You ever see that one kid in school who gives away his lunch just to be popular? That’s undercutting in business. At first, everyone loves him. But then he’s broke, starving, and watching the real players eat their lunch (literally and metaphorically).
Companies do this too. Jio did it, Amazon did it, Tesla kinda did it.
The strategy?
Charge so little that the competition either quits or starts questioning their life choices.
Sounds fun, right?
Well, let’s talk about whether this is a power move or a financial suicide note.
Step 1: The “Oh Damn” Moment
- Company A: We’re selling this at ₹100 and making decent profits.
- Company B: We’ll sell it at ₹50. Maybe even ₹0. Who cares?
- Customers: FREE STUFF?! TAKE MY LOVE!
- Competitors: This is fine.
At first, it’s fireworks. Customers rush in. Market share goes up. Investors throw money at the company like an overenthusiastic cricket fan at an India-Pakistan match.
The competitors?
Either adapt or start applying for LinkedIn premium hoping for a miracle.
Step 2: The “Wait a Minute” Realization
The company now has a massive user base. But there’s a problem: profits? Never heard of them. The math isn’t mathing. Suddenly, they realize that customers have developed an allergic reaction to paying.
Remember when Jio started charging for calls? People acted like they had been personally betrayed.
When Netflix raised prices, the internet staged a virtual riot. That’s what happens when a company teaches people that things should be cheap or free.
Moral of the story?
If you set the bar at “free,” good luck convincing people to pay later.
Step 3: The “How Do We Fix This?” Dilemma
Now, the company has two choices:
- Raise prices and pray customers stay. (Spoiler: many won’t.)
- Make money some other way. (Ads, premium plans, selling user data to a secret underground organization?)
The successful ones have a secret backup plan.
- Jio? Not just telecom. They built an entire empire—JioMart, JioCinema, JioCloud, probably even JioChai at some point.
- Amazon? Didn’t care about profits for YEARS because AWS (cloud services) was printing money in the background.
- Tesla? Sells carbon credits like a college student flipping sneakers.
The unsuccessful ones?
Well, they just become a tragic case study in a business school PowerPoint.
Step 4: The “Survival of the Fittest” Showdown
At some point, the dust settles. Weak competitors either:
✔ Merge (RIP Vodafone Idea).
✔ Pivot (Airtel started focusing on premium customers).
✔ Cry (self-explanatory).
Meanwhile, the company that played it right is now the final boss. They start increasing prices (Jio, Netflix, Amazon Prime—you see the pattern). If customers have become too attached to leave, boom—monopoly achieved.
But if they messed up?
Well, let’s just say a poorly executed undercut strategy makes a great “What NOT to do” business lesson.
Final Thoughts: Should You Undercut?
Undercutting is like taking a loan from the future. If you don’t have a plan to pay it back, the repo man (a.k.a. reality) will come knocking.
So if you’re gonna undercut, do it like a grandmaster, not a college dropout blowing his entire stipend on one grand party. Have a backup revenue stream, control the ecosystem, and for the love of business, don’t let customers believe your service should always be free.
Otherwise? Congratulations. You’ve just run a charity, not a company.
Disclaimer:
This essay is brought to you by Cold, Hard Business Truths™. Any resemblance to real companies is 100% intentional because they actually did this. If you’re an entrepreneur considering undercutting, please consult your future bankruptcy lawyer before proceeding.
No competitors were harmed in the making of this piece. Actually, wait—many were. They just didn’t survive long enough to complain.
If this essay made you rethink your pricing strategy, you’re welcome. If it made you angry, check your profit margins.
