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Posted by Creativity Marketing Centre @Creativitymktg at 8:21 - 0 Comments

What is the Secret of Building Brands in a Developing Market?

Apple got it wrong, Samsung got it right.

Feyi Olubodun, General Manager and COO of Insight Communications & International Associate of the Creativity Marketing Centre was invited to speak at ESCP Europe's London Campus. He shared his experience in the Nigerian market with participants from the MSc in Marketing & Creativity (MMK) and Executive Master in Marketing and Creativity (EMMK) programmes.

Feyi Olubodum said "Nigeria is currently recognised as the largest economy in Africa, larger than South Africa".

We have seen so many clients that have tried to come into the market without succeeding and then they pull out. Over the years I have discovered that this real secret is being able to arrive at the confluence of commerce, culture and the consumer.

Commerce

In terms of commerce, I am referring to understanding the market structures that you are going into. Is it a monopoly? Is it an oligopoly? Or is it a market that is perfectly competitive?

Feyi O.The Nigerian Beer Market

Today the beer market in Nigeria is not a perfectly competitive market. It is a market that is an oligopoly, which means that we have a few players that have very strong market power and control the market.

The spectrum of brands available to appeal to the palate of consumers is not broad. If you have that kind of market from a commercial point of view and you want to take a beer branding into that market, you have to worry about the structure.

In a structure like that collusion is possible. If you have two to three strong players controlling any market they can decide and change pricing as they will. They can raise entry barriers very significantly and make it difficult for anybody else to enter into that market. If you had this kind of market, how do you break into it? You break into the market typically by influencing government policies, because whenever you see such a market anywhere in the world, it is typically because there is some government policy involved that is allowing that structure to exist.

If you are going to a similar market you need to find a way to get government to create policies that would diffuse the power within that market.

FeyiThe flip side: How to control the market

If a country is not suitable to develop in terms of their economic policies, you can actually control the market. A good example is MTN Group which is the No. 1 telecommunications provider in Nigeria. When they looked at the Nigerian market nobody wanted to go there as it seemed like the price of mobile phones was too high for Nigerians to afford. It's a mistake that a lot of people regretted since then, because they missed a fundamental cultural insight:Nigerians talk a lot.

MTN paid such a high licensing fee to the government that one of the things they got the government to do was to introduce a policy that made it very difficult for any other player to come in, and within their first year they made back all the investment. As a result, the total profit after tax made by MTN was more than the entire profit after tax made by all the banks in Nigeria put together. Simply because Nigerians talk a lot! So understanding that structure and what is going on there is very important.

Culture

The second key thing that you need to understand is "culture". There are several cultural nuances and many experienced marketers ignore this. Being aware of these cultural nuances and how these influence buying behaviour is very important.

Audi in China

Audi tried to launch their sedan cars in China, which was a total failure and they had to pull out.

They did some research to understand why they failed. The answer is very simple - the Geert Hofstede cultural dimensions show that one of the things typically characteristic of emerging markets is that there is huge power distance which is very important.

In China, the owners of the luxury cars felt insulted because the distance between them and their drivers was too short and that is why they didn't buy the Audi.

Audi figured it out and changed their models, so the Audi Sedans in China are longer. So there is a bigger distance between someone sitting at the back and the driver. Immediately their sales went through the roof because of this very basic insight.

It is important to understand such insights, and to look at them from an agnostic point of view.

If you go into a developing market, the question is how consumers relate with each other. In a culture where there is a lot hierarchy, your position within the society is a very key component of your personal identity.  This means that your consumption behaviour and consumption habits will be influenced by the role that society has allocated to you.

The African Consumers

It is very important to look at the consumer through the right lenses. Quantitative data just gives you the best snapshots. You have to look at other things, quantitative data is useful but you do not get everything.

The birth position is very relevant in Nigeria and determines how you relate with other people. If you are the first born in the family that role defines the rest of your life. The same can be said if you are the middle or the last child.

Most handset manufacturers will see that phones below USD$100 will be for consumers in the lower classes, phones between USD$150 to USD$200 will be for the middle class and phones of USD$300 and above will be for the upper class. In Nigeria is totally different- phones priced at USD$300 and above are used by the lower class and those who have the income use handsets of about USD$200. What is going on here?

Apple got it wrong, Samsung got it right

For many years Apple overlooked the Nigerian market because the quantitative data said that 70% of the population is in the lower class, which means they cannot afford to buy an iPhone.

Samsung took a different approach, they figured out that in the African society if you are the first born it is expected that you will continually maintain the life style of relatives.

If you are the wealthiest family member, you must be benevolent to the others; there should not be much of a gap between your life styles. For example, the youngest born in the family will have different sources of incomes. If he wants to buy a phone, he will first go to his parents who can only afford $100, which he takes. He goes to his brother who can give him USD$150, so he now has USD$250. He then goes to the uncle who gives him USD$100, so he has got USD$350 now. His auntie gives him USD$200 more. He can now afford to buy an iPhone.

The wealthiest member in the family has many others connected to his income; he has one source of inflow and multiple sources of outflow. Thus he is careful with his money and does not buy a phone that is worth more than USD$200.

Apple missed the cultural nuances and Samsung got it right. They found young consumers with scarce resources buying the Samsung Galaxy phones and the others with higher incomes were buying the Samsung Grand Duo phones, which is a cheaper option. Eventually Apple figured it out and now there is an Apple store in Nigeria.

If you would like to uncover more case studies and key insights shared by distinguished guest Feyi Olubodun, the full presentation and its highlights will be available online soon.

Feyi is also a Guest Lecturer at ESCP Europe Business School in London, he is a valued contributor to our postgraduate Executive Master in Marketing and Creativity and MSc in Marketing and Creativity.

Related Videos

The Do's and Don't's of Cross Cultural Marketing

The African Consumer

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