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Marketing strategy for launching mobile money services in Mexico
E-CASH - MOBILE BANKING IN MEXICODidier Gutierrez Luis Morales Nokwazi Mzobe Takayuki Saito Ashish Tandon Irene Zubillaga March 6, 2012
MACRO-ENVIRONMENTAL FACTORS Technological Social & Cultural Economic Legal Mexico Demographic PoliticalDemographic Economic Technological Social & Legal Political Cultural•114,975,406 populati •Real GDP growth rate •VoIP has gained huge •76.5% Roman •Legal System: civil •Federal republic, on for 2011; 11th in 3.8%; composition: popularity Catholics; 5.7% law system with US with three main the world 3.9% Agriculture, •Teledensity stands at Protestants constitutional law parties: PRI, PAN &•Approx. 78% of the 32.8% Industry, and 18%; ranging from •92.7% Speak Spanish theory influence; PRD people live in urban 63.4% Services 41% to 5% •60% Mestizo; 30% judicial review of •Considered to be areas •2011 Unemployment •Triple play service Amerindian; 9% legislative acts politically stable, yet•Literacy rate 86.1% rate 5.1%; Labor has started in Mexico Caucasian; 1% •Accepts ICJ there is a ‘civil war’•Age Structure: 0-16 force of 47.77 million (TV Cable, Telephone unspecified jurisdiction with against drug dealing =28.2%, 15-64 = •Inflation rate 3.5% and Internet) •Literacy rate 86.1% reservations; accepts 65.2%, +65 = 6.6% •Gini Index: 51.7 •ADSL, is one of the ICCt jurisdiction•Immigrants to the (2008) fastest growing US: 11.5 M (including •After oil, the second telecom markets temporal residents) source of income for the state, is US remittance 21,271 million dollars •Part of NAFTA
Banking Industry Mexico INDUSTRY ANALYSIS 1% 1% • Banking sector is dominated by commercial banks 1% BBVA 8% Banamex • Four foreign-owned banks dominate the commercial 4% 30% Santander banking sector 6% Banorte Inbursa • Services: online banking, loans, home and life 8% Scotiabank insurance, credit cards, savings HSBC deposits, promotions, transfer of funds, lease of 17% ING transportation, foreign trading and purchase/sale of 24% Bajio dollars, investments and mutual funds through its large Others Economist Intelligence Unit 2011 branch network and ATMs.Mobile Banking Trends Opportunities for mobile money in Mexico• Mobile banking is emerging as a key electronic channel • The acceleration of mobile remittance services alongside new for the global banking and financial services industry mobile payments highlights the opportunities for the mobile phone to redefine the movement of money by:• Global customer base projected to reach 1.1 billion by • Lowering costs 2015 • Increasing convenience• Growing demand for microfinance, mobile remittances • Reducing fraud and micropayments services from un-banked population in developing countries is also expected to boost uptake of mobile banking services • Banking penetration in Mexico as of 2010 is around 54%
Family Remittances Mobile Subscribers Forecast INDUSTRY ANALYSIS 30 80 100%Billions Millions 70 25 95% 60 115 117 107 111 20 102 90% 50 96 91 15 40 85% 30 10 80% 20 5 75% 10 0 0 70% 2010 2011 2012 2013 2014 2015 2016 1995 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Dollars Number of Transactions Subscribers (Million) Penetration Banxico 2012 Monitor 2010 Evolution of Payment Methods in Mexico Highlights 100% • Mexico has 91.363 million of cell phone users in 2010 16% 80% 35% 16% • 11th in comparison to the world 60% 297 • Only 54% of the Economically Active Mexicans had a bank 40% 44% 67% account in 2010. 200 20% 19% • Evolving from 35% in 2003 166 0% 2002 2010 • 297M Interbank Electronic Transfers where made in 2011 118 Checks • 98% on the international transfers to Mexico were made by Debit Cards electronic sources Transfers • Less than 1 million transactions were made offline 2007 2008 2009 2010 Automatic Charges Operations (Millions) Banxico 2012
Market Segments CUSTOMER ANALYSIS Corporations Small Business Personal Users• Policies • Need of receipts and • Less than 30 transactions per month fiscal compliance• ERP Integrations • Looking for convenience • More than 30• High volume of • Low price sensitivity transactions per transactions • Considering the ceiling month established by Banxico
Personal UsersPersona # 1: Juan Perez Persona # 2: Mary Lopez CUSTOMER ANALYSISMexican resident who owns a cell phone. Mexican in a foreign country, and owns a cellAppreciates the convenience of making a phone. Works in a foreign country and needtransfer to another Mexican resident with his to send remittances to her family or relativescell phone. And the practical fact of withdraw in Mexico.his transferred money in any conveniencestore around the country. Mary’s Needs:Juan’s Needs: • Not having to open a bank account• Not having to open a bank account • Send remittances to their families and• Saving time (not going to a bank) relatives in Mexico.• Convenience: Immediate Money and • Convenience: Immediate Money and Speed Speed
BUSINESS MODEL – E-CASH e-cash International Operators Mexican OperatorsRetail Stores BANKS T-MOBILE AT&T Telcel Movistar
E-Cash comparison - strengths & weaknesses COMPETITOR ANALYSIS • No need to be face to face to do the transaction • Create your currency denominationCash & • E-Cash is new, thus it needs to get customers trustTraditional • Check accounts do not generate interestBanking • Traditional banks offer a wider range of services, hence possible expansion to offer wider range of services • Reduce the cost of international transactions • No need for Internet connection • No need to have a bank accountInternet Banking • Add the option of international transactions • Possible Hacking remains a weakness for bothE-Cash comparison - opportunities & threats • Growth rate of mobile users + market sizeCash & • More services could be embeded in the applicationTraditional • Offer an easier way to transfer money internationallyBanking • International laws and regulations • Offer an easier way to transfer money internationally • Barriers of entry will be erected through the partnerships • Reduce Partnerships uniqueness by approaching everyone in the marketInternet Banking • Share the same risk in terms of acceptance of new technologies by costumers • Open a new channel for illegal international and national transfers • E-cash has the threat of higher partnership risks • International laws and regulations
Marketing Objectives MARKETING STRATEGY$120 Revenues and Transactions 120$100 100 Marketing Objectives $80 80 $60 60 • Achieve 18% of the Telephone $40 40 users in 5 years $20 20 • Industry Experts expects that $0 0 mobile banking reach 15% of the 2012 2013 2014 2015 2016 bank users in the next three years International National Transactions National 2016 • That 3% of the transactions from Mobile Users 117 Between 15 and 55 yrs old 99.45 US to Mexico are made through Market Share 18% Clients 17.9 Avg. Trans per Month 6 our solution Avg. Price per Transaction (USD) 0.5 Revenues ($M USD) 53.7 • $98M USD in 2016 International 2016 Electronic Remittances 75 • $53M USD from National Market Share 3.0% Transactions 2.2 • $45M USD from International Avg. Price per Transaction (USD) 20
Brand Map MARKETING STRATEGY • Energetic, fast, precise, family Personality oriented, community oriented Message • Affordable • Convenient • Practical Promise • Trustworthy Provide our customers the most secure and convenient way to transfer money Vision Substitute the use of cash in 2050PositioningFor Mary and Juan who want to transfer money anywhere, any time.E-Cash is a unique service that provides a simple and secure way to send and receive money.Unlike Traditional Banking, E-Cash delivers an easy to use mobile money solution.
Research Plan MARKETING STRATEGYPre-launch ResearchPrimary Research How Where Objective 1 Surveys Survey on Facebook Facebook Questionaires at Government offices/ Segmentation, Consumer habits & Needs Post offices/ Grocery Stores Mexico & US Gathering opinions, beliefs, and attitudes about Randomly select potential users, invite issues of interest to your organization; Testing your2 Focus Groups Mexico & US them to provide feedback assumptions; Encouraging discussion about Mobile MoneySecondary Research How Where Objective 1 Bench-Mark Study Articles, Research Journals, Blogs E-Cash offices Get Best Practices i.e. with M-Pesa in Kenya 2 Competitor Analysis Articles, Research Journals, Blogs E-Cash offices Understand Competitor plans and objectives 3 Industry Trend and Analysis Articles, Research Journals, Blogs E-Cash offices Understand size of Market, Potential for growthTesting platform How Where Objective 1 Beta testing with Focus group Monitor and test userbility Mexico & US Test platform and get firsthand consumer feedbackPost-launchPrimary Research How Where Objective sms based survey after 1st transaction,1 Survey Mexico & US Gathering opinions, attitudes, areas of improvement then after every 10th transaction Randomly select users, invite them to2 Focus Groups provide feedback. Every 3 months Mexico & US Gathering opinions, attitudes, areas of improvement
MARKETING CAMPAIGN Campaign dates: April 1 – October 1Campaign objectives• Create awareness of mobile banking and E-CASH in Mexicans inside and outide the country Juan Mary• To actively inform people the advantages and solutions of our service Print Ads: Print Ads:• Get people to visit our website, and take advantage of •Buses •Buses our introductory product •Trains •Trains• Get Mexicans to feel their transactions are safe and •Retail stores •Retail stores immediate• Become known as the best and trustable way to make TV: 2 major networks TV: Spanish networks transfers •8:00-9:00 pm Soap Opera •9:00-10:00 pm News Touch point strategy: Social Media: Social Media: • Announce: Create mass awareness of E-Cash introduction •Facebook (4hrs/week) Facebook to the market •Twitter Twitter • Educate: Educate Mexicans on how convenient and safe is LinkedIn our service. Also educate our partners on how this will continuously increase their profitability Road shows: Radio • Act: Create engaging consumer & mobile banking to bring •Smaller Towns E-Cash to life. Also create engagement with our partners and leverage on them to grow fast Soccer Games: Church and Community •Stadiums Centers Media insights regarding target consumer: • Heavy Radio Listeners & TV watchers with preferred consumption of Spanish and Latin channels and stations • Public transportation users (commute) • Heavily influenced by culture and peer pressure giving Word of Mouth a critical role for their lives
EXHIBIT 1 – FINANCIALS Strategy Objective MethodTV Reach and impact massively Commercials, sponsorship on targeted while educating the programming. Combine with partner’s TV customer commercialsSocial Media Create awareness, Through the Social Media: Facebook, education and continuous Twitter, LinkedIn and Partner’s web sites. engagementPrint Ads Create awareness & Spaces on public transportations and education billboards in heavy traffic highwaysPOS Create awareness & Print Ads in partner’s retail stores (Walmart, education Oxxo, Telcel, etc)Radio Create engagement and Activations at key radio stations- that have excitement at launch critical reachCommunications Continuously educate and Continuous investment on Print Ads and(Church/Communities highlight the convenience of workshops in churches, community centers, our service etc.Consumer Activation Exhibit the differentiators Promotions with partners in order to offer benefits and drive consumer the trial engagement by actual trials
OVER MARKETING STRATEGYOffering + Money transfer service + High SecurityValue + Transfer money any time, any where + Simple and secureExperience + Control your finance at the tip of your fingers + Efficient use of your time + Easy to useRelationship + Trusted Advisors + SMS Based Survey
Sales Enablement MARKETING STRATEGY 1. Sales training session: • Materials • Feedback, etc. 2. Incentives and Compensation 3. Customer Analysis Data • Customer behaviors • Customer feedback 4. Buyer Personas 5. Directory of Technical Experts: Customer Service 6. Pre-Written proposal for our partners and customers
2,500,0002,000,000 Our Break-Even point is 1.3M1,500,000 Transactions1,000,000 500,000 - 1 2 3 4 5 6 7 8 9 10 11 12 Sales Fixed Cost Variable Cost Total Cost
Cash Traditional Banking Internet Banking ANNEX 1 - COMPETITOR ANALYSIS • Ease to use • Customer Service • Rapid growth of Mobile and wireless • Portable • Full range of services market • Widely accepted to the customer. • Substantially better interest rate thanStrength • More securer than those offered at traditional banks mobile banking • Protect our environment by using e- banking. • Secure to keep it by ourselves • Need to go to the • Lack of awareness about the new • Does not generate interest branch channel among the mobile users. • Easy to falsify • Time limitations • Security concerns about the new • Transaction has to be done in • International channel person transactions are • No Personal Customer Service (whenWeakness • Devaluation risks complicated and costly we faced troubles and questions) • Hacking, spyware program, computer virus and breaking online password are the weakness of e-banking or online banking. • New technologies to produce • Geographic expansion • Rapid increase in the Mobile user safer bills base and acceptance of the Mobile • Ecofriendly bills technology even in Rural areas makes a bigger market available for mobileOpportunity banking to expand. • With technology advancements in Mobile handsets rich features can be embedded in the application. • Newly joining companies • Newly joining • Acceptance of new technology by • Traditional banking, Mobile companies users. bankingThreat • Internet banking
Telcel / Banamex Telefonica / Mastercard E-Cash ANNEX 1 - COMPETITOR ANALYSIS Transfer • Telcel has more 80% of • Telefonica is the 2nd • Easy to use the Cell Phone Market largest Cell Phone • No need to have a bank Share in Mexico Operator in the country accountStrength • Banamex is the second • Partnership with • No need for Internet largest bank in Mexico Mastercard • Functions in all Cell Phone • Strong security Providers • Bad customer service • Need to have a bank • People need to learn how to • Bad reception in some account use it areas • Still need to interact • People need to learn to trust with your bank itWeakness • You need a credit/debit • Hacking, spyware program, card computer virus and breaking • No compatible with online password are the American Express weakness of e-banking or online banking. • Will offer the services • Partnerships with Online • Market size to the unbanked stores • Faster and easier way toOpportunity transfer money internationally • Market value • They don’t develop • Fierce competition with • Partnerships their own software Telcel • Harder to regulate by theThreat government
E-Cash PnL Best Case ANNEX 2 - FINANCIALS Year 1 Year 2 Year 3Net Sales 16,873,220 25,271,550 38,039,107Cost of Goods Sold 2,530,983 3,790,733 5,705,866Fixed Costs 5,061,966 5,061,966 5,061,966Operating Costs 2,580,000 2,627,155 3,903,911Depreciation & Amortization 1,518,590 1,518,590 1,518,590Total Costs 11,691,539 12,998,443 16,190,333Operating Income / Earnings Before Tax 5,181,681 21,125,806 32,616,607Less Tax (30%) 0 6,337,742 9,784,982Net Income 5,181,681 14,788,064 22,831,625% Margin 31% 59% 60%E-Cash PnL Worst Case Year 1 Year 2 Year 3Net Sales 5,624,407 8,423,850 12,679,702Cost of Goods Sold 843,661 1,263,578 1,901,955Fixed Costs 5,061,966 5,061,966 5,061,966Operating Costs 2,580,000 2,527,155 3,803,911Depreciation & Amortization 1,518,590 1,518,590 1,518,590 9,160,556 9,107,711 10,384,467Operating Income / Earnings Before Tax -3,536,149 4,378,105 7,357,202Less Tax (30%) 0 1,313,432 2,207,161Net Income -3,536,149 3,064,674 5,150,041% Margin -63% 36% 41%
Model for Chapter 11, Basics of Capital Budgeting 12/12/08 ANNEX 2 - FINANCIALS NPVData on Projects S and LWACC for both projects: 10% Initial Cost: After-Tax, End of Year Net Cash Inflows, CFt: TotalYears: 0 1 2 3 4 InflowsProject S: -$2,480,000 $16,873,220 $25,271,550 $38,039,107 $0 $80,183,878(Text Section 11-2) Project S 0 r = 10% 1 2 3 4 -2,480,000.00 16,873,220 25,271,550 38,039,107 100 15,339,290.91 20,885,578.89 28,579,344.42 0.00NPVS = $62,324,214.22 Sum = NPV for Project S