The 2% Solution

wealthymattersWhen I started my first digital entrepreneurial venture — in 1998, I was an innocent fool. Coming from a wealthy Marwari family business that made hosiery (a polite word for socks), I had assumed that things happened simply by asking. If asking didn’t work, they did by requesting. And if requesting didn’t work, then I got my way by demanding!

In my avatar as digital entrepreneur, as I began to pitch to large MNCs in India to use my free ‘Internet contesting’ site, I learnt a bitter lesson. My asking, requesting and demanding yielded no results. And that, considering I was offering a free service! After a bitter start, I learnt a rule that has always stayed with me. It was the rule of 2%. In the first year, I cold called 500 clients. About 300 came on the phone. Of these, 150 agreed to meet. Of the 150 meetings, 100 asked for a proposal. Out of the 100 proposals, 10 finally agreed to do business with me (free of cost). I closed 10 clients out of 500. That was a success rate of 2%. 

Here are some more 2% related statistics :

Out of 100 visitors to e-commerce sites, about 2% convert to buying customers.

In the stone-age of advertising (think Mad Men), glossy envelopes mailed to targeted databases elicited a 2% response rate (think a reply or a mail order).

In the highly cluttered world of internet advertising, a 2% CTR (click through rate) on a rich, well designed, interactive banner is considered to be supreme!

Zynga (a befallen gaming company) was able to sell virtual sheep, tractors, farmhouses and trees in a free virtual game to only about 2% of all its players. That game was called Farmville and the 2% made Zynga a multi-billion dollar company. For the record, the rest of the 98% (who didn’t pay) spammed their friends on Facebook and killed the social networking site’s game notifications forever.

And yes, only 2% of folks playing Candy Crush actually pay for more levels and power ups. The rest of them … well, they spam us all.

The famous 2% rule amongst stock traders states that no trader will ever bet more than 2% of his worth on any trade.

Clearly, there is a fascinating 2% rule that pervades the operating plan of this planet. And, it operates in real life too. Think — how many people do you randomly meet in a flight whose first name (that’s important) you can recall? About 3. That’s 2% of a flight of 150 passengers.

Now, what does 2% mean? Sadly, very little. It’s the 98% that slips away, that robs us of our profits. I mean think of how amazing it would be if 98% bought stuff on e-com sites or clicked on banners! But the hard truth is that the 2% of everything exists. Now, if you accept it as it is, you’re toast. But if you find ways around it, you can be king!

The Upseller — When only 2% of women bought virtual sheep in Farmville, Zynga did not fret. It leveraged that tiny 2% via the art of upselling. While most consumers bought 1 item of 0.99 cents in typical games, Zynga (using rocket science analytics), drove a typical 0.99 cents purchase up to US $9.99 and in some cases even US $99.99! Zynga was so phenomenal in its upsell to the 2%, that they more than made up for the 98% population that wanted ‘free ka maal’.

The Stalker — However annoying, e-com websites hound the 98% ‘non-buyers’ by using cookies and chase them all over the web with ads of the sites they abandoned. Data proves that of the stalked, 18% converted to buy what they had left behind.

The Hypnotist — Have you bought a domain on I bet that only 2% of visitors who look for a domain land up buying one. Now, once you have bought a domain, godaddy injects the fear of God into you. Even as you proceed to check out (which takes forever), the site scares you about security, spam hosting, fraud, etc And keeps selling you services you didn’t know you want for your newly acquired website. Godaddy hypnotises the 2% and makes them leave their wallets behind!

So, if you have a 2% situation, think of a clever way out of it. But for heaven’s sake, do not send spam mails to your friends and clients saying, “I am the rich Nigerian widow of a Colonel who has $3 million stashed away and need you to help me siphon it out of the country. All I need is…”

The famous ‘Nigerian Scam’ too has a 2% success rate, but that’s a method I would seriously recommend you skip!  – Alok Kejriwal

Sometimes A Little Goes A Long Way“Sometimes, knowing little of something absolutely new is better than knowing everything of something very old. To explain – in 2003, when we began working with Sony television in India on Mobile VAS, we were the only Company in India to understand ringtones, sms gateways etc. Just the fact that we could manage ‘mobile stuff’ won us the Indian Idol business in India and 50% revenue sharing across the board. Circa 2009, everybody knew how to do everything and the party was over. But in those 6 years, we managed to fund and exit the business!”-Alok Kejriwal


Hijack Marketing

Here is Alok Kejriwal with another interesting way of getting your company and its offerings noticed:

Do you have the guts to go to an industry conference or convention, sit in the back rows and then announce your name and Company and ask a question (intelligent please) in every session?

You will be effectively ‘hijacking’ a high profile industry event and getting quickly noticed amongst trade, press and potential customers.

Last year, at the flash gaming conference in San Francisco (organized every year by Mochi Media), there was an entire panel dedicated to ‘high quality games’. At the end of the session, I stood up and said ‘I am a successful games company that makes medium quality games, in large quantities. I believe in the Cartoons model of decent quality with lots of content vs. the Hollywood model of few movies that cost trillions. I don’t believe your hypothesis. And I have comScore numbers to back me’. The panelists broke into a fight with me, but the silver lining was that for the entire week, wherever I went (it was game developers week), I would meet people who said ‘Hmm…you’re the dude who questioned quality vs. quantity…. Good question’…

It’s not about being disruptive. It’s about going to events and conferences where the center of gravity of your business is and making your self get noticed.

I believe that this is high impact, albeit non-scalable marketing that has its own unique role to play.

Piggyback Marketing

wealthymatters.comCost of sales is a big expense for start-ups.However without sales a business is not going  to survive.One smart way to grow one’s business without much expense is to adopt piggyback marketing.Here’s Alok Kejriwal on piggyback marketing:

“When I launched, I really got lucky. I managed to convince MTV’s VJs in India to scream ‘log onto to win x and y prizes’ on the MTV channel all day long. MTV was keen to create online contests – I swapped my service for free mentions on TV.

I was piggy back riding them to a trip to the moon!Going piggyback marketing is hard work. It involves pavement pounding to find a gigantic and huge partner (compared to your size) who gifts you a winning lottery ticket in exchange for your unique product or service. Read more of this post

Learning From Alok’s Conversations


Alok Kejriwal is a serial entrepreneur who founded Contests2win (c2w) in 1998. c2w was the world’s first customized brands promotions website and has retained its leadership position since then.Alok and c2w have gone on to create 3 new businesses – Mobile2win in China and India, Media2win and Games2win and have raised venture capital from top tier VC firms and financial institutions.

I am no fan of VC funded businesses in general.However I still find it useful to read about Alok’s business experiences.Do read the 9 stories below.I’m sure you too will find them useful.I have highlighted what I find interesting in red. Read more of this post

%d bloggers like this: