Zero advertising costs!! No direct marketing!! Bootstrapped for a decade! And a staggering growth, even during Corona lockdown! This is the story of Zerodha! What’s their growth mantra? What is nudge theory and how Zerodha is using to grow? How does their vision help serve and benefit such a huge users’ community? What is the strategy story of Zerodha?
Read on, you’re in for a surprise!
Facilitating over 5M+ orders daily, Zerodha is an online brokerage platform founded by the duo Nikhil Kamath and Nithin Kamath back in 2010. The rules of the game changed when the Bengaluru-based startup made trading ‘brokerage free’ back in December 2015 and leveraged its technology platform to grow among young traders! Throughout the journey, Zerodha never just focused on earning revenue. They focused on earning the trust of the community of young traders through various initiatives.
Strategy: Instead of targeting veterans, Zerodha Targeted the Millennial and taught them to trade
‘Building credibility’ over ‘Marketing’? ‘Knowledge sharing’ over ‘Customer Acquisition’?To which extent does this work? With a whopping 500,000+ downloads, Zerodha’s Varsity application started with 2 modules, aiming to diversify the education ecosystem around stock trading and investments! Lets see what Varsity is:
Currently, it has numerous modules that include concepts regarding Options Theory, Risk Management and Trading Psychology, Stock Market Basics etc. The founding team bet on Varsity to target the GenZ population, over others. This strategy did work well! Read on to find the HOWs!
Here’s what the Varsity did right:
a) Leveraged The Power of Story-telling.
With easy-to-understand analogies, complex concepts such as Options Trading, Futures Trading, Technical Analysis, Fundamental Analysis etc. are explained in layman terms.
b) Structured Content – Divided into Modules.
A modular/chapter-wise approach helps in focused revision, a better study balance thereby an improved chance to reflect on acquired knowledge!
c) Rewards For Efforts Put In:
It gives users that extra motivation to keep going, by rewarding them points, and certificates of completion!
‘Besides trading, Zerodha has also been pushing alternate investment options. ‘Coin’, the mutual funds offering from Zerodha, has about 200,000 users and assets under management of Rs 2,700 crore, Kamath said. The product competes with players like Paytm Money and ET Money.’
– Economic Times, 2019
Here’s an example of how Zerodha leveraged the power of ‘Behavioral Economics’ concept Nudge Theory
Zerodha introduced risk warnings that pop up before users attempt to trade penny stocks and risky illiquid instruments. This makes it a platform that not only offers ease of trading but also assistance in instilling discipline, and increasing the odds of winning!
On account of this, the penny stock trading volumes on Kite, a sleek investment and trading platform product built for modern times and sensibilities by Zerodha have dropped by more than 50%!
This probably saved tens of crores of rupees for our customers, they said! Being customer-centric is what makes them truly stand out!
Such steps would prove truly beneficial, especially for first-time investors by helping them stay wary of the risky bets! Zerodha very well understood the application of the Nudge Theory. It’s really important to understand about Nudge theory here. Watch this video below:
A nudge, as we will use the term, is any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives.
Richard H. Thaler, Nudge: Improving Decisions About Health, Wealth, and Happiness
Here’s how Zerodha disrupts the stock market brokerage business in India –
1. Increased Transparency in Pricing:
Just like any other startup competes with its competitors, Zerodha did too! But how did they manage to have an edge over others?
By merely reducing the opacity around stock markets, that is they introduced a flat fee for every trade on the platform! They pioneered the discount-broking model, charging INR 20, on futures, intra-day trades and options.
2. Zerodha made it About The User:
Although the competitors had similar products, what made Zerodha stand out from others? Zerodha used the power of technology to differentiate itself Here’s how they executed the same:
Their customer-focused strategy has been simple! They’ve been building their brand with an increased focus on the product, and ensuring a seamless user experience!
The daily orders speak for an effective strategy, and according to the platform, they account for about 10-15% of the daily equity volume in India!
3. Zerodha is Building Credibility – Financial Literacy Made Easy:
Mentioned earlier in the article was a product of Zerodha, named Varsity that has also gathered a surge in usage, and an increased attention due to its simplicity!
The five-book series as shown in the image revolves around key financial concepts such as the significance of savings, the role of taxes, stock market basics and the need for investment!
Guess what?
Children as young as even 7-9 years old, can find these intriguing! The brand goes well into its roots, indeed! Through their incubator, Zerodha has also invested in Finshots, a newsletter that simplifies Business news, and macroeconomics concepts.
The ethos behind investing in such startups, they say is to ensure that more people understand this capital markets ecosystem, and have a better user experience!
Because of its well-rounded products and services, Zerodha has been able to find customers even during the current COVID-19 scenario.
“You cannot just put money in a bank account, savings account, and expect the country to do well. You need people to take that incremental risk and invest to help entrepreneurs build businesses and in turn, help the economy grow.”
Excerpt from an interview of CEO, Zerodha with ET NOW.
As they say, testimonials are the highest trust evoking factor, most of the new customers that hear about Zerodha, are through word of mouth! This is the best that can happen to any product/service, that too with no direct marketing! It all boils down to the ethos and the disruptive business strategies that abide by it!
Indeed it is an intriguing story on business using behavioral economics concept Nudge Theory! Isn’t it?
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