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In this era of deep discounts, the big question is, how to be price-setters rather than price takers? You know the fair price of your product, but for it to have a fair chance in the market, it must survive the price wars.
If you are operating in a saturated market, pricing is often your competitors’ weapon of choice. This creates a seemingly formidable dilemma — match the competitor's price and risk losing profits, or ignore the competitor's price and risk losing revenues.
The desperate need to keep prices undisturbed in the face of rising costs prompted the FMCG sector to invent ‘shrinkflation’ — product downsizing. Basically, consumers pay the same, but for less. But then shrinking tins, fewer chips, and more air in your packaging do not often go unnoticed.
Although the strategy has worked to some extent for the FMCG sector, it cannot work for others. What if you are selling an electronic good — shaving off the edges surely won’t help. All you can do is try and reduce cost.
Clearly, winning in a price-sensitive market is no mean feat, especially when multiple players are fighting neck and neck for the same customers. That doesn’t mean pricing is any less trickier in niche markets.
No matter which pricing strategy you choose, whether it is a saturated or unsaturated market, your price will drive away some consumers — some sit on the fence while others sigh over affordability.
All these customers need is a slight nudge. Here’s where BNPL makes all the difference. It helps you cut through the noise, grow your customer base, and dampens negative market sentiments against high or increasing prices. In fact, it’s sneakier than ‘shrinkflation’ when it comes to concealing price rise.
Buy Now, Pay Later (BNPL) makes price tags an afterthought.
It’s not what you do to your product, it’s what you do to your customer
Businesses operating in a mature market often turn to value-based pricing — which is touted as a key success factor in competitive markets. However, value-based pricing is complex and can cost you extensive resources, time, and effort with no guarantee of returns.
If your product has lost its lustre, customers are unlikely to respond to marginal changes in value, even if your products have distinguishable features. Because customers are past caring. Therefore, the way to escape ‘commodity status’ is to quit adding value to the product and instead craft an irresistible buying experience.
Add the BNPL sheen
When you package BNPL into your offering, you’re also offering a one-tap checkout, instant microcredit with relaxed eligibility criteria — that too at zero cost for your customers.
BNPL eliminates friction during purchase, helping you stand out. When embedded credit can help you sell your products like hot cakes, why invest in micro and incremental innovation that’s likely to go unnoticed? Or for that matter invest in pumping-and-dumping your marketing messages that may not get through?
By enabling access to credit, you can create a whole new customer cohort
Businesses operating in niche markets can add an entirely new segment of customers to their base by simplifying credit.
Let’s say you attract a specialised population segment. But you see tremendous revenue potential in going beyond your current customer segment. What do you do?
For example, luxury brands attract a much larger section of potential consumers than they actually end up selling to. So, should they resort to making more affordable products to cater to different customer segments?
Launching a new product line is a rather arduous way of growing your revenue, especially when you can with your existing product line.
You simply have to find and target what can be called ‘aspirational consumers’. Aspirational consumers are those who crave the exclusivity and experience of your product, but are not sure whether they are there yet, to feel the pinch of the price tag. Providing these consumers a little help with affordability is all it takes to realise a whole new customer segment.
BNPL reduces moral tax
What BNPL essentially does is it reduces the price pain for these ‘aspirational consumers’. You take away the guilt they feel about having broken the rules of thrift.
This is the main reason why credit cards became so popular, until they became not so popular - the moral tax on consumption got blurred with credit cards only until the credit card bill hit these customers.
This is where BNPL shines. It disconnects the consumption transaction which is pleasant, from the payment transaction which is painful. And it doesn’t do it with the unpleasantness of a credit card bill. For one, prompt payments don’t cost you a bomb unlike in the case of credit cards. Two, the added benefit of an auto debit system (e-NACH) works wonders on the psyche. In fact, it’s quite insidious that way.
Hence, if growth hacks is what you are looking for — maybe it’s time to move focus from marketing to pricing. Especially pricing well and selling the affordability of the product through new-age credit instruments such as BNPL — instead of the price the tag carries.