The number of suppliers joining the Meesho platform has grown steadily over the past few years. In 2021, specifically, the worst year of the pandemic, we saw a sustained spike in the volume of suppliers we on-boarded.
The pandemic had pushed typically brick and mortar businesses, small and big alike, to look for alternate routes to reach their customers.... And Meesho became the preferred platform for this pivot, especially among tier 2+ cities, thanks to our 0% commission policy.
As the volume of suppliers onboarding Meesho increased, all internal trends and extrapolations pointed to an increase in the order volume as well. However, the outcome was contrary to our projections.
In fact, we witnessed a significant drop in the post registration conversions (sellers actually making sales after registering). This anomaly caused a veritable spike in our Customer Acquisition Cost (CAC).
Why did this happen?
Despite a huge influx of suppliers, the huge drop in post registration conversions was owing to two major reasons:
- First-time user anxiety and limited understanding of e-commerce (remember: most of our users, both sellers and buyers, are not digitally native)
- General lack of trust on digital instruments
While these issues were unique, they were solvable given the team’s experience working extensively with tier3+ populations, and our commitment to user research. So, we fell back to the basics and divided the solutioning stage into the following parts:
- Analyse what we know:
In the past, Meesho has implemented several referral programs to attract new suppliers to the app:
- Meesho dost: The program leveraged our existing supplier base to attract new suppliers. The post registration conversion rates of this program were 150% higher than organic registrations
- User referral: Initially launched to promote an alternate source of income for our entrepreneurs, the user referral program delivered ~30 - 40% reduction in CAC compared to other channels. Additionally, we achieved approximately higher conversion rate and the referred suppliers formed a good part of our overall base
While these programs gave convincing results, they were withdrawn because of several limitations ranging from being too operations heavy to requiring better referral management systems.
But, they led way to a key discovery: the effectiveness of the “word-of-mouth” marketing that was central to all our referral programs With this established, the team went back to the drawing board to chalk out a plan for developing and implementing a referral system that drew from the learnings and shortcomings of its predecessors.
2. Formulate the action plan: The supplier referral program needed to meet two basic requirements:
- Motivation: Both parties — the referrer (existing Meesho supplier) and the referee (the referred supplier) — needed to be motivated for conviction to become conversion within a specified timeframe
- Gamification: The reward structure must be multi-stage and milestone based to build sustained conversion motivation by both the referrer and the referee
Since the referee would normally be acquainted with the referrer, the challenge of digital literacy and trust, mentioned earlier, was solved. Based on these, the end goals the following reward structure was developed:
The table breaks down the referral reward structure. 1 successful OD (Order Delivered) by the referee (new supplier) would unlock INR 100 as reward for both the referrer and the referee. 5 OD would unlock a INR 400 reward for the referrer and INR 100 reward for the referee. Similarly, increasing amount of rewards would be unlocked as the referee makes more order deliveries.
This system of two-way rewards system meant that both the referrer and referee stood to gain from order conversion. Complimenting this plan were a set of fail-safe parameters that the team put in place to fill in minor loopholes and cover contingencies:
- Referral management system to inform the referrer and the referee about their progress and reward payout
- Simple and comprehensible program guidelines
- Fraud detection mechanisms to fish out any sneaky business going around
With the action plan in place, it was now time to devise the launch strategy. 3. Strategise the launch: A 3-phase roll-out was designed and program capabilities and cons were measured across stages:
- The pilot was launched with manual processes over sheets/3rd party systems to selected suppliers. This supplier pool was created based on parameters such as revenues, order in the last month, etc.
- The second phase was launched to a bigger supplier pool with functionality features such as sharing capabilities and reward mechanisms
- The final stage, which featured sharing capabilities, referral management system, and collateral management, rolled out to the entire supplier base.
A phased launch meant that the team could experiment with reward curations and test the capabilities of the reward structure.
The Impact
The supplier referral program went live in January 2022, and in its first 6 months has contributed approximately 13% in supplier registrations and 30-32% in order activations.
While these figures aren’t explosive, it is the timeframe, i.e 6 months, that indicates the pace of supplier adoption.
The virality is set to grow exponentially in the coming months (registration virality has already jumped from 1.8 in December last year to 2.9 in April this year)
Consequently, the CAC has reduced and the conversion rate has increased with 50% suppliers, onboarding via the referral program, reaching >=100 OD (Order Delivered).
While the referral program is still in its early stages, it has gathered substantial intent and interest from existing suppliers that will subsequently convert into higher registrations and conversions.
Huge shoutout to Chetan Agrawal and his team for building this program from the ground up.
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