Illustrative image: In a cash-strapped economy, brands and businesses whose profit margins are being squeezed are having to resort to alternative marketing and pricing strategies. But, according to The Future: More than 80 Key Trends for South Africa, businesses might face a backlash from consumers, who are becoming more savvy. 
Algorithms are now integral to retail, specifically as e-commerce evolves and social commerce rises, but online shopping has always been more intentional than serendipitous. New platforms, together with artificial intelligence (AI), are changing that and recreating impulse buying on digital platforms.
We’ve all had the creepy experience of speaking about a product and then seeing advertising for that product appear almost instantly on social media. Well, virtual product placement (VPP) and dark advertising are now set to enhance that creepiness.
VPP allows brands to insert a product placement in post-production and not only customise the offering to specific audiences at specific times, but also enable the advertiser to monetise the content multiple times.
Dark advertising allows companies to generate ads visible only to their targeted audience, rather than a broader public. The adverts are also transient, so even a targeted customer who clicks on the ad will not see the same advert on the business’s account page. It is both stealthy and very effective.
Hide-and-seek pricing
In a cash-strapped economy, it isn’t only consumers who are struggling. Brands and businesses are also finding their profit margins being squeezed.
During the latter part of 2022, Shoprite and Pick n Pay spent a combined total of R906-million on diesel for generators at stores just to combat load shedding. To make up for this, one of the retail strategies that is being employed is to push some of these costs on to consumers.
“Shrinkflation” refers to brands maintaining the prices, but subtly making the item smaller or the quantity less. “Drip pricing” is when the advertised price does not include all the taxes and various handling fees, which are added in later.
Hotels and airlines are increasingly resorting to adding “junk fees” – unexpected charges that are not included in the initial or listed price. Some US airlines are, for instance, charging extra for family members to sit together. By the time you finalise your airline booking, you discover that it is nowhere near the low advertised price that caught your eye in the first place.
Other businesses are opting for “surge pricing”, where the price fluctuates based on demand. Also known as dynamic pricing, the concept has been around for ages in the airline and hotel industry, and consumers have grown accustomed to it in these sectors. The practice, however, seems to be spreading to other more essential goods, like food items.
A British pub, Coach House, in central London, announced that it would charge pubgoers 20p extra for a pint of beer on busy evenings and weekends. This announcement made news headlines and angered regulars.
A new retail strategy to save costs is “shrimpflation”, whereby businesses cut back on the quality and availability of their services while keeping prices steady. Examples of this include fewer workers to assist in stores, eliminating services or swapping high-quality ingredients for lower-quality ones.
Many of these retail strategies have tended to fall under the radar, but financially constrained consumers are becoming increasingly aware of what they are getting for what they are spending. These strategies, therefore, run the risk of alienating customers and losing market share. For example, in 2016 when Toblerone changed the shape of its iconic bar, making the gaps between the triangles wider, there was outrage from the public. The strategy continued until 2018 when the company finally capitulated and returned the bar to its original shape, but made it larger and raised the price.
Another example of a customer pushing back is when British rock band The Cure forced Ticketmaster to refund fans a portion of unnecessarily high fees after outraged fans took to social media.
It’s key that businesses ensure they are upfront about all their fees. In the case of junk fees, businesses need to make sure that those incidental costs are either prominently displayed or not hidden in their marketing material. If the extra costs are significant, consumers will feel duped and may abandon the sale and, even worse, never return.
For surge pricing, businesses should emphasise that prices are high during peak times and low during off-peak periods, allowing a choice to those who can’t afford the peak prices.
Transparency and clear communication are essential for building and sustaining a strong relationship with customers.
“The question is making sure there’s no secondary effect, like people getting pissed off and not understanding [the pricing method]. The devil is in how it’s communicated because you’re trying to get this customer to come back tomorrow,” says Marco Bertini, professor of marketing at Esade business school in Barcelona.
Pay-to-play social media
In recent years, Snapchat, YouTube and Discord have all introduced a system whereby users pay for special perks, and now Facebook, Instagram and X want users to sign up for subscriptions.
Meta started testing Meta Verified, a verification service for Facebook and Instagram, in Australia and New Zealand in February 2023 before commencing with a global roll-out that will offer paying users more security and visibility.
These social media companies are taking the route of user fees because they can no longer rely solely on advertising. The advertising market has weakened, and increased privacy restrictions make it more and more difficult to target users with specific ads. Also, the increased threat of regulation has made it harder for these apps to sell advertising.
In short, they need to find new ways to make money.
Meta verification could provide various benefits to businesses, including improved visibility, protection against impersonation, dedicated customer service support and access to additional features.
However, the system also comes with disadvantages. The line between advertising and organic content tends to be blurred, with many users already complaining that Instagram, for example, is overly commercialised. The system could thus jeopardise the standing of apps among users who don’t want to see more promoted content. It may also alienate users who don’t want to pay.
Businesses who rely on Facebook and Instagram advertising would be advised to opt in for this paid system, and will gain greater exposure than when it was entirely free.
Businesses who are not using Facebook or Instagram should consider it as a strategic tool now that paying for it will gain them greater visibility over businesses that are not paying.
The disadvantages mentioned above should, of course, also be weighed up. DM
The Future: More than 80 Key Trends for South Africa by Dion Chang, Bronwyn Williams and Faeeza Khan is published by NB Publishers and costs R300.
This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.
You may write a letter to the DM168 editor at heather@dailymaverick.co.za sharing your views on this story. Letters will be curated, edited and considered for publication in our weekly newspaper on our readers’ views page.
