Analysis of User and Merchant Dropoff for Sugar App - Project Overview

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Background		Data Source		Methodology

Project Background

We are currently living in a digital age where possibilities are limitless. Rapid technological advancements has continuously shaped and changed our attitudes and behaviours towards different aspects of our lifestyles. With this move towards a more digital society, conventional shopping that has traditionally been taking place in brick-and-mortar shops are now gravitating towards online platforms for ease of convenience and getting a better deal.

Singapore has the highest smartphone penetration rate in the world at 88%, ahead of other countries such as Hong Kong, Australia and the U.S. For local businesses, consumers typically look for Price (38%), Quality (38%) and Availability (28%) before making a purchase decision. Approximately 42% of Singaporeans also turn to local discount websites such as Groupon, Deal.com.sg, Lazada and Qoo10 in search of better deals to secure better value for their money spent.

Introduction of Sugar

Sugar is an interactive city guide that seeks to encourage a culture of exploration in Singapore and helping local small businesses get discovered.

Currently, Sugar operates in 3 countries – Hong Kong, Jakarta and Singapore. It originated from Shanghai where it has experienced tremendous success of over 250,000 users a day and hence, the founders has decided to expand its operations to Singapore in early 2014.

Sugar has discovered that convenience is an important factor for users when selecting a local business. (See Fig.1) Thus, as a city guide with its location-based features, it hopes to revolutionise the online shopping industry.

Mechanics of Sugar App

Sugar exists as a platform in a two-sided market. Like many other two-sided markets, it connects users to merchants and earn fees for connecting these 2 groups.

There are two main stakeholders of the Sugar App: Merchants and Users

Sugar’s Merchants are mainly small local businesses in Singapore. It has a large variety, including cafes, small restaurants, bars, hair salons, gyms, gift shops. The benefits for Merchants is advertising to users that are in close proximity to them. As mentioned before, convenience is an important factor for a purchase decision and thus, Sugar is leveraging on this aspect.

Users derive benefits from the discounted deals on the app. For example, the typical deal can be a 50% off truffle fries at a restaurant near them. Since price is highlighted as extremely important, this can entice existing users and new users to check out deals on Sugar app.The location-based feature also provides them with ample opportunities to explore hidden gems and new establishments in their vicinity.

Differentiation from Other Apps

What differentiates Sugar from its competitors are primarily 2 features - Location-Based Recommendations and a Skimming Mechanism

Location-Based Recommendations

Sugar uses a location-based advertising approach for local businesses while simultaneously offering attractive deals to users. As a heuristic for the best deals, the app uses location information provided by the user. Location can be set by the user or by the in-built GPS system.

Skimming Mechanism

Another important feature of the app is the Skimming Mechanism. It allows each user to reduce the price of an item by 20 cents, hence “skimming the price”. This gives the app word-of-mouth potential as users are motivated to reduce the price further by persuading their friends to skim the price of an item. For example, if a person can get 4 other friends, the 5 of them can reduce the price of an item by $1 for everyone.

Project Problems and Motivations

As Sugar is a relatively young start-up in Singapore, user growth and user experience is important. To reach critical mass, Sugar needs to minimise Customer and Merchant attrition, while maximising user experience.

User experience: Non-Redemption of Vouchers

One of the user experience issues is the non-redemption of vouchers. There is a 7-day redemption period before it expires. The client has pointed out that many customers did not redeem their deals. This is peculiar behavior. Minimizing the non-redemption rate will benefit both merchants and customers, which will also increase the brand value and the reputation of the company.

Customer Retention

To attract merchants, Sugar needs to grow as fast as possible while retaining existing users. Many users become dormant or stop buying after the first purchase. Analysis can be applied to find out why they stopped and what solutions may be available to attract them.

Merchant Attraction and Retention

Not all merchants are the same. There is a large variation between the popularity of individual merchants. Some merchants experience uptake daily whereas some have little to none at all. As a result, many of the latter may choose to drop out after a period of time. Since Sugar functions as a two-sided market, a high attrition rate of merchants may result in users also ceasing usage. As Sugar has limited resources to reach out and engage merchants, high value targets can be identified to optimise their time and effort. Further analysis can be finding out the main factors for merchant attrition.

Project Objectives

Therefore, the objective of the project is to perform survival analysis, subsequently deriving recommendations for Sugar to increase its KPIs - user redemption rate, customer retention rate and merchant retention rate.

Scope of Project

From our dataset, we have identified certain variables that we will using in our analysis.

Some indicators and areas of focus that we have selected preliminarily are:

• Consumption Pattern
  • Date
  • Time
  • Merchant
  • Merchant Outlet
  • Original Price
  • Skim Amount
  • Price Bought
  • User
  • Address
  • Geolocation of User
  • Comments
  • Item
  • Item Category
• User Interactivity
  • Impressions
  • Skims
  • Spreads
  • Clicks
  • Purchases
  • Expired or Validated

Project Deliverables

• Project Proposal
• Mid-term Presentation
• Mid-term Report
• Final Presentation
• Final Report
• Project Poster