Is Discounted Pricing only your arsenal?

It was my first major role change in the initial days of my career with telecom company (Fascel Limited, later Vodafone) where I was given the responsibilities for tariffing (pricing) in marketing. From that stint, I have explored and got deep understanding of the power of one of the P’s of marketing mix (which formed basics for any marketing course). 

In the new age digital business, pricing is used effectively and sometimes (very) loosely by companies. Growth hackers look to experiment with it (pricing) to mop up new subscribers. Seasoned marketers use it to retain and win loyalty. Dynamic pricing is used to push customer decisions.

Pricing is not a mere mathematical equation derived from cost plus profit equation. It should never be looked in isolation as it has lot of reference to the human psychology. As saying goes “you can't judge a book by its cover” but for products, large part of judgement is made from pricing only.

Let’s take a case of well-funded ePharmacy startups space as it has suddenly become hyperactive with above-the-line and below-the-line campaigns by players like Medlife, Netmeds, Pharmeasy and 1mg. The space is crowded one and has other marginal and regional players which vie for their share-of-pie.

But is discounted pricing the only tool available to attract?

Though the discounted pricing attracts the eye-ball share, the decision element hierarchy is three-layered as below as per me:

As expected by a marketer, a first-time customer gets attracted to discounted pricing leading to trial. Post-trial as customer experiences the product, she may still go for multiple (digital) brands and then based on her experience with them, the decision hierarchy may interchange between convenience and brand.

But what happens when your neighbourhood store or retail chain say Medplus offer you same discount (which actually happened as last week they unleashed the 20% off campaign across all stores)?

Convenience takes over the brand as the most important decision factor (discounted pricing) has been marginalized or vanished. The customer psychology research says, “familiarity drives attraction”. Despite building a digital brand, customer drift to offline may happen.

Google Bain Consulting and Omidyar Network study says 50 million online shoppers dropped out in India especially in tier-II and lower cities due to poor internet and lack of content in vernacular language. However, this also calls for case to understand the drop-in metros and urban areas. Was discounting only driver of business?

Pricing can be used as an ammunition to drive and mop up more uses, unless your conviction level puts a case where post the cool-off period of pricing war, you will be one of the survivors.

We have a classic case of Jio in telecom industry which mopped up huge customer base effectively with pricing. However, the growth for Jio is not only by driving trial but by constantly thriving to enhance the customer experience too.  But do remember people also use multiple telecom service providers, Is that the case in your industry too?

Learning: Use of discounted pricing strategy calls for understanding the business landscape of your industry and your business objective, driving-factors for customer and a strong retention plans to take the customer journey forward.  Based on your objective such as to clear inventory or drive trial, discounted pricing can be taken as short-term strategy or it can be used as long term too if you want your brand to be a price warrior. Choice is your…