Friday, November 22, 2013

Is it Always About the Price? The Intricacies of Nigerian Buyers

Nigeria, more than anywhere else that I have ever journeyed to, is a consumer’s paradise. Advertisements are, literally, everywhere. Goods and services are peddled from shops, but also from stands, sidewalk blankets, wheelbarrows, and from the omnipresent street hawker. Everything is negotiated, from the price for a certain quantity of goods to the quantity of goods for a certain price. What’s more, Nigerians spend high percentages of their income purely on image. Think Beverly Hills, Mayfair, or Palm Jumeirah. Except that the average Nigerian makes $3.25 a day. I have even encountered Nigerians who skip a meal a day for months to afford a new smartphone or to purchase that new, glitzy suit.

In Nigeria, everyone is trying to sell you something.
Like these Hollandia Yogurt girls in Ibadan.
It is not my intention to malign Nigerian spending habits. In fact, I believe it is a sign of a healthy economy when consumers choose to spend a large chunk of their money rather than engage in over-saving, which taken to its ultimate extreme can lead to a situation not unlike deflationary Japan in the 1990s. Indeed, SVTP has made most of its revenue from Nigerians who love to buy useful electronics gadgets such as our own. What I do find fascinating, however, is in spite of how much they love to spend their hard-earned and often scarce cash on products and services, Nigerians perennially complain about the price. And not just meek grumbles here and there. I’m talking about intense, twenty-minute symposiums on how the price of whatever good or service they want to buy is too high.

People all around the emerging world where incomes are lower do tend to haggle over prices. But I have found that this phenomenon is exacerbated in Nigeria. Partly because of cultural pressures to make as much money as possible in preparation for marriage and building a home back in the village.  Partly due to slightly higher consumer prices compared to their African neighbors. And partly due to a very high INCOME GAP between very rich and very poor Nigerians, resulting in the latter desiring to do everything possible to spread their money out and “live the life” like the posh Nigerians they aspire to be.
Livin' the good life in Osogbo, Osun State.

What this somewhat ironic “buy well, but price well” mentality means for a company like us is complex. Should we listen to people’s complaints about the price? Absolutely. At SVTP, we take pride in being a people-centric manufacturing company, and every iota of feedback is valuable to ensure that our products continually incorporate customers’ reaction into their redesigns. However, is every price complaint equal? Here, I would argue no. Even if we sold our entry-level, Basic C200 solar phone charger at N500 ($3.15), we would still have complaints about the price. Moreover, many Nigerians, both consumers and distributors, associate products that are relatively inexpensive and that have a big “negotiation margin” as “Chinco” products – a deprecating term that signifies very cheap, often Chinese-built, mass-produced consumer goods. Clearly, pushing the price down a lot, even if that was possible with our modest margins, isn’t the winning strategy for a company aiming to distinguish itself on quality AS WELL AS price.

The solution? Well, I’m no rocket scientist, but I have noticed that Nigerian consumers largely group merchandise into two categories: The first are Chinco products – products they expect to be of low quality, which will need to be replaced within a few months but which can be bought very cheaply (usually all three characteristics). The second, which is what we here at SVTP are aiming to manufacture, are the “sexy”, high-quality products. The real Blackberry Q10 that just came out. The real Beats by Dre headphones. The real Samsung air conditioners. The real LG washers. For these latter products, Nigerians will still bargain, at first. But most Nigerians who can afford them (more than outsiders would assume) plus a large number of Nigerians who on paper cannot afford them STILL will ultimately pay whatever price in order to get their hands on them.

Even in this low-income village in rural Jigawa State, residents quickly snapped up the few samples I had, demonstrating the type of demand that exists for our products.

Long story short: once we convince a critical mass of Nigerians that SVTP means quality, that SVTP means American-designed, that SVTP means long-lasting, people-centric manufacturing coupled with effective sales, marketing, and after-sales support for distributors, then, and only then, price won’t be a major issue for us. But until that day comes, you'll still see our sales representatives and distributors on the streets of Lagos, Kano, Port Harcourt, and beyond doing what they do best: showing consumers that no better product can meet their phone charging needs at an affordable price than those from SVTP!

SVTP Northeast Nigeria Sales Representative, Mohammed Abubakar, and two DJs doing what they do best at a promotion in Bauchi!

Sunday, November 17, 2013

Summer with SVTP

This week I caught up with Gagan Gupta, one of our seasonal team members. This past summer, Gagan spent a month in Ghana with SVTP before heading off to Stanford Law School. After completing his MSc in International Political Economy at The London School of Economics, Gagan wanted to work with SVTP because he “missed  the social mission.”  His experience working on social innovation policy in the Obama administration, as well as his coursework in supply chain logistics and international development, made him an ideal candidate for us

Gagan, Tunde, and Kevin
Gagan admits he had no real clue of what to expect, having never been to Africa. He spent ten days in Nigeria with our regional sales manager before setting off to Ghana to conduct market and consumer research—a somewhat overwhelming task, but that is often the nature of our work. His goal was to answer questions such as: “What kinds of products do our consumers really need,” and, “How can we meet those needs?”  Answering these questions required that Gagan play a few different roles in Ghana, including “market research, sales and product development.”

What does market research look like for a social enterprise working with the base of the pyramid (BoP) in Ghana? Gagan studied markets, ports, supply and distribution chains; researched competitors’ products; and talked to end users. He describes how he conceptualized his work in two ways: top down vs. bottom up. “Top down” approaches included liaising with larger companies, entrepreneurs, public sector entities, NGOs, and private sector firms to learn more about partnership opportunities and existing products. The “bottom up” approach involved  working with end users, distributors, and salespeople in places such as Makola and Kaneshie markets in Accra to learn more about sales potential, product development, and consumer needs. For SVTP, end users are usually found in rural areas where access to electricity is extremely limited or virtually nonexistent.

Like all companies, our goal is to put our products in the hands of consumers. This requires generating brand recognition: educating end users about SVTP’s products and their unique value.  Brand recognition takes extra footwork in the BoP market.  Our teams must hit the streets and market our products through strategically positioned display stands, campaigns, radio ads, market promotions, and word-of-mouth approaches.  Gagan candidly shared how “hard it was not knowing anyone and not knowing [his] way around.  Working in the marketplace is challenging, particularly amidst the heat, pollution, and the hustle and bustle.  But it’s also really exciting.”

Gagan and customer
Gagan identified this process as “one of the most difficult aspects of his work, yet also one of the most rewarding.” He notes that you can’t do business in a place like Ghana or Nigeria without understanding the subtleties of the markets’ social structures, which are often difficult for a foreigner to navigate. Also, market entry operates differently in West Africa than it does in the West where you have established distributors and retailers.Gagan also noted that many of his initial assumptions were challenged: he found West Africa to be a vibrant place where, stating: “I could literally feel the world changing around me.” He felt a distinct entrepreneurial energy and noted that West Africans called it a place where the world was moving.

Overall, he says that his work with SVTP was a “thrilling experience where the learning curve was absolutely vertical.” Gagan spoke candidly about the freedom of working with SVTP. He appreciated being able to understand the company’s vision and the accompanying autonomy to expand the business in ways that made sense to him. How has this experience shaped his thoughts on social enterprise? Gagan said his SVTP work was his “first true experience in this space,” and it reaffirmed his faith in social enterprise as the solution to many development issues. We look forward to being a part of that exciting and rewarding process! 

Tuesday, September 10, 2013

Perceptions, Profit, and Information Disconnect

Distribution networks in emerging economies are fraught with obstacles, foremost for small companies with new products. Getting your merchandise from manufacturing facility to home country seaport/airport to end consumer is difficult enough due to lack of economies of scale, misapplied tariff codes, corruption, and poor infrastructure. But the challenge is even further compounded by another, frequently overlooked factor: an information disconnect between those resellers at the top of the distribution pyramid and those small-purchase, often rural customers at the bottom.

A market in rural Jigawa State, near Dutse
Although West Africans always take pride in the “village” where they come from, more and more are settling in some of the fastest-growing urban agglomerations in the world – Lagos, Dakar, Abidjan, Douala, and others. The link to the usually rural village is gradually becoming severed, for better or worse. As SVTP’s West Africa Sales Manager for the past 11 months, I’ve frustratingly realized firsthand that many large vendors at the main big city wholesale markets are not as attuned with the struggles and needs of low-income consumers in rural and peri-urban areas, which are our main markets.

Onitsha, arguably the largest market in Africa, and
full of urban-minded wholesale vendors
Thus, large wholesalers at Alaba International Market in Lagos or Emeka Offor Plaza in Onitsha may “come from” villages and peri-urban areas in Osun State or the hinterlands of Imo State, but in reality spent little time there and might only visit every few years for a couple days, perhaps for a wedding or a funeral. As a result, their perception of what the average Nigerian consumer wants and needs is often skewed towards those Nigerian consumers they interact with on a daily basis in the big city. Electrification may be relatively high in Lagos and Blackberries may be all the rage in Onitsha, so the urban wholesaler may assume that the same goes throughout Nigeria.

What this means on the ground is that top-level distributors tend to stock devices that they themselves can attest to based on the needs of their environment. And while they refine their purchasing decisions based on orders and feedback from their lower-level reseller and retailer customers, they still are products of their environment, pun intended. And when the product itself is new, not yet very well known, and geared towards the rural and peri-urban consumer, a paradox of sorts emerges: The wholesaler is not convinced that there is a market for the product since he doesn’t require the product in his immediate surroundings and also because his rural retail shop customers aren’t demanding it. However, the retailers, who often come to the large market every week or so to buy goods, would indeed derive great utility from the product, yet don’t demand it from the wholesaler as they don’t realize the product exists.

SVTP Sales Representative, Tunde Akinboye, demonstrating a solar charger to a crowd in rural Ogun State

Therein lies one of our greatest yet also most fulfilling challenges here at SVTP: bridging the information disconnect. Our basic line of solar chargers  (model C200) are geared towards rural or peri-urban customers who spend most of their time using small/feature phones. Our job, then, is to convince the wholesale vendors at the top that not all consumers enjoy near-constant access to electricity, have Blackberries or smartphones, and are away from the sun all day like them.

Part of SVTP's marketing team at a promotion in Computer Village, Lagos
Luckily, SVTP is not tackling this empty-handed. We have quality designers and engineers always incorporating on-the-ground feedback into the next batch of production in order to increase the value proposition of our products. We have well-run marketing campaigns at our disposal to spread the word about our innovative products, both to the end customer as well as to the potential mid or top-level distributor. And we possess a strong sales team who deal with wholesalers, retailers, and end users alike. Together, the information disconnect becomes far less daunting, and we are able to increase our chances of getting useful products at the right price to customers who truly need them.

Friday, July 12, 2013

Thank you, Peace Corps

Ten years ago today, in 2003, I flew to Washington DC for Peace Corps training before heading on to the Gambia, West Africa. Peace Corps had a huge impact on my life, my conception of who I am, and what I want to do with my time on this Earth. In that spirit, I'd like to open this blog by explaining how Peace Corps influenced the first two stages of the SVTP product design process today.

Stage I: Consumer Research

My American parents and my Gambian host family, 2004
Peace Corps Volunteers in the Gambia often live in remote villages. I can't imagine any way I could have found myself living in a mud brick hut without running water or electricity, except through Peace Corps. By saying, "I'm here, this is my place, I want to be part of this community," PCVs can get an in-depth understanding of another world.

At SVTP, this kind of in-depth understanding is the first part of our overall design process. We have to understand the key challenges in the developing world if we want to come up with solutions to them. The right product for the USA may not be the right product for China or the right product for Kenya. Plus, each of those countries has millions of people with a variety of lifestyles and needs: some people in Tanzania use iPhones; some people in the USA struggle to make ends meet. Only by "following our customer home" and "walking a mile in his shoes" can we understand his life and have a chance at solving his problems.

Stage II: Product Development

One "ah-ha" moment for me came on a visit back to my original host family in West Africa, several years after my Peace Corps service. While I was a Peace Corps Volunteer, a friend and I came up with a cynical phrase we felt captured a local attitude that made progress difficult: "Why pay money for something halfway decent when you can get something crappy for free?" But the reality for people without much money is that they have to economize and judiciously allocate scarce resources -- and sometimes, there is just no money available.
A well is a really difficult way to get water.

But when I visited my host family in 2009, I found a new water pipe serving their village of a few hundred people. The women would carry a giant bucket to the water pipe and pay a small coin to fill up their bucket. Surprised, I asked, "Why would you pay money for water, when the well is free?"

My host mother answered:
(1) The pipe water is safer for babies.
(2) The pipe water tastes better.
(3) The well is a lot of work.

I think reason #3 may have been the most important -- it was a labor saving issue. The well, while free, was a huge amount of work. Two or three women together would exert incredible effort pulling a small bucket up from hundreds of feet below.
However, I think there's a fourth reason that is absolutely critical:
(4) The cost of the pipe water was low.

That was the "ah-ha" that disproved my old cynical idea, and replaced it with a new one:  If the price is right, progress is possible.

Let's consider what I believe was going on in that village. An influential family had gotten together with its neighbors to pay the fee to the national utility company to lay a pipe several kilometers out to this village. Somehow, some people agreed to put up the money to make this happen. As far as I know, this was not charity or foreign aid; it was the local people themselves who wanted water and cared enough to make it happen. And the price was right.

Carrying water, 2009.
Someone had to pay the water company bill every month. And whoever paid for kilometers of piping probably wanted his or her money back. So, someone sat at the pipe and collected coins. The key to making this all happen was that the cost of the pipe and the water company bill was low enough to make this possible. The coin for a bucket of water might have been equivalent to $0.05. It probably wouldn't have worked if that coin had to be $0.25.

However, "the price is right" also means that the price was high enough. It might not have worked if the price was $0.001, if that wasn't enough to pay for the pipe and to pay for the utility's water purification facilities.

This is where I see SVTP coming in. We have to balance the price our customers are willing to pay for a product against the benefit they can get from it.  To do this, we need both an in-depth understanding of our customers and an expert knowledge of technology, manufacturing, and distribution costs. If we can leverage a new technology, or come up with a better design, and if we can do it at an affordable price, then we can push forward development at the base of the pyramid and help our customers lead a better life.