Equity for a Service

Just like me, if you have also been using online services and payment apps then you must have come across a scheme called “cashback”. Cashbacks are a way to keep a customer loyal to the service or lure them to use the app more often. This is a neat trick and a deceptive financial product to make us believe that we, as a customer, are being rewarded for this transaction without taking an extra effort. I won’t go into the details of why cashbacks are only meant for businesses to get more sales and not for customer benefits.

Coming back to the point, customer loyalty is one of the biggest challenge internet businesses are facing right now. It is as simple as downloading another app and switching to another service. For this very reason, businesses are coming up with new ways to make customers continue using their apps.

This article proposes an idea where business owners and the customer both have something valuable to get every time they pay a premium for a service. The idea tries to tackle two types of problems.

Problem 1: I’m a product owner and I want my customers to stay loyal to my product. I do not want my customers switching to another product when offered a lower pricing or cashbacks.

Problem 2: I’m a product user and I have to pay a “surge” amount to use the service when I need it the most. I naturally get inclined towards a service that quotes a lesser price at that point. What am I getting out of this premium that I pay?

How do we solve both problems?

The solution is to make customers a partner in your business when they use your product. This will give them a feeling of ownership as a result of which customers are more inclined to use your product, or in other words, be a loyal, returning customer. It sounds crazy, I know. But hear me out.

“Increase the loyalty of your customer by making them a partner in your business.” — no one

In short, the idea is to offer some fraction of shares to your customers every time they use your product by paying a premium. This will give them a feeling of ownership while making them more likely to stay loyal to your product.

From a user’s point of view, they already love your product and they use it often. Now for doing nothing more than what they used to, they also receive a fraction of the company’s shares.

Let’s break down the argument into two parts, Financial and Loyalty.

Financial

Let’s say Uber charges Rs. 100 as a surge price, over and above the fare, on average. This amount completely goes as a profit to the company or at least a majority of it does. What if, in return Uber could give out 0.001 shares every time someone uses their services to commute.

Let’s do some “math”

Assuming I travel 20 times a month, if Uber charges Rs.100 as a surcharge every single time I commute, then over a period of 20 years I would have paid Rs. 4,80,000 as a net profit to the company.

A company like Uber giving away 0.001 shares may look huge at first, but it’s not. A customer has to use Uber 1000 times and pay Rs. 100 as a surcharge every time, just to earn 1 share. To sum it up, they pay Rs.1,00,000 i.e (1000 x 100) to earn a single share.

The current market price of Uber is roughly Rs. 2432 at the time of writing this article.

Loyalty

I will explain the loyalty part using an example.

There are two major players in India for cab services: Uber and Ola.

Let’s say Uber offers a fraction of shares to their customers for using their service, and Ola offers the ever-popular cashback. They both have pretty much the same standard of service and similar app experience. However, what sets Uber apart is that the customer will also become a part of the company as an investor by getting more value for the surcharge they pay, and it would give them a sense of ownership because they know that the amount they paid is also an investment in the company.

The customer gets a return on their investment (aka spending) over a period of time, thus making them come back to the product to reap more benefits.

A question to ask here is, towards which service provider is the customer more likely to stay loyal?

Based on my theory (and a fair amount of assumptions), I believe that the customers will stay with Uber for a longer period of time. It is no longer a matter of switching apps, the customers are now investors.

Of course, a user who really wants to buy shares of a company can always sign up on a trading platform and buy them. But what if a customer doesn’t have to go through all that, and what if there was a way to earn shares of a company whose service they enjoy and love. I understand that my theory might be oversimplified ignoring details regarding implementation (which is outside the scope of this article). Agreed, it may not be as simple as it sounds but customers are paying extra bucks anyway for using the service, so why not give them something more in return so that they have something to take back other than a cashback.

What benefit does a company have by offering shares?

• It brings loyalty
• Customers have a sense of satisfaction after paying a premium
• Increase in sales

Making customers a partner in your business is a great way to strengthen the bond and offer them more value for a premium charged for the service.

Credits:
Divya Sivaram(proofreading)
Muhammed Rajeef M K(ideas on how to write this article)