Market Penetration For Startups – Through Discount Or Disruption!

While the growth in the number of startup businesses has opened the door for numerous opportunities; it has also summoned a massive competition in the market. Placing the brand in the eye of possible customers is vital to gain superiority over others in the market. For defining what exactly your company stands for, you need to take certain steps in order to gain trust and loyalty that measures the success of the brand.

While many think that branding and marketing can seem like an art, it is just pure science. It is important to observe your customers’ reactions towards your brand and how they describe their experience. Generating the value proposition of the product/brand in a market swarmed with contenders, is the key to existence, accomplishment and incremental growth.

Customer Value

Customer value used to be an artless and simple theory of how much the customers pay for a solution, equated to their incremental reduction in cost driven by one’s business. Nowadays, this simple model of customer value is complicated by the instant access to alternatives already present in the market, secondary social and atmospheric influences, and the rate of change facilitated by the prevalent market shift to digital.

Penetration pricing is a promotion strategy which is used to increase market stake by selling a brand new product at a price lower than its competitors. But the company gradually raises the price of that particular product after it has found its place in customer’s hearts and a place in the market. This could be executed using techniques, for example, competitive pricing, growth in advertising communications or using reward schemes such as loyalty offers/discounts.

While new tactics like Disruption consist of employing new methods to increase profits, improve sales and output, with the aim of staying pertinent and competitive in the longer run.

Customer Acquisition: Discount vs. Disruption

Customers don’t want to buy products that they are not familiar with, and with the market being heavily dependent on the consumer and brand loyal relationship, many tend to use market penetration techniques like discounts. One such example is Walmart, where they offer products at lower prices than other stores in order to gain the customer base, this way they also money in the name of discount offers and lower pricing.

They also penetrate the current market by competing with the present stores that are well established, as they have defeated them they tend to increase the prices gradually.

This technique is hugely popular as Penetration pricing, where a company introduces customers to a new product at a very good and steep discount rate where they often face loss; in the hope of creating brand loyalty and love for your brand and increased willingness to spend more in coming days. And at the end of a definite time period, the prices escalate. Most customers might continue to pay the remaining amount as well but some jump to a new brand offering a discount or lower price, this shows that discounts are not the only option to acquire customers in the longer term.

The retail business is facing unparalleled disruption as new technologies and challengers overturn recognized methods of doing the trade.  Puzzlingly, these drifts make it unfavorably significant to preserve and nurture loyal customers, but simultaneously they make it tougher to build robust and long-lasting customer relationships.

Startups Should Employ Disruptive Innovations

But nonetheless there is always a solution; here we use Disruptive innovations that can help in making things accessible. A disruptive corporation has one of two aims: design its product or the service that can match up to the demand of the developing market, or entirely re-shape a current product or service to meet the demand of unsatisfied consumers. Corporations take things that only a definite section of the populace could reach, and find a mode to dispense it to the masses.

The same notion helps in understanding disruptive marketing which uses the same knowledge, where it takes something that people used to do and takes a different approach. Nowadays, customers want to be a part of the exchange, they wish to have access that is provided by Disruptive marketing and connects them on a human level to the brand itself.

Going through some real-world examples suggest that disruptive marketing aids in the solid understanding of it all. Disruptive marketing gets society’s attention by being diverse and taking risks. It embraces ideas that are freestanding and out of the average that has shock value. It even sometimes has some shock value. That’s the aspect that forces people to stop and take a good look as it embraces innovation.

Disruptive Innovations: A Real World Example

We can take a good example of Apple iTunes and how they introduced a special feature of providing singles from albums when they were not available or needed by the people as a whole album. When singles were not available on compact discs, they introduced a pristine tactic, iTunes worked on the customers’ wish to purchase only one song by an artist, in addition to their desire to evade spending hours of music they weren’t intended to listen.

Venture capitalists have also learned many lessons the hard way, about the Indian startup ecosystem. They have begun to better comprehend the customer behavior and the mentality of an Indian customer.

They have found that they are not loyal to just one brand but are driven largely by cost and price marketing techniques such as discounts that cannot guarantee a loyal consumer whereas the investors have found ways around this problem and suggested solutions such as hyperlocal delivery, on-demand services or just the traditional e-commerce and have learned to disrupt the market rather than disrupting their own business.

About the Author: This article is contributed by Vikram Upadhyaya – Chief Mentor & Evangelist at GHV Accelerator.