Daybreak - Why edtechs need to rethink their aggressive sales strategy

Episode Date: January 25, 2023

The edtech industry in India is facing a host of challenges from all directions, from a decline in funding to the emergence of formidable competition.One that stands out, however, is the allegation of mis-selling and fraudulent loans. According to the Advertising Standards Council of India, 33% of the complaints filed with it in FY21-22 were related to the education sector. And one of the reasons for this is the overly aggressive sales playbook. Byju's mastered it so successfully that many of its its peers followed suit.But now with the government expressing concerns over these allegations, edtechs including Byju's need to rethink their sales pitch. Tune in for the details.

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Unlike most other businesses that suffered during the pandemic, for the ed tech industry, it was their time to shine. Online education was the need of the hour and the ed techs delivered. And one way they nailed it was through their rather aggressive sales strategy. But last year, things began to change. Schools and colleges reopened and normal classes resumed. And then of course the dreaded funding winter set in. EdTechs began to see a decline in funding.

According to reports, the EdTech startups in India recorded a 44% drop in investment in 2022. Now, EdTech is seeing the largest number of layoffs compared to all other sectors in India. That is not all. Bad news is coming from all directions for EdTech companies. Last month, Google announced that it will be launching its new product called Courses on YouTube. With its 450 million viewers, most ed techs do not stand a chance against YouTube. Many say that this might be the final blow to ed tech companies. And then there are the consequences of the aggressive sales that ed techs are facing the music for now.

The government has expressed concern and taken quite a critical stance on the alleged miscellaneous. selling of courses by ed tech firms. 33% of the complaints filed with the Advertising Standards Council of India were related to the education sector. There is a churn going on and ed tech companies are scrambling to keep it together. So last week, Bayju's announced that it was shifting to virtual only sales, which basically means no in-person sales course. But it was this very strategy of aggressive in-person sales

that pushed Bayju's right to the top of the AirTech world. Today, I will tell you about how the EdTech sales engine was its strongest pillar and why it has to change its strategy now. Welcome to Daybreak, a new podcast from the Kent. I'm a host Nick Das Sharma and I Don't Chase the News cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time.

Today is Wednesday, the 25th of January. In the latest edition of her newsletter, Ed Setco, my colleague Olina Banerjee tried to answer a simple question. What was it that worked so well for EdTechs in India? Was it the need for quality content? Yes. And the need to make it all available online for learning from home? Yes.

Did the availability of limitless cheap data and smartphone coverage make it easier for ed techs, of course. But there was more to it. These factors only helped grease the main engine. And what was the main engine? It was their airtight sales pitch. And one company that nailed it, no prices for guessing,

buy juice. In Olina's own words, they didn't just master it. They built the biggest, baddest, flywheel of FOMO to financing to promise pay off in recent times. It was a sales pitch that could put the best FMCGs to shame. Let me give you a sense of what they were actually doing.

First, they began with the prep. This included tracking their app usage. Once they noticed high activity, they would call and convince the parents for a meeting. Next came the visit. They would meet the parents, put the child through a test on maths and science, and based on the results, they would try to convince the parents for a trial. And here comes the tricky part.

Once a parent was convinced to sign the documents for a trial, they would receive a tablet within 4 to 10 days. After that began the 15-day trial period. And this is when the sales team would push the parents with all their might. Parents would get more than 20 calls from product experts, counselors and salespeople during this period. Now, there were two possibilities. One that the parent was convinced and they bought the product.

In the second scenario, when the parent wanted to do. to cancel, Byju's customer care and counsellors would ignore all their calls. And once the trial period was over, there was nothing that the parents could do. Because they had already signed the ECAS documents or given Bayju's post-dated checks. EMIs would get auto-debited. The only option left for the parent was to go to the bank directly and ask them to stop the auto payments. The money that was already debited though stayed with byju's.

Now, you see how it was in fact the sales machinery that was doing all the heavy lifting for these ed techs. But this aggressive approach eventually turned out to be quite the sore thumb for not just Bayju's, but all other ed techs that followed its playbook. Ed techs are now faced with repeated complaints, court cases and a never-ending political debate. And for good reason, of course. So last week, Bayju's announced that it was shifting to virtual-only sales. meaning no in-person sales calls. The policy is of course being rolled out

to curb the instances of mis-selling and fraudulent loans. But this very aggressive sales strategy was Bayju's strongest pillar. It was what worked for the company to the point that all other ed techs began to follow a similar strategy. Why then is Bayju's giving up on its core business model without a stronger fight? The answer lies in Bayju's first. and favorite baby, the K-12 or the kindergarten to class 12 category. The category saw a spectacular rise during the pandemic, but when schools reopened, it was quick to course correct.

Agents who sell it say that it is mostly hardware dressed up with a few perks like online doubt-solving. But now this favorite first child is turning out to be what Olena calls fun-sucking zombie for byju's. The thing is, the K-12 category is directly linked to Baiju's in-person sales strategy. The two are inseparable. But like I said earlier, with school's reopening, K-12 is turning out to be quite a hard sell. In fact, now parents can almost see through the sales pitch. A sales executive who has worked for different ed techs, including Topper, which was

acquired by Bujus, told Olina that the old aggressive ways of selling are over. He said that the parents don't probe them anymore because they know that the age of are not going to provide them with a service. He said, and I'm quoting, if you can't sit face to face and assess the child, you cannot build a rappo. Over the phone, there is no authority. Because parents can just hang up or worse,

they can put you on a blacklist. In an online sale, the counselling session, if it gets to that point, has to be on Zoom. Byjouz now gives its agents three hours of talk time per day to use up and it also tracks how many hours they've spent on Zoom convincing clients. The agent said that the script has not changed much from offline, but the impact on the customers is markedly different. Now it's come to a point where most sales agents want to leave K-12 sales, because according to them, it is too dynamic, too

dysfunctional and there is too much pressure. So clearly, K-12 and the old sales playbook are a done deal for Bayju's. What then is Bayju's new strategy? It is quite interesting. So we know how Bayju's has been acquiring the most promising startups in EdTech, right? Turns out, it is not just acquiring them. It is also picking up different selling strategies from them. When Bayju's acquired White Hat Junior and its sales process for $300 million, it introduced the demo class strategy to the mainstream ed tech world.

Buju's original sales playbook stayed separate from this, for a while before White Hat Jr. got completely folded into the parent company. And even though White Hat Jr. was a key reason why Bayju's revenues were muted in 2021, the demo class strategy lives on. In fact, a host of new startups are also trying the demo class route. In 2021, Bayju's also acquired the test prep mammoth Akash Coaching Center. Now, if you remember, Akash is known for its first. physical coaching centers. And here is where the potential for Bayju's to try a different business model comes in. No annoying calls, no pushy messages, no demo classes will be required for this.

Because Akash doesn't really need to apply a push sales strategy. We know that its physical coaching centers because of its brand name pulls in the students. This is the exact opposite of what Bayju's had to do with K-12 sales. All it has to do is push out ads, combine Akash's coaching institutes with Bayju's tuition centers, offer counseling, and that is it? Olina says in her newsletter that this is one way in which Bayju's can exercise its K-12 zombie and with it, its old sales tactics. So far though, Bayju's has played it smart by announcing only virtual sales. This way it gets credit for ending its aggressive and unpopular ways of selling, and it also gets to revamp the business model that does not really work for it anymore.

Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps, and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host and today's episode was edited by my colleague Rajiv Sien.