available to consumers grab market share
Traditional forms of recharge such as purchasing physical recharge cards, poses a great challenge to Freecharge
Lower vigilance of cyber-crime in India
This leads to consumers being hesitant to use their credit or debit cards online.
Consumer mind-set regarding online-payment frauds.
Existing distribution channels for recharge. Difficult to penetrate into the set channels of reaching consumers.
Cartelization of mobile operators could hamper business severely
Potential Revenue streams
Direct Revenue
Commissions from telecom companies
Advantage of buying of pins in bulk quantities This helps Freecharge get bulk discounts and better margins in transactions
Indirect Revenue
Commissions from retailers, chain restaurants and various franchises
Since, Freecharge provides additional business to the tied-up franchises, we could create a portal for various brands to promote and advertise on the site
Using the customer data base of over 1 million users (logistics & analytical purpose)
Data of face book or telecom company users could be used but not sold for advertisement purpose (more than 1 lakhs face book users)
Making available advertising space for companies wanting to promote on the website
Logical Deals and Possible Extensions:
Post-paid Bill payment tie-ups could be ventured into
As per TRAI (press release-55/2011), the mobile industry displays a growth rate of more than 32%.
97% of the 885 million active mobile users are prepaid mobile users. However, 30-40% of the revenues are accounted by the post-paid users. By tapping these 3% users, Freecharge could look at a substantial share in the value chain in this booming telecom sector.
However, terms and conditions would need to be altered for this payment
Other domestic Bill Payment could also be paid with similar terms and conditions
Data Card Usage could be tied up with the DTH f acility
Internet card plans could be ventured to diversify business
This business could piggyback on the already existing DTH business by recharging discounted credit for televisions
Movie Ticket booking and Airline Booking
Insurance Premium Payments
Forward Integration by getting into courier services
Online shopping portals
Here, we could integrate the rewards offered to consumers and make it usable on the online shopping websites. This would create a symbiotic business for the the recharge website as well as the online shopping portal.
Creation of mobile apps to carry out transactions in case of no- computer availability or penetration (example: PayPal, M-Pesa, safaricom)
Analysis of Physical Coupons Advantages:
Tangible benefit to consumers
Coupons directly by the Tie-up
Low cost for attracting many consumers
Delivery costs not very high
Disadvantages:
Major driver of logistic costs
Increases operational costs
Increases time lag between transaction and actual delivery
Difficult to maintain and preserve
Chances of loss by consumers is high
Chances of thefts or misplacement during travel is high
Leads to reliance of delivery on third-party
High investment cost for designing of physical coupons
Since disadvantages outweigh the advantages, a probable solution would be sending of coupons through mobiles.
At the time of recharge, as the payment is confirmed, there would be an instant SMS that would be delivered to the customer consisting of the unique coupon codes redeemable at respective outlets.
Three copies of this code will be maintained.
One with the customer who receives the SMS.
Second with Freecharge.in in order to track the date and period after which a coupon is redeemed.
This would add as an additional source of information in the analytics line of business
The third with the respective outlet or chain. As soon as the coupon is being redeemed, the unique code will be matched with the database of outlet. Correct identification will instantly update the status of the code in the database of Freecharge, ensuring effective monitoring.
In this way, the following advantages are achieved:
Operational costs reduced
Logistic requirements minimised
Effective monitoring of coupons
Green initiative by the company
Helps in CSR as well as in acquiring various certifications like the ISO
Easy transactions for tied-up companies
Consumers generally complaint that they do not receive the delivery of the coupons in the prescribed time limits. Often, consumers do not receive the coupons at all, which triggers theft or misuse of coupons in the delivery process. The logical solution as mentioned earlier would be to establish a courier service that would ensure timely delivery of coupons with appropriate and strict supervision. However, this still involves some levels of transaction costs which could be minimized to a great extent by the use of m-coupons. Conclusion:
The online prepaid recharge business currently contributes to less than 1% of the total prepaid recharge which ensures a huge potential to tap the market. The working model of Freecharge seems to be a sure win-win for mobile operators, retailers and the users.
