Finding a viable key to outrun price wars
Guest Column: Neha Chauhan, Brand Strategy Partner, Arc. Worldwide, shares some great examples on how brands across categories have outrun the price war
In the battle to capture the customers, companies use a wide range of tactics to ward off competitors, ‘price slashes’ being the oldest & easiest weapon of choice. Creating low-price appeal is often the goal to suffice an immediate spike in product sale and increase cash in-flow, but the result of one retaliatory price slashing after another is often a precipitous decline in industry profits and brand’s perception.
An example from the Indian FMCG sector where HLL launched its ‘buy one get one free’ offer and extended it to its shampoo brands making the sachet prices drop to 50 paise and 1 Rs (Clinic Plus & Sunsilk) in order to undercut P&G’s Rejoice and Panteen. P&G retaliated by slashing prices to match HLL but this resulted in the drop of ‘premium’ imagery for both Panteen & Sunsilk. The price war also made the ‘pre ml cost’ of shampoo way cheaper when compared to bottles, resulting in purchase behavior switch at the retail where value conscious customers switched to buying strips of sachets instead of bottles. The price war resulted in loss of sale volume for both FMCG majors and landed the need to rectify pricing. Following this the sachet industry for shampoo also saw evolution where twin sachet packs of shampoo & conditioner were introduced for premium brands like Sunsilk, H&S Panteen & Dove to regain lost imagery.
Apropos above, capturing the customer’s attention is critical but is ‘price war’ the only answer given the risk faced by profits and brand perception? Brands are now constantly looking for ways out of the price war by trying different marketing strategies that go beyond offers, discounts or grammage change. Here are some examples on how brands across categories have outrun the price war and engaged with customers across socio-economic classifications.
When Jio launched its services with free voice and data in Sep 2016, it caused a price war like never before among competitors and directly challenged industry giants, Vodafone and Airtel. With this entrance, Jio managed to onboard 100 million subscribers in less than a year and took over 10% of the market share. The price war though a successful entry tactics couldn’t be sustained and there was an urgent need for Jio to innovate for continuing to be relevant and retaining their new position in the market as a paid service. The brand acknowledged the role of telco companies in the lives of the mass consumer as ‘gateway to the world’ and chose to delight the customers addressing this opportunity. Staying true to its appeal Jio created a whole ecosystem that had something to offer for everyone, the idea was to make Jio ‘a way of life’. The Jio ecosystem today hosts apps, chat, e-wallets, news, OTT collaborations (national & vernacular) and more that was appreciated and adopted by subscribers across the nation. Jio today aims at on boarding 1.2 billion subscribers leveraging its consumer delight ecosystem.
Another brand in the telco sector that escaped the prevalent price war and managed to retain its HNI customer base in telco category is ‘Vodafone’. The HNI business that contributes to more than 30% of Vodafone revenue and 10X ARPU is also facing intense competition, making it critical for the brand to engage with this niche customer base.
This evolved segment of customers is skeptical of brand advertising; however, they believe in customer relationship more than in customer service. To strengthen customer relationship with HNIs Vodafone presented them with a unique, personalized experience: A framed copy of the front page of the newspaper (TOI) on their date of birth. Vodafone managed to overly delight about 1100 HNI customers in Maharashtra and Goa which led to its Net Promoter Score (NPS) among the HNI customers increasing by 300 basis points post this activity. The activity was later scaled across states.
FMCG as an industry is extremely volatile, and the constant price war has pushed manufactures to find ways to satisfy if not exceed customer expectations in order to retain & acquire new customer base. For instance, the ORAL CARE category: price slashes, grammage change, bundle offers, freebies etc. are the common tactics that the category giants have practiced for a while to win over one another. But with the incoming of local players like Anchor, Aquafresh and Vicco the category leaders like HLL and Colgate are forced to innovate in order to be relevant for the mass TG at a fiercely competitive price. In an attempt to win over the mass rural consumer group, Colgate decided to attract customers by putting forth its “expert on oral health” claim and addressing an urgent need. ‘Pocket Dentist’, a program especially curated for rural India, a region with limited or negligible access to dentists. The program appreciated the tech comfort of the TG and took form of a mobile ring-back service providing dental care information using Voice Recognition Technology (supported 30 vernacular languages). The program also facilitated telephonic consultations with dentists; successfully positioning itself as a brand backed by ‘Experts’. Over six million people received individualized professional dental advice and the brand saw spike in sales in the activated regions. Under the same premise of ‘Expert on Oral Health’ the brand activated general trade in the urban markets with ‘Ask the Dentist’ program, the brand took over touchpoints within the retail that had direct association with need of the product – ‘Candy Jars’ and placed messaging with Colgate as ‘expert oral health partner’ for enjoying the treats. This strategic messaging not only helped claim dentist recommendations, but also aided the customer ‘mom’ with complete oral care support, in order to demonstrate true expertise through a toll-free service of ‘Ask the Dentist’. The service answered the most common answers that moms have on dental care. The activity was well appreciated and saw thousands of moms call in for expert advice while triggering sales at the store.
Price war at its ugliest is witnessed in the Indian Aviation industry. The past years have seen continuous price slashes of base air fares by all airlines in order to either bring in quick cash flow, avoid loans, book vacant seats or get more customers during peak season. This prolonged price war has made many players in the category shut-shop due to inability to run operation at reduced or negative revenue. To combat this always on war, IndiGo Airlines wanted to make their brand more appealing and decided to incentivize their customers like never before by launching the country’s first Rewards Program for aviation, IndiGo 6E Rewards. The 6E Rewards Program is not a frequent flier program, but is a paid rewards program connected to a co-branded card Indigo Ka-Ching credit card (HDFC Bank & Mastercard) wherein members can accrue 6E Rewards by using their co-branded card on IndiGo and other merchants (shopping, grocery, entertainments) and redeem the 6E Rewards for benefits which include IndiGo discounted tickets, priority check-in, choice of seat, quick baggage claim, free meal, airport facilities etc. The rewards program was launched in Feb 2020 and celebrating their first milestone the program brought in newer collaboration with hotels, multiplexes and premium retail brands to further add to the customer delight.
Arc’s Perspective: The brands covered in this article have proven that ‘price war’ is not the only strategy to win over competition and influence customers across categories. Brands have realized the constant need to innovate in order to be present, relevant & viable for their customer groups in order to ward off price wars.
Way Forward: One such strategy that has seen effectiveness across categories & consumer groups in creating brand love and preference is ‘Consumer Delight’. In today's competitive business world, delighting your customers rather than simply satisfying them has become critical as this can assure more loyal customers who further become brand advocates and promoters. Consumer Delight can stem from any aspect of a customer’s life, it can be need, aspiration, personalization, occasions, celebrations, engagement, entertainment etc. It is recommended to follow a calendar of sorts to map the customer’s year and ensure always being on their mind with the right topical engagement/solution. The mass TG has evolved rapidly and today holds a sizable digital footprint on social media and other platforms, this shows merit in integrating digital engagements or providing digital solutions to delight our mass customer.
Disclaimer: The views expressed here are solely those of the author and do not in any way represent the views of exchange4media.com
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