People Innovation Excellence

Zalora CFO: Customer Acquisition through Subsidies Generates 2.5 Times Multiplier Effect

A rapid growth in the number of e-commerce companies in Indonesia, being not only local but also international groups, leads to a stiffer competition within the industry. Consequently, the speed a company has for acquiring customer makes one of the most important factor, in addition to the speed and aptness in talent acquisition, a great marketing strategy, and complete product variation. The speed for customer acquisition is commonly built by giving away subsidies which, in the case of Zalora, has generated a 2.5 times multiplier effect.

This finding was raised up in the past Tuesday’s (1/12) CFO Forum, having had Zalora Indonesia CFO Fransiscus Budi Pranata as a speaker in BINUS BUSINESS SCHOOL (BBS), JWS Campus, Senayan. As Budi himself revealed, Zalora provides subsidies for the goal of changing the customers’ habits which, by turns, can be very profitable in the long term.

“Based on our experience, this practice (giving subsidies-red) generates a multiplier effect as much as 2.5 times. This means that, when we give away a Rp200.000 voucher, if the customer likes it, then he or she, being the receiver, will buy the next week and they will do this more than 3 times during the year. This becomes profitable for Zalora,” stated Budi who first joined Zalora Indonesia in January 2014.

In terms of his company’s subsidizing strategy, Budi clarified that Zalora does not do it on a monthly basis. “May be once every 3 or 4 months, depending on our sales target and market’s condition. For instance, when the market faces a downturn, we then distribute the vouchers,” revealed Budi, adding afterwards that his company once spent as much as Rp2.5 billion in a day only for the voucher subsidies. In Budi’s point of view, the most essential factor in providing subsidies that acquires customers is that cost acquisition (CAC) should be less than customer lifetime value (CLV).


Fransiscus Budi Pranata Shares His Experience in Managing the Financial Cashflow at Zalora Indonesia
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