In the last article, the issue of pricing as a factor that can cause the failure of a product was reviewed. The case of Econet (now Airtel), MTN and Glo was used to illustrate how products need to respond to changing dynamics in the microenvironment for them to remain relevant. Pricing a product without consideration of environmental factors can lead to the failure of the product. Today, the issue of pricing is still going to be the point of discussion, but this time from a customer perspective. Entering the market at a price that is simply beyond the reach of the consumers can destroy a product.
This may sound like an obvious mistake. In practice, it is a surprisingly easy one to make. The organisation builds the business case for the product on a cost structure that may have been appropriate but is not appropriate for the destination market. It adds a margin target that reflects the organisation’s return on investment expectations. It models a price that makes commercial sense internally. It launches the product at that price without adequately testing whether the consumer in the target market has the capacity or the inclination to pay it.
Affordability of a product by a consumer may be due to several factors, one of which could be the reduction in purchasing power. There was a market shake in the cola industry in Nigeria between 2015 and 2019. Prior to this period, the cola industry in Nigeria was dominated by Coca-Cola and Pepsi. In 2015, there was the introduction of Big Cola, which has a Peruvian parent company. They introduced 60 cl of cola drink at 90 NGN. The market players, Coke and Pepsi, were being sold at 100 NGN for 50 cl. That was a penetration price by Big Cola. However, this was coming at a time Nigeria was experiencing an economic crisis, and the purchasing power of the consumers had declined.
