Stop Discounting, start Premiumising

An intuitive but ill-advised action of many businesses in the Covid crisis is to offer illogical discounts, jeopardising the balance sheets even farther. While the real barrier for consumption is usually safety perceptions or access blockages and neither are being addressed sufficiently. We are truly in the era of Marketing Hysteria where actions are being taken without the credence of reason.

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If the 80-20 rule defined our customer focus during normalcy, the 70-30 rule must guide customer strategy during the pandemic. Which is the significant realisation that 70% of all urban customers are grossly unaffected in real wallet terms and this is a statistical truth. They may be worried and insecure but in hard analysis, their actual disposable incomes have been unaffected due to great prudence or sheer good luck in terms of employer selection. So to offer this fellow a discount is a truthful fallacy and one that really works for nobody. It further dishevels the businesses and does not demolish the entry barriers for what must be called re-entry. Instead, what we need is premiumisation in terms of experience creation where price is just one variable and not the overwhelming influencer.

A classic case is the hospitality industry, which is offering medieval age tariffs to lure the customers and deal hunters know that now is the best time to indulge. But then, the target audience does not consider the price to be the reason for not visiting as the overwhelming issue is the fear of Covid. Quite similar is the case of restaurants and at least in this case, the cloud kitchen model is a fine example of customisation beyond the established norm. But the luxury outlets in malls and the High Street bely this norm as they are demolishing their profit margins and indeed bonuses for the customer who frankly has no issue in paying up for the Ferragamo. Even luxury automobile makers are not immune to this trait as the world seems to inexplicably believe, following western ideas that the solution lies in self-sacrifice.

Now here’s my suggested formula for every business talking to the 70% as a key source of business. Let’s approach marketing from a premiumisation mindset and not a discounting defensiveness. But premiumisation from a holistic experience perspective and not just pricing, where status quo may well be the order of the day. A fine example is the Oyo alliance with Unilever where the hygiene of every room is guaranteed by the most significant corporation in its space and I sincerely hope that they maintained their ARR. It does not quite guarantee the chance of Covid but at the very least, it offers a credible higher order assurance. Now if a KFC or McDonald’s followed the same pattern in collaborating publicly with Harpic, Colin and Pril, then the price of the burger does not need to be reduced. When Bigbasket delivery boys are certified by a Max Hospitals daily testing regime and the beauty parlour employees follow a similar daily hygiene certification, the 70% will throng as per prior habit.

The key customer insight for this period is the assurance of continuity, where life is just one of the many variables. It is an enormous business opportunity for healthcare providers to adopt a daily assurance protocol and this certification can help earn a premium for self and the client. For the legions of urbanites who have said no to stepping out, the delivery of goods and services at home is becoming a lifesaver and every brand who has a stake in it must contribute to the value addition. A sanitised Uber, a packaging technology that demolishes the virus, PPE kits that are fool proof and eventually a value added hygiene protocol that genuinely deserves a premium. Perhaps Michelin can add an additional star for this dimension only for 2020, for establishments that are committed to building and delivering genuine premiums, for themselves and most importantly the employees they serve.

While I have taken the reference of only a few industries, the message is applicable for a whole host of industries. Get out of the denominator mindset, also known as discounting, and instead focus on creating clear markers of value addition, better known as premiumisation. Which is to retain profitable price points with courage and integrity while trying to address the core customer pain points with defensible fortitude. A world-class hygiene protocol with relentless adherence to quality, exceptional service endeavours, customer appreciation measures, innovative ensembles and so much more. While constantly bettering the core product or service to surpass its prevailing standards while viewing the pandemic to be a passing storm and not a persistent prevention.

The coronavirus crisis is indeed a formidable test of character for every citizen of the universe and not just the business owner. What we direly need is the effortless convergence of ambitions and that is exactly where premiumisation and not discounting can be a formidable ally.

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