We had the privilege of hosting Arindam Paul, Chief Business Officer and a key member of the founding team at Atomberg Technologies , on the next session of BRICK by BRICK: Building Insurgent Brands.Join us as Arindam shares insights on how Atomberg, one of India's largest and fastest-growing digital-first consumer brands, was built on first principles.
Arindam joined Atomberg pre-revenue and funding, to lead all customer-facing functions, including sales, marketing, and service. Over the past eight years, he has successfully scaled up the company's annual revenue from 0 to INR 1000 crores.
During the conversation with DSGCP's Hariharan Premkumar, Arindam dived into several key topics, including:
• The Amazon and Offline playbook Pre-PMF and Post-PMF
• Nurturing a learning and first principles thinking culture in the organization
• Metrics to monitor at different stages of growth
Good evening, everyone. Thank you for joining us on this BRICK by BRICK session. The topic for today's session is The Atomberg Story -- Lessons in Brand Building on First Principles. We have with us Arindam Paul; CBO and founding member of Atomberg. He's seen the journey from inception to recently when they clocked 100 Crore revenue a month. It's a brand that's been built on a very capital efficient manner and I think is well on its way to become a category-defining brand. Arindam is one of my favourite LinkedIn and Twitter follows. I think he's literally open sourced the playbook that helped them get here. And thanks for that, Arindam, I think, that's like great service for the ecosystem. And super excited to have you here with us.
Thank you, thank you, Hari, for having me here. Pleasure to be with you guys and share whatever little I know.
Now perfect. So, you know, you've published a lot, and it was a hard challenge figuring out what we should focus on. So I've picked up four areas given we just have one hour, it will be: Amazon, Offline, Brand Building and Our Culture. So let's start with Amazon. We know that you initially started your journey in the B2B channel and then forayed into Amazon. So talk us through the journey to win the trust of the customer on Amazon, and you know, especially in a category like fans, which is a big ticket purchase item -- how was that journey, in terms of triggering, trial, purchase, however you think about it?
Yeah. So I think we started selling fans from October 2015. So started off with B2B for about six to seven months, I think we did exclusively B2B, selling to schools, colleges, different industries, primarily, the ceramic industry in Saurashtra. Did it for about five, six months, and very soon we realise that B2B even soon hit a peak, right? So at the end of the day, if you really want to build a big business, 95% of fans in India installed in consumer households, so you need to reach consumers. And there was no point for us other than ecomm and D2C, right. At that point, D2C were not even a buzzword. I think it didn't exist, the term did not exist in 2015-16, when we were starting. So what we did was we had a website in place -- a functioning website, so launch then add the product on the website, and listed the product on Amazon. I think at that point, I think even on Amazon, it was a category, we're just taking off at that point. So it was a fairly small category, and people could not imagine that fans could become such a big category at that point. But I think there were two-three lead indicators. So one was, at that point, people were becoming more and more comfortable buying stuff from Amazon or or ecomm, right. So in say, how ecomm wave had happened was, it started with, say, books, then it moved on to mobile phones in 2013-14, mobile phone and fashion. And then 2015-16 is when appliances and everything else, right. So that was one trend. The second trend was a lot of digitally influenced sales are happening. So looking at Google searches online and all. So even though there are no sales that are happening online, but the searches were increasing year on year. And anyways, we didn't have any other option, right, we couldn't go offline at that point. So that's why I decided saying, okay, let's launch on Amazon and let's have the product on the website. Now the interesting thing is, right, how consumer behaviour evolving at that point was that there was this set of early adopters, right, for whom excitement was more important than trust. So yes, trust is very important. But if you look at the innovation curve, right, there will always be that 1%- 2% of audiences in any segment, whom you call innovators or early adopters. They really want excitement in products. And I think this was a category that had not seen any excitement for 60-70 years, it was the same old fan, and we had a product that had a remote control. So that was the hook; the hook was the remote control, energy efficiency, everything else came layered on top. Even though the core USB was an active end, but for the early adopters, the hook was the remote. Saying here's a fan that comes with a remote, I will install it in my homes and show it off to whoever comes in. So I think that was what had like, helped us get the initial sales. And of course, like Amazon, by that point had built that brand saying, If you don't like the product, you can always return it back in 10 days, 15 days, and so on and so forth. But for the early users, and I see this for any category, if you, especially when you start. I've seen this behaviour that is, the product needs to be exciting for people, especially for the innovators who would have a innovator mentality in that all of a cycle, right innovators, early adopters, early majority, late majority and laggards. So, if you're able to highlight excitement and communicate excitement, I think that really matters a lot in the initial zero to one journey.
Interesting. So you're saying just the fact that you had a remote control fan, and it was a unique product. Okay, and that was enough. And Amazon, you know, one of the other questions I had was how, whether you had to like give any free trial period, etc, that you're saying Amazon took care?
Amazon takes care of it. So I think in our category, I think there's this 10 day return. If you do not like it, you can return it within 10 days. So I think in mattresses, you have the 90 days and all that, right. So trust was already there on Amazon, they did not trust Atomberg as the brand, they found the product exciting, but they trusted the platform. And that was the reason why we did not bet big on D2C, because then you were trying to do two things, you are getting people to try and trust where they are purchasing from as well as trust the brand, which was a difficult battle to fight at that point of time. And that's a conscious decision that we had taken saying we will build excitement with the product, and let people trust Amazon and buy from Amazon.
Okay, and so you started selling, and when do you think you hit product market fit? Or you know, I know you like to call it product price market fit. When was that moment?
I think we launched early 2016 or so, right? And it was October 2016, when this great Indian festival right when that sale happens. And we ended up doing 500 fans in that month, and at that point 500 fans was too big. And that is when we realise, okay, we are onto something. And now there are lead indicators, right? So we launched say in around March and then month on month we're seeing some indicators. And that's why they tell you how do you measure whether you understand you have PMF or not specially on Amazon, right? The first metric was the ads are becoming more effective. So for example, today, if your ads conversion rate was, say 2%, the ads conversion was becoming 3%. So the ads are becoming more effective month on month. Second is your ratings and reviews are consistently improving. So you have month one you would have, say, 5 reviews. Month two, you would have, say, 10-15 reviews. And the ratings were, say, 4.3-4.4, and on. The third was, say, the first month because you will not have any organic discovery, right, but slowly and gradually, your organic discovery also increases. So reliance on ads, for example, in the first month, 90% of your sales will be ads driven. But in six months, I think we had reached a point where only about 70% of our sales. So there's a decreasing trend on the dependence on ads. And the fourth was the overall conversion rate. So overall conversion rate as your ratings and reviews increase, and I like to call it Amazon flywheel how the flywheel works. So I think these four things indicated that we have a strong PMF. And the moment we had hit these 500-600 fans in a month, then at that point was big, I think we're doing around 2,000 fans a month, and 30% of our sales are coming from Amazon at that point. So I think that was when we realised that we have a -- I would not say a very strong PMF, but at least the indicators are right if we can improve and build upon it, because the fundamental metrics are all moving in the right direction. And in fact, the first product right, it did not look good, it was a very plain vanilla fan and it was built for B2B. It was built for hospitals, colleges, schools and all, so it didn't look good. And that's the feedback you're getting from consumers in the reviews, the feedback was saying: you have a very good product, I like the technology, savings are there, remote is there, but the looks are not good. That is actually feedback that we took and brought the next product which is today our flagship product and contributes to more than 50% of the sales.
Got it. But is there like just in terms of absolute figures, any thumb rule that you have in terms of number of reviews, what should be like, should it be like four, star five star in terms of ratings, etc, to get a handle on whether you have product market fit.
See, I think it depends on the product and the price, right. So for example if you're selling a premium product, so in our case we are 2x of the competition. So we had to be 4.3 plus, for it to show 4.5 star. So anything more than 4.3 shows 4.5. So I think for a premium product, if you're not a 4.5 star rated, then it's very difficult to escape from a rating point of view. So we were obsessed with ratings, and we are still obsessed with ratings even today. And that's how we decide to kill a lot of products, we launched a lot of products, if it doesn't fit in then we kill it. And I think the same metrics hold true for every product launch, you launch a product or you launch a brand. Month one, your dependence on ads will be very high. So 90% of your sales will come from ads. So that 90% has to come down to 70%, 60%. So the decreasing trend has to be there month-on-month. And the second thing is, your ads need to become more effective. So whatever sales you're getting from your ads, your ads has to become more effectively tight. The conversion rates has to improve with time. If you're able to do these two things, if these two metrics are right, that means you have a strong PMF and then it's only about figuring out how big the TAM is. If the TAM is big enough, then you will keep scaling it.
To give some sense to people on what the gold standard is like, for instance, on dependency on ads. You said it starts with 100%? Best case what's like the gold standard in your view? That percentage.
See it depends, right. I think, in our case, today, I think ads driven sales will be 20%. So if I turn off ads, 80% of sales will still continue to happen. So I think it's a virtuous cycle and I think users need to keep pushing the limit to as much as you can, without impacting the growth rate. So I don't think there's any number to it, whether it is 20, or 40, or 60 will depend on the category, depends on the competition. But what need--the trend has to be in the has to move in the right direction. So all of a sudden, if you see that your organics are coming now that means your flywheel has stopped working, or it has dropped and something-- some other brand has taken your share and their flywheel started moving.
Now moving to the other part that you mentioned, which is around marketing efficiency improving over time. That is.. I always found that interesting. Because, you know, if I look at the journeys of brands in our own portfolio and others, it seem that is something that always comes under pressure as companies scale, it's almost as though if you're able to maintain your early stage marketing efficiency, it's a job fantastically well done. Talking about improving marketing. So two things -- maybe we can start with, do you have a view on why the other bands, you know, most of the bands are struggling on that? And the second thing is just talk us through, you know, how have you managed it.
I'll tell you, the main reason is, there are a few channels which are compounding channels, and there are a few non-compounding channels, so I use this term. So compounding channels are channels where we scale, things improve. So Amazon is a compounding channel, general trade is a compounding channel. Exclusive brand outlets are compounding channels where you get operating leverage at scale, right. Or you have a flywheel that kicks in motion. A lot of brands which have high dependence on D2C, right, so D2C is a non-compounding channel. So in Amazon, what happens right, I'll run you through Amazon and tell you how the how marketing efficiency is improved. So on day one, you start, you start with ads, because without ads, you don't get any traffic. So you drive that traffic through ads on the product page. On the product page, initial days, your conversions will be low, right, because you don't have any rating history, you don't--no one knows your brand, so it's a cold start problem. So initial days, you need to put a lot of money to get the ball moving. So you get some sales, if your product is good, you start getting good reviews. So the moment your ratings and reviews start improving, your conversions will slowly and gradually improve. So your ads start getting more efficient. So maybe your conversion rate on day one will be, say, 0.1% after some months it will be, say, it will reach a point of 1%. You will also start doing a lot of off-platform activities, right, off-platform brand building activities, there will be word-of-mouth and all of this which will result in people coming in searching for your brand on Amazon. So the moment your brand searches increase, automatically like you don't need to pay for those, right, most of your people are coming searching for your brand. So those are much more efficient. Once all of this starts happening, right, your sales velocity also starts increasing. Now how the Amazon algorithm works is, the more a product sells, say for example ceiling fan, right, we are selling ceiling fans. We are already the number one in ceiling fans, so if someone comes and searches the keyword ceiling fan, organically Amazon will rank me on top, right, and that is where the efficiencies kick in. And that's why I said why you should get efficient with scale. Now, when you look at any other channel at D2C, right, unless you have very strong brand affinity, and people come look for your brand, organically come looking for your brand, search for your brand and come to your website, you are always in the mode where you have to pay to acquire consumers. So, in Amazon, if you're able to get into that flywheel, you move away from where you continuously do not have to pay to acquire consumers. And the moment that you--
I have to interrupt Arindam, I'm sorry, my question was actually on Amazon only because I was wondering whether it is a function of competitive intensity, you know, because we know personal care brands that were sort of in that virtuous cycle for a while, but all of a sudden, even their efficiencies are coming under pressure. Is it a function of competitive intensity, that?
See, competitive intensity will always be there, I think it's there in our industry as well. So I think the competition impacts your CPCs, right. So when you look at ads efficiency, there are three things, right. One is your organic discovery, or organic discovery-slash-brand searches, right. If your organic discovery and brand searches are high, you don't need to pay anything for those orders. The second parameter in the ads efficiency is a CPC, now CPC is a function of competition intensity, right. So whether your CPC is 20, or 100, or 200, is decided by competition. And the third is your conversion rate. Now conversion rate, again, has nothing to do with competition, if you have the right product, right price, right ratings, of course, your conversion rates will keep on improving. So out of three parameters, one parameter is basis, competition intensity, the other two parameters are independent of competitive intensity. So if the other two parameters are right, if you're doing enough things outside the platform to build brand awareness, if you are ranking high organically on few keywords, and then you just need to maintain--so in our case, right, so our share of spends on Amazon will be 5%. So it's not that--and our market share will be say, 3x of that. So that can only happen if the efficiencies kick into play. And there are multiple ways to optimise--so I think that's the framework that I used to look at. So there is one parameter which is not in your control. So instead of looking at whether, my ROAS should be three or four, maybe I say okay, these are two parameters, which are in my control. These are third parameter, which is this is competitive intensity, which let competitive forces decide what the CPC is and irrational competition might be there for 6 months, 12 months, 18, 24 months, they will not be there forever.
That I completely swear by. Now, that's an interesting way to break it down and how to think about it. You know, now just sticking to the pre-PMF journey of brands, you know, the biggest questions that founders are always solving for is how fast should I grow? And second is just capital allocation in terms of marketing dollars. Among in the three product market fit phase, they think about it, you know, in terms of revenue targets, and, you know, marketing spends that they should incur before the PMF.
Yeah. Fine this is very--I don't think there'll be a rule of thumb for this to arrive at it. But I think what most people get wrong or don't get it right is people overestimate TAM, so in a lot of cases. So I think TAM is a reality, right, and how I define TAM is like, you cannot be too flexible with TAMs. Say for example, if I'm selling a 3,000 rupees fan, I cannot just say that every fan sold is my TAM, because there are fans sold at 1,000 rupees, and there are fans sold at 1,200 rupees, now I cannot get a 1,000 rupee consumer to upgrade to a 3,000 rupees fan. So, defining TAM as part of the price point cut, I think that is very critical to have a realistic understanding where we are. So, how we look at it is usually by year one, can we get to around a 5-10% of the TAM. So, for example, say if there are 100 fans, which are sold greater than 3,000 rupees, can I at least sell 10 fans within a year? And to get to 10 fans, how much do I need to spend? I think CPCs are available--publicly available for any advertiser, you calculate, you build a model wherein you put in the CPC--CPCs don't change, CPC will only increase with time, your conversion rate will improve with time and your reliance on ads will keep coming down with time. So for example, month one will be 90%, month two it will be 80%. So, using these three you can actually create a model which will arrive saying, okay, to reach 10% market share in my TAM, this is what I need to spend. Now whether it is 10%, not 20% or 30%, that depends on the risk appetite and the capital allocation that the brand will be able to do at that point of time in their journey. If it's a bootstrap brand, maybe that will be 10%. If it's a funded brand and the mandate is to grow fast, maybe that could go up till 25-30%. But a lot of people overestimate TAM, they would say that my TAM is the whole category and not this price point category. And that's where you end up bleeding and you end up attracting bids on keywords where you should not bid for. Say, for example, if you take the example of fans, right, I would never bid for a economy ceiling fan. So economy would always be a negative keyword for me. Now, that could be a high volume keyword. But I totally understand that that is not--like if I bring in the audience, my marketing efficiency will go down.
Yeah, no, that's interesting. Yeah, knowing what you should know is as important as what you shouldn't be doing rather.
Yeah. So overestimating TAM is a is a bit....again, you should not be too rigid with TAM, I think people are flexible to a range of 20-25% in most categories. I think someone who had a budget of 2,500 with the right inputs, maybe they'll upgrade with 3,000 rupees. But someone with 1,000 rupees budget will never upgrade to 3,000 rupees come what, what I do.
Okay. Moving on to the post Product Market Fit phase. Actually, you know, one more question in the pre Product Market Fit phase, you spoke about launching multiple products and then killing them. So how long do you give a product till you decide when to..?
Again it depends on the scale of the brand. So for us today, it would be in the range of six months. So after putting in, say, if these metrics don't move in the right direction after six to eight months, even directionally, so continuously works in the same way, add dependencies in the same. My conversions are not coming down or even worsening with time, so then we just say there is no PMF and there's no point in putting more money into. And sometimes it might not be a PMF issue, it might be a product market channel fit issue. So we have seen few products, which did well in offline channels, because maybe there's a slightly more higher price, people want it, the look and feel maybe we're not able to do justice to that on the listing and what could be done organically.
Got it. Now switching to the post product market fit phase, again, we're still focusing on just the Amazon channels, you've gotten to that 10% of the TAM with 4.3 star, right. So when you hit that stage, how do you know more in terms of for future growth? Planning for future growth, capital allocation? How should people think about it?
So, I think one is when it comes to future growth rate. So once you've reached 10%, you should have a clear--like justification in your mind, what percentage of TAM you'd hit. So year two could be 20%, year three could be 30%, as long as that is backed with your right product portfolio and all, right. Once you--if you think you have the right product portfolio, you have a right to win. And that's a very honest conversation that the founders should have with himself, saying, "Hey, do I have the right product and brand to demand 25% market share in the TAM, in this price point?" So once you've aligned with that, say, I think in the long run, I'll be at 25% to 30%, then you phase it out, say, a year two, year three, year four, how I'll get to it. And then you TAM will also increase, right, because the category also grows. So in more categories, the premium categories are growing at a much faster rate than the overall category. So that category growth input you'd get from the category team, right? Say for example, the category is going 50%. So year one say the market is 100, you do 10, year two your aspiration is to do 20% of the TAM, the TAM becomes 150. So 20% of 150 could be whatever, say, like, say around 30. So that's how you'd plan your revenue numbers. When it comes to your marketing budgets--again, it comes in the same way you need to plot the three parameters: ads, sales driven by ads, CPCs and conversions. So these three parameters, ideally should improve or should stay constant as as you scale. I think that's a like in--that's the broad framework that I use and I advise people to use for planning growth on Amazon. It's a fairly simple framework.
Yeah, no, it is. And, quite powerful as well. You know, now switching to offline. Talk us through when you decided to, you know, launch the offline channel, and if we can, you know, discuss the three product market fit journey and offline as well, right. So just take us through your own journey when you decided the..
First time we did try to launch online was just when we started in 2015. We have a very naive, yeah, of course. So we went to the market, we went to this retailer saying "Please let us talk" and they told us "Just get lost, you are mad, like this product at this price by you people who have no experience, you cannot sell." So that was the first time that we tried to launch in 2015, then, of course, we came back. But we are always clear that the market is there offline. So 90% of the consumer market is in offline, in fans. And I had a very strong belief even in those days that changing someone's channel preference is very expensive. So, if someone wants to buy your ceiling fan offline, and I try to get him to buy online, that is where my marketing efficiencies will always go for a toss. And say, for example, I'll give my example: so I never liked buying shoes online, for some reason, four feet or something. But I keep seeing a lot of ads. So that's a total waste, right. And sometimes I even like the product, I want to try it out. But it's just that resistance in my mind that I always buy shoes offline. The same thing holds true for any channel. So whenever you are trying to change someone's channel preference, it's a very expensive affair. So the market was there offline, and we're always clear that we have to go offline at some point. And by 2017, we started getting feedback from consumer themselves, saying, "Hey, I like your product, but I want to see it. Because I don't trust you, and I don't trust Amazon also," Because by that point, we had exhausted the early adopters. So they're saying "I buy from my nearest retailer, because something goes wrong, I go and ask him that it has gone wrong. So I liked the product, I like the brand, but I'm not going to buy without the trust of the local retailer." So I think these things are happening 2017. So 2018 is when we decided, saying, we need to go offline. So we started off with Mumbai. So for the first one year, we did only Mumbai. The reason was we wanted to fine tune on GTM. So in our industry or in any industry, there are multiple GTM for getting to offline even for general trade, right. There is a direct dealer model, there is a distributor model, some brands that are wholesaling model, very new suppliers or wholesalers, and then the smaller retailers buy from them. Now, I think wholesaling was out of the equation, because wholesaling usually works for brands who already have a very strong brand pool. So I think we had to choose between, say, whether a direct dealer model or a distribution model. And we said the best way would be to pilot it out. So half part of Bombay, we tried with direct dealers, half part we tried with distributors, and then we figured out what the right GTM would be. So for a year or so we did this, we figured out what the right GTM would be. We figured out that we had a, again, a product market channel fit, I'll maybe tell you what the metrics that we look to arrive where we are. And then once we find tune and I think next year, we were already getting a lot of online data, where our fans were selling, where the demand was, it was very clear that it was in South and West. I think 80% of our sales were coming from South and West, the five southern states and Maharashtra and Gujarat, so year two was expanding into these seven states and replicating what worked in Bombay, and replicating the same in the six to seven states.
Yeah, if you could just talk us through, you know, the metrics that that gave you comfort that you had product market channels in the offline channel.
Yeah, yeah. So I think, again, primarily, right. So the first thing was we're seeing a lot of repeats. So just like you look at consumer repeats in D2C, right, you look at consumer cohorts. So the same thing in offline is you look at retailer cohorts. So you open retailer, and you look at M one, M three, M six repeats. So the retailer cohorts are very, very healthy for us.
What's healthy in your category?
In our category, it's if retailers are coming back 70-80% of them are coming back and ordering every quarter, that's a very healthy metric for us. So I think that was one, second is the throughput was increasing. So the same retailer who started off, say, with 5 fans a month, they had moved to around 20 fans a month. So I think these are the two primary metrics. So one is the the coverts were improving with time. Second is the throughput was increasing per stock. And third is increasingly we will find it easier to open more counters. So opening the first 20 counters took us three months, the next 20 counters took us a month. And it was getting easier with time. So by five, within five, six months, we understood that there's a product market channel channel fit. So.. of course to get to there, I think what got there I think a lot of inputs, a lot of scrapping things, a lot of non-scalable things to ensure that this happens.
And you know, tertiary data is a bit of a black box in retail. So how are you able to track that accurately?
You don't need to track tertiary accurately, I think if you track secondary, right, and--see without tertiary, secondary will not repeat. So, at max, a retailer will purchase a product for the first time but if tertiary doesn't happen, he will not purchase again. So I think we didn't put too much effort in trying to track tertiary. Of course, there are levers, I think we track warranty registration and all of those things. So directionally, we of course, we understand better how tertiary is happening. But we are obsessed about secondary and not tertiary. Because if a secondary is happening again and again. Without tertiary secondary cannot happen.
Right. And, you know, you said for a year, you were just in Bombay, and what sort of revenues, did you hit at the end of year one,
I think we're doing around close to... I think 50 lakhs a month more or less. Yeah, 40-50 lakhs a month, I think we had hit.
Okay, so 50 lakhs a month in year one, and the other metrics you mentioned..
The other metrics? Yeah, it will depend from category to category, but other metrics will hold true. I think the revenue numbers, of course, will depend but the other metrics on the retailer, cohorts and all of these, I think we should improve. I don't know what the absolute numbers are, but the numbers should keep on improving. If these numbers are not improving, that means you're doing a one time activity, which will only show one time spike in sales.
I think that's the sort of, I think, important takeaway for everyone as well, because what I've seen founders always try to target is they assume that offline can scale as fast as online and take like, unreasonably high targets on the revenue front. For a year, you just hit the foundation in Bombay got to 50 lakhs a month? Fundamental metrics checked off. And then you expand that into seven states, you said Okay. Now talk us through that journey from, just being in one city to, you know, now getting into seven states. So, we can apply the same framework in terms of what sort of growth rate aspirations, once you take in the offline channel, once they hit the product market fit? Yeah, talk us through that.
So I think, again, we didn't have--we're very--we're not very obsessed about the revenue numbers. I think, in the offline space, again, what worked, the same things, right, so I think reach was more important. See, we need to, I think, in offline, we're primarily looking at reach, and numeric as well as weighted distribution. So saying, I need to be present in the bigger counters, and we are present in so many counters. So I think that was the most important metric in any market that we launched for the first six to eight months. Because once and--of course, the retailer cohorts and all, right, I think, what I mentioned. So if this happens, right, and you continue to improve month on month, so if you continuously improve, the number of counters will, and you continuously improve the throughput from those counters, I think automatically, your revenue numbers will keep on increasing. But if you have a say, a primary target, saying I need to do so much, that puts a lot of undue pressure, and you end up taking a lot of short term calls, in terms of appointing the right distributor or dumping some extra material in some counters, and that will ensure that you don't spend enough time on sell out, on driving sell out. I think that's again, a very important thing in the initial one year or so. We did a lot of scrappy things non scalable things to drive sell out. So in the first year in Bombay, almost every weekend, I used to go to the counters, one of the counters, any of the counters, go and stand there for six hours, eight hours trying to sell from the counter myself. That did two-three things right, one is that give a lot of confidence to the retailer saying this brand is serious, if this guy can come and stand in for six-seven hours and try and sell our products. Second is it gives us a lot of learning, in terms of I think no amount of Facebook ad analyses or Google Analytics data or any kind of research will give you the kind of firsthand understanding that you get by pitching your product to consumers at the point of purchase. Because at the point of purchase consumer don't lie, right? They cannot say "I like this product." Because if they say it, they'll have to buy it. So you get a lot of real time honest feedback, a lot of scrappy thing, we did a lot of society activations, electrician programme, Shopbot. So the focus was always to ensure how to get sell out from those counters. And there are no brand awareness, right, we started spending on brand much later. So without brand awareness, how do you ensure sellouts? So a lot of these crappy activities, non scalable activities, we did it and it's still a playbook. So even today, for example, if I launched, say, a market in Assam called Dibrugarh, which are not there, I will repeat the same thing for the first six months, that I'll do a lot of scrappy activity, will go stand there, try and sell himself. if we are not able to sell ourself from from a counter, how will the retailer sell at any point of time?
No, that's well said. And I remember even we spoke about the importance of sell out, ensuring distributor retailers getting confidence in the brand.
This can only happen if you're not too obsessed about the primary numbers. If you're obsessed about primary numbers, then your sales team is insane. Everoyone incentivized for them. The moment you say I'm obsessed about sellout, I'm obsessed over repeats. If you place product in a counter, I need repeat from the counter. I don't need another 20 new counters.
Yeah, that's an important point as well. You know, just defocusing on the importance of primary. Great, I think that was useful Arindam. Okay, the other question, when straddling multiple channels, one thing that founders grapple with is maintaining pricing parity, you know, like, you will have your end of season sales on Amazon, etc. So how would you advise founders to think through pricing across channels?
Well, I think that's something that I strongly suggest everyone that you need to maintain pricing parity, there are no two ways about it. Because if you do not do that, you will lose the trust of the channel. Somehow, if a channel thinks, these people--and for all digital-first brand that inherent bias is always there. So when we started the bias, even today, that bias is there, but it is reduced significantly. Saying this is online brand will always sell online, they will sell cheaper online, right? Because a lot of these retailers, they have launched businesses to online, right. So whatever online today, ecommerce today 10% of the rate, so that could ideally would have come from GT only, right. So GT is the one who's losing. So inherently, they don't like online as a channel. So I think if you give them any further reasons, saying, you're finding it cheaper online and all, it's very difficult to build trust with them. And also, it's wrong for the consumer. So consumers today feel cheated, when they find the same product is available at different prices in different channels. So I think, of course, there will be trade offs, but I'm a very strong proponent that you should have the same pricing everywhere, even though the cost of channel might be different. In few channels, some channels might be more profitable for you, let it be. But maintaining pricing parity for a single SKU, if the SKU is available everywhere, across channels is paramount. So even in those big billion days, and all, our fans, again, hardly the discount will be 100 rupees compared to what it is normally, you will never find the 3,500 rupees, find at 2,500 on those days. If that happens, that destroys brand equity, that destroys channel confidence.
Absolutely, fully aligned on that.
But it's a very difficult thing to do. Because again, discounts are like antibiotics, right? So you will see immediate spike, the moment you do a discount, but you do it four or five times it becomes a habit and it's a vicious cycle, you cannot come out of this.
What's the maximum discount that you work with at Atomberg?
I think we have an MOP. So in our category, there's no concept of MRP. So on top of the MOP, I think at max, we go around 7-8%. That will be the prime during say, the big billion days or a Prime Day or something like that. But even that price will be higher than what the retailer buys at. So even if the retailer--on those days also retailers will make a certain margin selling the products.
Got it. Okay. Now, you know, if we have to bring this together, just focusing on Amazon and offline in terms of, you know, I know you're, you have a lot of metrics that you track and you've written about, but if you have to distil it down to say the top three metrics that you track on a daily or weekly basis. What are those?
It will depend on the same on a channel to channel basis.
So let's take Amazon offline then.
I think see for offline, right, I think again, it comes down to the same like getting the three things right. I think one is for us it will be, say a total counter gain. I think that is..for every month, how many counters are built, what is your total secondary and what is the new counter that we are open. Because now we are in the expansion phase and so opening new counters are also equally important. So I think these are the three metrics I think will be important. These are three metrics that I have been tracking for the last four or five years. On a quarterly basis, of course, you look at the retailer churn, the cohort data, and all of those things you look at. On Amazon, again, you look at what your sellout numbers are, what your growth is, compared to last year. Last year, same month growth last month, compared to last month, what the growth is. And we look at the overall TAC costs, I call it I think the total advertising cost of sales that is marketing spends as a percentage of revenue for that channel. I think these are the three-four bigger metrics. But we have fairly detailed dashboards which we run through every month or so.
Yeah, that is evident. Okay. Now, you know, focusing on brand building a bit. Yours is a fairly infrequent purchase category. So how do you think about brand building and essentially being relevant to the customer post purchase in a category like yours?
Yeah. So I think, slightly counter view I have on this. So I think people really don't care much about brands, I think brands serve as a shortcut for people to make decision-making easy. People want brands to be in the background, right? It's like they don't want brands. See as brand owners, as part of the ecosystem, I think we are much more obsessed about brands than a normal consumer is. So I think as long as one thing is your awareness number should be there, I think Spont, total awareness, all of this in your TG, whatever number like awareness metrics should be there. As far as being relevant both parties is concerned, I think there are only two things: One is the product needs to deliver what it committed. If the product doesn't deliver, there's a negative, if the product delivers you are relevant. Second is, in the worst case, if something happens to the product, you need to give top notch customer service. And that is something that we are obsessed out right from day one, because there's a reason why Atomberg is very unique company where service has always been a front-end function. In a lot of appliances, consumer durables, usually service is a back-end function, with the only metric being the cost of service should be X% of revenue, we never look at it. So in our case, marketing budget is marketing budget plus service budget. So we look at the overall budget. So I think, for us being relevant is the product have to deliver on what it commits. And second is, if something goes wrong, we need to delight the consumer, with our after sales service. And the third part is, of course, I think, at a brand level, I think you need to have a certain presence so that wherever they are in the buying journey, we are there in the initial consideration set. So usually, when you buy infrequent categories, you start with some four or five--for example you're buying an automobile or a mobile phone, right, you always have the three-four brands in your mind, it's important to be in that consideration set, then, of course, with all your digital marketing, and all you would need to win them in the evaluation phase. And then post purchase, you just need to ensure that the product and service delivers on what it commits. I think that's the best way to stay relevant. I'm not a very big believer that people are fans of Atomberg, people keep on thinking about Atomberg. Ideally, they should not think about Atomberg much once they've already purchased. That's the best case scenario for me, if they're thinking too much about Atomberg they're only thinking of the fact something goes wrong with the product.
That's an interesting perspective. So next focusing on culture a bit, what comes through in your posts, just that, very refreshing first principles approach to almost everything. So how have you created that culture and the organisation?
I think first principle is a hiring filter for us. So I think we check for that, like, in the hiring process itself. So we overindex slightly more on first principle thinking and problem solving, rather than saying whether you understand the industry or not. Because understanding the industry, understanding the category, I think those things can be easily taken up. Like if you are say, understanding any channel. So in our case, the entire ecomm team, the entire ads team, the entire digital marketing team, none of them had any relevant experience before they started working, so even fairly senior people. But all they had was they had first principles thinking that everything else could be learned.
So how do you test for that?
I think there are multiple ways, right. I think asking questions. Like, just like how you test for problem solving in consulting, right? So there are case studies, there are examples. There are real world examples on the feet, how can people think with numbers, how comfortable they are with numbers, and all of this. Framework driven, Do they have any mental model setting. So that's the hiring filter. The second part is along with first principle thinking there are some skill sets which you need to build. And in a fast growing organisation, what happens is those skill sets clearly evolve. Say, for example, my example right in 2017, I was earning a 10 Crore organisation, today, it's 1,000 Crore organisation. So the skill set that I would have needed to evolve--so I think it's always very important to visualise 12 months down the line, 12 months down the line, what will be the scale. And to do my role at that scale, what is the current gap that I have, and I fulfil it. A lot of people wait till they reach that scale, and then it's a disaster for all stakeholders involved. Because the moment they reach that scale, I will not have the time or bandwidth to invest and learn or talk to people, and fulfil that that skill set. So I think that's the culture that we have built. And we were very open about it, I think, right from the founders to everyone, I think we are very open saying we are all punching above our weights, none of us are qualified to do what we are doing. So we are not qualified to run the 1,000 Crore brand, right? Or, or any of us, whoever leading ecomm, whoever the leading digital, none of us are qualified and none of us will be qualified to do it next year. Even if we are doing it today, it's very important to understand the gaps and what today so that 12 months down the line, when that scale come we are ready for it and there are no... So 50-60% of the people are able to upgrade to the next level, and that's something that we have done pretty well in our course.
No, yeah. And along with first principles, the other thing that goes hand in hand is learning culture. So about setting expectations, but do you do anything beyond setting expectations to nurture a learning culture?
I think a lot of things, I think there are a lot of freely available resources, etc. We, whenever someone wants to get connected with someone, we facilitate it. I think, in fact, for me, I was very shameless in the 2017-2018 phase where I reached out shamelessly to all people whom I thought are experts in their fields. So for branding, I would have reached out to everyone I knew or I could find on LinkedIn, FMCG giants and all because they are the best people to learn branding from, right. Or say, for example, for service, I would have reached out to people even today, I reach out to people from company and all saying how do you do this, can you teach me. Usually I think that if you are very clear with your ask, open if you're asked, and you respect people's time, people oblige, I think the ecosystem or in general people oblige and people help as much as possible. That is one, and second is, of course, I think reading, there are enough resources, I think it's not the lack of resources, which are there, it's the lack of will or the time that people puts in, and also a lot of foundational stuff, a lot of people do a lot of fluffy stuff and things which are good to read. So for example, I would have read at least three books, three textbooks on media planning, before we started our TV distinct. Now I didn't learn TV planning from a blog post or something I actually read three media planning books, which are taught in advertising, or a marketing professional or marketing communication professional would know. So I think that culture, somehow we have been able to build and follow.
I think it's also a matter of leading by example and know what you do and they follow. Maybe when we put out the recording, we will share some of the books, etc, that you would recommend. So I'm gonna start taking-- we have a fair bit of questions, you know, the questions one by one. Let me start with Kuldeep's question. So the question is, how do you evaluate market size on Amazon? I think he means when you filter it by pricing, right? How do you get a handle on it?
Yeah. So I think the best way to do it is you have the bestseller ranks, right? So you look at the bestseller ranks, I think that bestseller ranks are publicly available. And you look at the number of ratings or reviews which are there. Usually most products will have a rating review in the range of 2-3%. So say for example, if a product has 1,000 reviews, like you assume two person review rate and you get to that number, that is one way. Second way you talk to the category team, I think most category teams are fairly reachable, fairly open, if you have reached a certain small scale. And the third is of course there are multiple third party tools like Helium 10, and all of those which will give you a keyword listing and then you can create some kind of proxy saying if the keyword search volumes are this, this would be the market size. So I think these are three ways you triangulate and you arrive at a number.
The next one is Jitendra from HairOriginals. His is a category creation product on Amazon with little competition. And it's a high AOV product. So I think the question is, how should one think about benchmarks, etc, when creating a new category? And I think the question is assessing TAM.
Yeah, I think category creation is a different...I think it's a difficult challenge. I don't think there's any right answer for this, right. I think some categories were non existent, today, there are huge categories, some categories did not grow. But I think it's independent of Amazon, I think if you think there's a category... I don't think you can evaluate. But if it's a category creation play, you cannot figure out how big the category is. I think we'll have to have some, some proxies to come at it.
So you know, Jitendra, if I can pitch in, that's how we think about it. It's essentially proxies, what is the customer using for that specific need today.
More top down approach saying so many consumers are there, so many consumers have this problem? It's very difficult to do a bottom up.
The next question is from Jyoti, how did you get the first few offline distributors on board, since you're in a category where incumbents enjoy absolute trust?
Very difficult. So this was more difficult than even getting the first investors on board. So the same story, right, you go to this---
We should learn from them. (laugh)
So I think the first thing is you go to the retail market, you figure out, you ask the retailers who are the distributors in the market. So you would understand who the top distributors are in that market. So then you go to the distributor, and you pitch him his business plan. On day one, of course, the numbers will be low. But again, just like you show the story to the investor on how the brand is going to grow for the next three, four years, you need to tell the same business plan to them saying today you are here and this is how the brand is going to grow for the next three, four years. If you join me today, this is how your profits will increase in the next three to four years. So it's very similar to investor pitch, he's just a partner, you need to convince him with a business's value. If we invest in the business today, he'll also grow with the business as the business grows.
But yeah, easier said than done.
I think the next one is what incentives or culture building practices you think has helped drive your sales team?
It's an obsessive focus on input metrics. Even today, right. So how many counters you are visiting, what you are doing in these counters, it is more important than what numbers you get. If someone does numbers without focusing on the input parameters, I think that's something that we don't reward. So I think that obsession with input metrics is what has really helped us and we continue doing it today, the moment you start. Because I strongly believe that in a lot of categories, including ours, sales team can only do so much to drive sales, as the end offline sales team, their objective is availability and visibility, as long as they support them output metrics, availability and visibility. For them the input metrics are visits, quality of visits, retailer engagement and all of this. The moment you start linking it with sales, primary sales, and all, it becomes very difficult. As long as they're making the product available, visible, all the ranges are available, then all of these things, like I think that culture drives him. Of course, I think things like overall numbers are also at play. But all of these things come at a later point even today, a good chunk of our scorecard goes into defining controllable outputs and inputs for them, for ultimate final sales number is not in their control. Today, it is raining in Bombay, if it rains for a month, numbers will go down. If they do not make their incentive because of rains, then they will never be motivated to focus on the input metrics when I asked them to focus on.
You mentioned obsessive and I heard from people on some crazy things in terms of obsession, especially when it comes to tracking sales team performance. So can you, double click on that, what does that mean in terms of frequency of tracking, metrics, etc?
I mean, I think it is one is the number of visits that you make. Second is whatever beat your plan, how much you're adhering to the beat. So I think these are the two metrics which are very, very critical. Saying for example, if I plan to visit a counter Monday morning 11am, I need to visit that counter, no ifs and buts. I need to visit, I need to do my four activities, I need to take a photo of the branding, I need to speak with him, I need to clear his all previous dues, whatever it is, scheme settlement. So we have a SOP which is a very enabling tool for us, if you go to a counter, what's the four-five thing that you need to do, you need to complete all of those. So this is obsessive input metrics. The output metric for them are availability and visibility, they need to make the products available, ranges available, and visible. These are in their control. Now, after doing all of this if sales is not happening, consumer walk in is low, whatever it is, then it's a much bigger problem which they cannot directly influence.
Okay. The next question, I'm curious to know that although you designed the product with the USP of energy efficiency, how did you realise and adapt once you realise people were getting hooked because of the remote control?
I think that was the early adopter. So what happens is what we realised very early, there were three different TGs for us three very unique TGs. So one of them is early adopters, techy-tech guys, engineers, and all, they were obsessed with remote. For them, we launched the smart variant, which is Alexa enabled and all of this, then there is second TG which is say, who want the fans for interiors. For them fan is a part of the home decor, they want good sleek looking fans with interior, they spend a lot on their interiors, they're architects and all, so that's the second big segment. And the third segment is people who are value conscious who make a very rational decision, can I buy this product, I save 700, 800, 1,500 rupees a year and that is why I pay the premium. So I think we figured out very early in our journey that there are three unique segments. Digital communication was very separate for each of these three. And when we went broad I think it's a mix of all of these three, you will see in our ads we'll speak about energy efficiency, we'll show the remote, the looks of the fan, anyway, we showed, so all of these things come into play in overall brand communication.
Okay. The next one is on influencer marketing, how big do you think influencer marketing will play a part in the pre product market fit and post product market fit journey?
I think it does play a role across categories. Again, it depends on which category you operate. Some category which are more Instagram friendly, you need Instagram influencers who show the product and all of these. Categories like us which are more evaluated, right, people go to YouTube and search for reviews and all of these things. So in categories like us, I think YouTube influencer, unboxing, product reviews, I think those things become more important. But figuring out what you are using influencers for I think that is very important. Whether you are using them for building brand awareness, or generating trials, or getting people to trust the brand. I think the right objective is very important on why you are using influencers.
Right. The next one is Atomberg's products are more technically advanced versus competition. In your initial days, did you see Amazon ratings on the lower side? As the consumers didn't know what to expect?
No, I think we did not do so. For the consumer it was the fan, right. So they didn't really care what the motor was and all, as long as the fan perform, saved electricity bills, give good air delivery, worked with the remote, I think they were very happy.
Okay, the next one is from Nivedita. With regards to brand building, how would you weigh online channels for establishing trust, brand presence versus performance marketing? Were there any specific marketing initiatives that worked better than others?
I think overall, what had worked was the focus on ATL for us, I think that really worked. I think once you reach a certain scale, like when you are present on a bigger screen, on a TV, right, I think that really take the brand trust to the next level and I'll tell you how this works usually. Say seeing something on digital, right, because everyone knows digital doesn't cost a lot of money. So so that's a framework--the mental model consumers have, saying, hey I'm seeing hundreds of ads you're just one of those ads. But the moment you're there even on a regional ATL, right, the number of brands which advertise on regional ATL will be much lower, 100x lower than what the number of brands which would advertise on Facebook or YouTube. So I think being ATL I think other than the things like awareness and all, the logical things on how ATL is better. The other way how ATL work for us is in building trust, saying if this brand is spending money on TVs, this is there on TV, it is a brand which is there for the long run. I think that's a belief that a lot of retailers, distributors have. And even today, right, I think, although this recent funding boom and all allowed a lot of non sustainable businesses also to advertise on TV, but historically, over the years, brands that advertise on TV are fairly large brands, big brands, brands which have reached a certain scale and people associate TV with trust. And that's something that has worked well for us in building trust and overall mix.
I think the next one is on, any inputs on how you went about building your sales team, specifically GT?
Again, very similar, I think we've focused on people who believed in the input parameters more. I think, a lot of bigger organisations, what happens is because the brand pool is so high, right, you don't need to have that rigour in the market. So I think we were very clear saying this will require a lot--even today, right, it requires a lot of legwork. And that input metrics are very important for us, so that was one thing. Second thing is we try not to hire from market leaders. So we would always hire from a number four number five brand in the market, because they know the struggle. And they see the struggle, they hear rejection on a daily basis. And for a startup, when you're going offline, I think you'd hear rejection again, and again. I think, for me, when I was doing GT for the first year, to open a counter, I think it took me at least five to six visits. For the first three, four visits, you would not even let me enter the shop, you just say please get out. And again, the fourth or fifth visit you would come offer me tea. And only in the fifth or sixth visit, you'd say okay, you place the--so you'd hear a lot of rejection. So you need people who can handle rejection and were open to it. So a lot of pressure, a lot of young people. And that's what I think, relationships...and all these things are slightly I think.... we overindex on the importance of this thing, saying I need people from the... Okay, of course, you need people from the industry, but do you need everyone from the industry? Maybe no.
That's interesting. You know, hiring from the fourth and fifth. With regards to your initial Google and Meta ads, did you send the customers to your Amazon page or..?
..No, D2C. So we have always send people to our D2C website, because let people come to the D2C website, let them get all the information. Because my D2C website allows me to tell the story in a much better way. And then let them make the decision from where they want to make the purchase. Whether it is from Amazon, Flipkart, A to Z, offline today. So that's the same one that we have followed.
Yeah, maybe last two questions, your thoughts on how to incentivize distributor sales? I think now they're talking about why you use distributor sales force.
Ah our distributor sales force
Yeah. That's basically retailers. How do you incentivize them? Distributors sales force?
I think the distributor sales force we don't incentivize, because distributor does three things. Distributor's not responsible for sales, distributor's responsible for ensuring that the products are supplied on time. The distributor is responsible for helping you identify the right counters in that market, on which counters the products will be available. And thirdly, the distributor is responsible for giving credit to the retailers, I think these are the three things. The distributor cannot be responsible for increasing your sales, at least not for the first few years of the brand. If you are doing that, then you don't have control of your sales, then you're as good as a wholesaler, right, the distributor is selling wherever he wants us to. For us, we are very clear distributor is solving for only these three things, distributors solving for identifying the right counters, supplying products on time within 24 hours to the retailer whenever the retailer needs, and giving credit to the retailer.
Okay, I think you know, we have more questions, but I've taken 10 more minutes. So thanks, thanks, Arindam, really appreciate it. One last question before we wind up so, for those listening in if they want to be Arindam, what are the personality traits, habits that you think will get them there?
(Laughs) I think there are two three things, which I do, again, nothing unique or something. So one is perseverance. So I think that's a trait that is their key. And I think that's a trait in most folks in the startup ecosystem. You just need to survive long enough, if you survive long enough, you will get lucky. And continuously focused on the input parameter without worrying much about what the outputs could be. Second is, again, hard work. This might divide opinion today, you hear a lot about work life balance and all of these things. But I think that's a trade off, right? If you really want to do great things, you need to put in the hours, put in the hours to learn, put in the hours to-- because if you're trying to do two things at the same time, right, you're trying to upskill yourself, learn new things, also ensure that the day to day operations are running. So usually, like I think hard work is something that in most rooms, I'm the most hardworking people in.. at least within Atomberg. And of course, the third thing is you question status quo, I think you don't just accept what works. Again, the first principle thinking, it's not that something is once this way in needs to work this way. If you question things from first principle, you'd figure out a lot of things are not done fundamentally right. And maybe that's, that's an opportunity for you to to do that right. So I think these three things are something that I would associate with my personality traits. Hard work, perseverance, and first principle thinking.
That's amazing. There's one line that I use always, this is like from Jeff Bezos, he likes to call it work life harmony, not work life balance. It doesn't have to be at odds with each other actually. But thanks, thanks, Arindam, this was fantastic. Learned a lot and really appreciate the time.
No, no, it was a pleasure. And I hope that people who are listening or who will listen to the recordings will find value in whatever we spoke.
Perfect. Thanks. Thanks, everyone.
Thank you. Thank you, everyone. Have a good evening.