Category: Business

The best kept secret of Gurgaon: Roots!

Readers of this blog (all two of you) must be aware of my travails with Gurgaon. But then like every cloud that has a silver lining, even Gurgaon has some things that make up for all the hassles and a trip to Gurgaon worth the ordeal. No I am not talking about malls or hotels or that kingdom of watevers. I am talking about places that go under the radar because they are either too small or too simple to get eyeballs. In next few days, I would try and list those.

To start with, lets me talk about the best kept secret of Gurgaon – Roots, the cafe in the park. Roots is located in the premiss of the Rajiv Gandhi renewable energy park, close to the Iffco Chowk Metro Station and is bang opposite the famous Kingdom of dreams. So its very accessible and there is no reason why you shouldn’t spend an evening there.


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Roots is a far cry from those commercial Baristas and Cafe Coffee Days sprinkled all over the country. For starters, the place is ecofriendly and everything is cooked by solar cookers. Then the menu is organic with natural ingredients. It has things like Sarson di roti and makke da saag and Nepali platter, things that you dont really get at most “coffee shops” in India. The staff is very unobtrusive and very courteous and they let you be

And the best part, when you are at Roots, all you can see is a lush green garden, trees, kids on slides and swings and such things. You can not see a single high rise and you can not hear any traffic. The air is clean and fresh. A visit to Roots always, without fail, invigorates the damn soul, if not the mind and heart.

And since its almost a weekend, you must visit this best kept secret of Gurgaon and experience the magic by yourself. And if you do, please share your opinion on it.

Rant on the cost of acquisition of a customer

A lot of friends, who run internet businesses, work around the cost of acquisition (of a customer).

It is defined as the amount of money that they need to spend in order to get a customer to perform an action. The action could be a mere visit to the website. Or it could be a purchase of an item of certain value. 

IMHO, the idea of working around the cost of acquisition is fundamentally flawed.

It’s a metric that someone needs to look at when they are VERY sure that the customer would stay bonded to their service/product. A credit card for example. Or a bank account for that matter. Once you acquire a customer in such a business, you are sure of the repeat transactions and thus continual revenues. And thus it is justified to invest (aka spend money) on getting a new customer. You recover the investment over time and thus the idea of cost of acquisition makes sense. Look at all the razor companies for example. In fact this article on wikipedia is very highly recommended to understand more about the razors and blades.

On the other hand, if you run a website that sells deals, or electronics or clothes for example, then there is no compulsion for the customer (that you spent something like 600 bucks to acquire) to come back to your website to buy things again. The customer is not loyal to the platform (aka your website) but is loyal to the brand he is buying. Or to discounts for that matter. He will simply hop onto the website that gives him more discounts than you.

However, on the other hand, you can somehow create a very solid reason for the customer to come back to you and buy more things from you, then you may spend money on acquiring customers. Something that a business like Zovi.com is doing. They are creating a brand. And the cost of acquisition can thus be justified by apportioning it between marketing and sales. Ideally, your product, your brand must be something that he “needs” (not “wants”). Like recharge for a mobile phone connection. So if you were Zovi and you were creating a brand of menswear, how would you make the brand a “need”?

Apart from this, another reason why I think it sucks to spend so much money on acquisition is the imbalance of incentives. When I am acquiring a customer, I should pass on the benefits to the customer. In most cases, the money that I spend on acquisition goes to the brokers (the search engines). Just because they are marketplaces, they command prices and make the most value out of the entire acquisition game. If there could be a business that paid the customer, or me, for transactions, I would be interested in knowing more about it.

And that’s about it I guess. Like a true critic, I just know that this is broken and I don’t know how fix this. If you do, please share!

First posted on Sandbox.

84 Fucking Lakhs


This day on, my blog will start featuring adult content. Reader discretion advised. If you think am getting offensive with what I write, please move on.

I am pissed. Very pissed. Furious. Raged. And all those adjectives that the creators of English language created to express an emotion of extreme anger, frustration and helplessness. I am all of that. And more. More than words can express. More that I can put in shape of words. Wish I could write better.

And why is that I am all of the above? Because I just came back from a wedding where the groom was “gifted” a BMW. From what I heard, the car is about 84 lakhs INR in Delhi. Can you believe it? 84 lakhs? A gift. I dint even know a car could cost that much. Not even in my dreams.

I thought people like that only existed on Page 3s. And if they were for real, they had to be bollywood stars, cricketers and/or politicians. But now I officially know a guy, firsthand, who has received a preposterous amount as gift. For his wedding.

I have always know that world is unfair but it suddenly looks lot more depressing. The battle with myself look pointless. The reason to exist and go though all the agony look pointless. All the effort that I am putting in, all those things that I am doing, all the flak that I have been taking from friends, family, neighbors etc seems going down the drain. All the promises I made to myself look like mirages.

Imagine there are some people, that have enough free cash to be able to gift their daughters 84 lakhs. I am not even talking about other expenses that a wedding entails. Fuuck!!!

In my 27 years, my total earnings, ever, collectively is less than half of that. And I am an MBA from one of the top ten BSchools in India. Come to think of it me, my dad, my sis put together do not make that kind of money.

How the fuck am I supposed to compete with people who have all the money to do what they want to do? I couldn’t launch a business for want of bloody 10, 000 rupees. 84 lakhs is 8400 ten thousands. This dude can launch 8400 of these businesses before I even dream.

And if I asked that guy to make that much money without using any influence, power, contacts, friends, how many years, wait, how many lives would he need to reach a tenth of that amount? O, this is debateable. Forget this line. But its unreal the kind of opulence that some people live in.

How did guys like Dhirubhai Ambani manage things? How? Some divine intervention? May be. Mera kya hoga? Suddenly I am worried. And how.

Life suddenly looks so so unfair and so meaningless. Why the fuck am I even trying? fuck. One of those days I guess …

Initially written on 3rd Dec 2009. Gave myself a break of few day before posting this to be able to look at things rationally. But more I think about it, more sick I get.

Pricing and Demand

Lets say I am selling shoes. These shoes are not meant for the entire world, but for a select few. Lets say shoes for computer gamers. Something that all gamers would want for sure.

Once I have a product to sell, I have a few options of creating a pseudo demand (and inflate prices). Let me call them models.

Model 1
I create 500 pairs and sell each at say Rs. 100. Like a typical sales process happen.

Model 2
I create 500 pairs. Sell them in lots of 50 at Rs. 50 each. Once each lot gets over, I jack up the price by Rs. 25. I create that “rush” where everyone would want to buy the shoe when its still 50. If lot 1, gets over, everyone knows that if they dint buy it for 75 (and miss this lot), the price would go up at 100. So on and so forth. Also, since these shoes are limited in number, by raising the “price”, I raise the “value” of the shoes that have been earlier purchased. I theoretically sell faster and make more money.

Model 3
Reverse of Model 2. Lets say I want at least Rs. 100 per pair. I create lots. I sell the first lot for Rs. 200. Every incremental lot, I reduce the price. I think this is the worst of all. This is infact the winners curse. The price for other users falls as a result of actions of the winners. But there is something interesting. Moment I slash the prices from Rs. 200 to Rs. 100, I think a lot of people would compare the two prices and use models like contrast and grounding to buy in herds.

Is there a merit in thinking about pricing and economics before you create a business? Which of the three is advisable in the long run if your product is not a commodity? Is there a fourth, fifth, sixth .. way to think about pricing and generate demand.

Thoughts?

Originally posted on Cyntax Blog

Value Add – Price Premium

While creating a philosophy for Cyntax, I have been thinking what kind of businesses can command a price premium. I think the businesses in the value chain that add “unique” value to the end product are the ones where you can ask for money. This is probably as old and as commonsensical as Michael Porter‘s work on value chains, but realizing it myself, was an achievement.

Let me take an example. The tee shirts business. Three most important components are the supplier, the designer and the retailer. The supplier can not ask for a premium. Simply because he is manufacturing a commodity. There are bound to be many suppliers with similar or near similar offerings and only thing that all suppliers can compete on is the price. A retailer, might command premium if he is a large player and has a ready set of customers. Someone like, say Big Bazaar. But over a period of time, with Internet eliminating all kinds of middle men, a marketer would no longer need a retailer to sell his products. Cases in point being zappos (ok, zappos is a retailer), threadless and cafepress.
On the other hand, if you are someone like Tantra or People Tree or Play Clan, you add value to a basic white tee shirt. You add a unique design and print that design. You dont sell just a tee shirt. You sell this design that no one else can do. And you thus ask for a premium. To compete with a Tantra, I wont need the supplier, I wont need the retailer but I would need a designer. Obviously I am assuming that I would be able to squeeze the suppliers and command terms to the retailers and create a fantastic online community (and a shop).
Tee shirt business is ok. What about travel business? Who will command a premium?

Travel chain has two components – service providers (airlines, railways) and agents (Traditional, OTA). Off the two, agents can only sell the inventory that service providers make available. And its a simple business where you add zilch value (online agents add value in the sense that they make available the inventory real time) and hence they cant command a premium. Moment an agent asks for a premium, the user would move on to the next agent. You compete on mindshare and again, cost!

What about HR consultancies? Petrol pumps? FMCG companies? Who do you think commands a premium? What to you guys think?