The Strangest Referral Programme -- Sarda Farms

Sheila Roy

Author: Sheila Roy

Date: Wed, 2016-09-21 13:36

What is a typical referral programme?

You buy a product. You love it. The company tells you to share your love for it with your friends in return for lots of discounts and happiness. You share your referral code with your network. They buy, you get more of the product with less and less. Makes a lot of sense and of course that is what we are used to.

So the Sarda Farms programme had me stumped.

I refer my friends to buy Sarda. They get 30 days of free milk. In my next bill, the price is up by 10 percent. I am confused.

I call them. I tell them that this is not how a referral programme works.

They tell me: Ma’am, our concept of referral is that you share your happiness and good things in your life. You share if you like us, not because you will benefit from it.

I am stumped and I think harder…and I realise that she is right. I shared because I love the milk, I love their bottle even more and I love their mobile app the best. It makes my life simple and convenient.

But how could Sarda farm fund 30 to 60 litres of free milk to each new customer (yes you can opt for 2  litres of free milk for 30 days). I could come up with only one possible justification.

The entire farm to fork supply chain of Sarda farms is owned by them. They breed a herd of 1,300 Holstein cows on the farm on the outskirts of Nashik. The whole process from milking the cows and packaging is automated. The milk is delivered to a consumer's home directly from the farm on motorcycles (yes Haryana style!), with no intermediaries. (Ref -   http://www.businesstoday.in/magazine/features/sarda-farms-does-not-aggre...)

Now cows being cows, need to be milked daily, no matter what the demand. Sarda farms has probably invested keeping in mind a certain demand. At present, it is only relying on word of mouth referral communication for increasing demand and hasn’t invested in any aggressive marketing campaign. So it’s quite possible and it probably has oversupply. And what better way to invest the excess production than to distribute it for free to potential customers. And maybe make some ghee.

They probably would not like to compromise on the profile of customers who buy their brand. And no communication campaign can compete with WOM on reach precision to a targeted audience. If I refer, I will only refer to friends who would appreciate its worth at the higher price.

So after much thought, while they have a referral programme completely at odds with the market practice,  there seems a lot of merit in it, especially since Shrirang Sarda, the owner, has chosen to get the system in place instead of mindlessly going on an expansion spree. All the best to them!

 

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Comments

Sarda farms has piqued my interest ever since I was referred by a close friend. I shared in your bewilderment as to how this small time farm was able to afford offering its customers a 30 day free trial with a limit of 2 liters per day! I was so intrigued that I actually visited the farm and met with Mr.Sarda. His philosophy is very simple, offer a high quality product at a bit of a premium and grow organically. His passion is farming and is very content with a slower growth rate with less capital expenditure rather than a high expenditure high return policy. As you have pointed out there are quite a few examples of companies employing successful referral programs. Companies such as Netflix and Uber offered similar trial and referral programs respectively when they launched in India. This marketing strategy made sense given that they were already established, profitable entities and were merely implementing best practices for their launch in India. Uber is the closest comparison in terms of marketing spends and referral programs to Sarda farms. Uber follows a strict no mass media marketing policy and has instead opted to strike key strategic alliances which have paid high dividends for the brand. It seems like we are witnessing a paradigm shift in how companies market their products. It would be interesting to see how companies implement this strategy in differentiated products.

Thanks Ma’am for sharing this story. I am amazed at the risk which Sarda Farms proprietor has taken. This indeed is a complement of what has been prevalent style of referrals in the present world adopted by companies like Hike and Uber, where they offered discounts and cashbacks to retain customers. One point that left me pondering was how milkmen tackle low demands versus the steady supply they have, with a constant number of cows or buffalos over time. Being in the Indian society, where we celebrate so many festivals, the demands for milk and milk products vary across the year. For instance, demands for milk increases during Shivratri, while sweets made from milk show an all-time increase in demand during festivals like Diwali and Raksha Bandhan. All of this leads to increased demand versus a steady source of supply. This situation arises in every city of India, and is an exact contradiction of what Sarda Farms is doing, distributing free milk up to 60 litres to account for oversupply. The situation gives rise to an opportunity for milkmen to get involved in fraudulent activities like, increasing milk supply by production of synthetic milk be it mixing it with water or milk made from powder. Hence, the increased demand of milk and its products is offset by increasing the supply of synthetic milk resulting in not only losing the holy spirit of festivals but also putting lives of many in danger. As per one article by Maneka Gandhi, “A minister of Maharashtra, while a random inspection saw people in organised rows in the filthy hutments taking out milk from branded packets and putting in white water from buckets”. According to Delhi Health department, up to 100,000 litres of synthetic milk along with 30 tonnes of Khoya is being manufactured every day in the city. Amidst all this fraudulent activity, it is important that we appreciate Sarda Farms whose business model is an inspiration to all these milkmen. The business model sticks to one rule of business – Good Product constantly meet its purchasers, without forceful advertising. Although it is a tough model to sustain, Sarda farm relies upon its innovation in end to end delivery without compromising in anyway on the quality of milk. Concentrating on the referral program, I see it as a confidence of Sarda Farms on its product’s premium quality. The distribution of free milk although gives incentive for the acquisition of new customers, it may not be required to the scale that is being provided, 60 litres of free milk for 30 days might help Sarda Farms deal with its oversupply, but it seems to me like adding extra sugar into the sweet. Sarda can work on producing other products of milk, which are long lasting, and decreasing its production in times of increased demand due to festive seasons. In a nutshell, Sarda Farms could have worked equally well even with launching a mild referral program of distributing say ,20 litres of free milk per month. Once again, thanks for the article, it was though-provoking.

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