the big idea
A Mumbai-based company has come up with a service that allows you to virtually recharge your phone for free.

How it works:

  • Get a recharge of the amount you want.
  • Get a coupon of the same amount for an outlet of your choice.
  • The retailer pays the amount for the coupon.
  • Since the customer chooses the coupon of his choice, he is more likely to redeem it in the outlet, which increases the revenue of the retailer.

Challenges:

  • Increasing the speed of recharge and delivery of the coupons.
  • Getting customers to believe that something that sounds “too good” is true.

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It sounds too good to be true

 
 
Shah is also launching a scheme to recharge DTH subscriptions, which will open up a wider market.
 
 
. In fact, at first, most people suspect it to be a scam. But Kunal Shah’s Freecharge is a very legit operation. It’s pretty simple, really. If you have a prepaid mobile connection, you log on to the Freecharge website (www.freecharge.in) and enter the amount that you want to recharge—the amount could range from Rs 100 to Rs 1,000. Then you select coupons of an equivalent amount, for anything from a Domino’s pizza to a PVR movie ticket and pay for the recharge. In a few days, you get the coupons and can redeem them at the store. It’s as good as a free recharge.

Before he launched the website in August this year, Shah ran a company that facilitated cash-back deals. The idea for Freecharge was born there. “We couldn’t see above-the-line promotions leading to a large increase in footfalls to retail stores. That’s when I started thinking how footfalls could be increased without a significant increase in cost,” he says. Shah identified prepaid mobile phone users as the target base. “This was a win-win, I thought; we could tell the customer his recharge was free and the retailer that his footfall had increased,” says Shah, who, at 31, considers himself very old.

Swinging Into Action

After working out the contours of the idea, he filed for a patent. And spent the next nine months trying to convince a telecom operator to sign up. “They all heard the idea and said I was stupid,” he says. Reliance was the first to sign up; Tata followed soon after and then Airtel.

In four months, Freecharge has gone viral. According to Shah, the site issues 25,000 coupons a day. “Also, since the coupons are chosen by the user, the redemption is very high. While the industry average is 2%, in our case 30% of the coupons end up getting redeemed,” he claims. Currently, Freecharge is entirely online.

The cost of the coupon is borne by the retailer. Either the retailer pays for every coupon issued or, where redemption can be accurately accounted, a fee is charged per redemption. “But it’s early days and we are still evolving. So we will be working out various models of revenue generation,” he says.

Come January, Shah plans to actively advertise and promote Freecharge. Its customer base (and 60,000 Facebook fans) has come entirely through word-of-mouth publicity. “We realised that 60% of the people who used our site were transacting online for the first time in their lives. So, there is a large population that is not online yet, but which will come to our site once it hears about it,” he says.

Challenges Ahead

Though Shah is in the process of getting a patent, it is inevitable that competition will spring up. Mobile operators themselves are certain to get in on the action. Vodafone already has, with its Vodafone Delights basket. But Shah and his team of 15 are not too worried. “For mobile operators, this will not be the main area of business. They will not have the kind of deals that we do,” he declares. “And the number of mobile users is so high that I am not worried about losing market share.”

The other problem Freecharge faces has to do with credibility. When the company surveyed 1,000 users, more than 900 thought the business was a fraud, simply because the idea seems too good to be true. And when there is a problem, people quickly go online and complain.

There have been two areas where hitches have occurred so far; delivery of coupons is sometimes delayed and, on occasion, the phone does not get recharged immediately because of the load on the server of the mobile company. “Though we have a policy of 24-hour auto refund, people tend to press the panic button quickly. Now, we have an online chat service that allows you to get in touch with us. From January, we will also have a customer helpline,” says Shah.

Shah also has other plans. By the time you read this, he would have launched a scheme to recharge your DTH television subscription. That is bound to open a much wider market and increase the ticket size of each transaction significantly. Freecharge is currently funded by the Tandon Group. When the operation touches 15,000 transactions a day (from the current 3,000), the group plans to start talking to venture capitalists and seek a good valuation. With all the excitement, it isn’t surprising that Shah feels “very old”.

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