Buy-now-pay-later advertisers bet on Instagram
Buy-now-pay-later (BNPL) services are joining contactless payments and curbside pickup on the list of retail trends accelerated by the COVID-19 economy.
Gen Z and millennial ecommerce behaviors fare well for BNPL and social commerce. According to Mintel research on eCommerce behaviors, of US internet users aged 18-43 who have shopped online for certain items in the last 12 months and use social media:
- 50% would use buy-now-pay-later options to buy expensive items online.
- Nearly 35% like purchasing items directly through social media sites.
The Klarna advantage
Klarna’s ability to obtain a broader view of customer spending gives it a competitive advantage. June 2020, Klarna reached a record 7.85 million US customers, driven by apparel, beauty and footwear retail partners.
Notably, Klarna’s shopping trends data revealed that, as US consumers began to receive their federal stimulus checks, Klarna-enabled purchases reached levels similar to the holiday shopping period.
The Instagram effect
Instagram is making shopping inherently more social and giving retailers more ways to connect and engage with shoppers. Instagram is the primary channel for the top spend BNPL advertisers. May-July 2020, Klarna and Afterpay allocated nearly 80% and nearly 70% of their digital ad spend to Instagram, respectively.
In Instagram ads, Klarna pushed app downloads and positioned its app as a social commerce hub. The Klarna App now has more than 1 m monthly active users in the US, and this year alone has outpaced all of its closest competitors with more than 1.7 million downloads.
The role of Instagram influencers
Influencers play an important part in social media marketing as vehicles for discovery and inspiration. Klarna and Afterpay have invested in influencer marketing to boost brand awareness on Instagram. Klarna’s influencer strategy included more high-reach influencers, while Afterpay took a targeted approach, prioritizing micro- and nano-influencers to maximize engagement.
Both brands invested in celebrity partnerships to maximize reach and build brand affinity. Celebrity partnerships featured Klarna partnering with beauty influencer and social media personality Bretman Rock, and Afterpay partnering with actress Sarah Hyland.
What we think
As consumers experience continued economic stress and consumer spending priorities shift, business models centered around protecting customers (and preventing them from becoming financially over-committed) resonate.
Klarna’s expanded investment in cross-channel media says it’s here to stay and eager to reach consumers top, mid and bottom of funnel. To remain top of mind, Afterpay will need to reevaluate its digital strategy as it works to deepen customer relationships and compete with Klarna’s digital ad budget.
As installment plan providers promote the brands they work with through their own payment apps, as well as advertising campaigns, they serve as marketing partners at a time when many businesses can benefit from increased reach and exposure.