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!