Social Selling for EdTech? Sunflower Mom (向日葵妈妈)- The Meesho for EdTech

Given the increase in marketing spend of edtech companies, is there a possibility to build a reseller model for edtech? (like Meesho OR Tongcheng for EdTech) Let’s find out!

EdTech segment is seeing innovative startups come up across the world, along with huge inflow of capital. Due to influx of capital, there is one common problem all the companies are dealing with- increasing cost of user acquisition. Since more and more companies are trying to acquire the same user, the CACs are climbing higher than ever.

Different EdTech firms bidding for the same JEE aspirant (India)

There is a clear trend of increase in sales and marketing costs across startups

Most live class packages sell the first package for a few sessions, where the likelihood of negative contribution margin is high, i.e. that there is reliance on renewal of subscription to be able to make operating profit on a customer

High CAC driving down Contribution Margin

Given the plethora of options, there is higher probability (than before) that the customer might not repurchase from the platform, hence making it difficult for the platform to make profits. 

Hence, it’s very important for EdTech companies to solve for CAC and ensure sustainability in the long term- with focus on breaking even or making profit on the first purchase. 

There could be many ways of solving for distribution, but the one I want to focus on today is the reseller model- and present a case of a Chinese platform: Sunflower Mom 向日葵妈妈

China is home to 250K+ Edtech companies targeting a market size of ~$65B (K12 Online Education). Sunflower Mom is a platform, founded in 2018, providing access to high quality teaching resources to mothers (and students), and letting mothers distribute it (as resellers)

Model of Sunflower Mom- Social EdTech

It’s actually not a new model, this is how purchase decision are made in education often. When my mother was looking for a tuition teacher for me, she would often reach out to her friends and seek recommendation.

Highlights of Sunflower Mom

Some other platforms in China are爸妈严选 (Ba Ma Yan Xuan), 妈妈心选 (Mama Xin Xuan）

Value Proposition of Sunflower Mom

As a social reselling model, it has very obvious value proposition: 

•   Courses at discount: 
  Mothers can purchase high quality courses at a discounted fees

• Opportunity to earn:
  Mothers can share the courses with their friends and start earning commissions as the courses are bought from their links

• Onboard more resellers:
  Mothers can onboard more resellers (Mothers) and make commission as their onboarded resellers start selling

Reminds you of Herbal Life? 

That brings me to potential concerns of this model:

• EdTech is a service, not a product
  Because the delivery of service is in the hands of the EdTech company, if the course doesn’t live upto the expectations of the students/ parents, it reduces the credibility of the reseller as well as the platform.

• Perception of MLM
  The model can be perceived as a scam, since there has been an ongoing debate on ‘multi-level-marketing’ models.

Comment from a potential user online

Potential Unit Economics (on social EdTech model)

It can improve the CAC significantly and hence, improving overall economics

Indian EdTech companies are also looking for alternate distribution channels due to rising CAC.

• There are about 160M+ housewives in India and several platforms are also targeting them for reselling across categories.

Successful reseller model companies in India

• Most of the large EdTech companies have the highest team strength in sales function. BYJU’s team size is ~20K (as per Linkedin) with ~45% team participating in sales department. Not every company can build large internal sales teams, but can certainly build great products; hence alternate distribution channels will be very important.

  

  BYJU’s Linkedin (Snapshot)

• Sales personnel in Education are getting paid much more than teachers (2-3X). Nothing against it, but here’s what it sounds like: ‘selling education’ has more relevance than ‘education’- pointing out an inefficiency in the system.

Social reselling platforms focused on EdTech in emerging economies can help not only in reduction of CAC but also increase penetration in smaller cities. Is it the next billion dollar opportunity?

PS: There are several concerns to be taken care of, as mentioned above. 

It’s been a tough situation due to pandemic across the world- especially India. I would like to pray for everyone’s safety and well being. I am willing to offer 30 mins sessions to discuss ideas, pitch decks, etc. to anyone who makes donations for COVID relief. You can reach me here: rahul@beenext.com