To build an effective business strategy as a new entrant in the Nigerian market, most multinational companies have to be sensitive to the various pricing strategies in Nigeria. When introducing new products and services in the Nigerian market, every new entrant must take into account the behavior of the average consumer.
In a country where the average consumer is very price-sensitive and remittance of a multinational company’s revenue to its home office is at risk due to how Nigerian currency is oftentimes in a volatile state, using the right pricing strategies in Nigeria is a key determinant of your company’s success in the Nigerian market.
A few pricing strategies in Nigeria that will help your business accomplish its goals while navigating this emerging market are highlighted below.
Know What Your Consumers Value
While you should always thoroughly research a market before entering into it, when deciding on a pricing strategy while operating in the Nigerian market, your research should also incorporate detailed information about your target customer. More specifically, it is imperative that you become aware of what your target consumer base’s needs are and how your company can fulfill them.
Also, focusing on how local consumers perceive your brand and product is also a necessary component of getting to know what your target consumer’s values. Furthermore, it is important to highlight the fact that brand loyalty is extremely high in Nigeria, which makes identifying your competitors and studying their pricing strategies in Nigeria a must. It is clear that Nigerian consumers value a good deal, so pricing your products accordingly could prove to be a lucrative choice in the long run.
Adapt Your Pricing to Meet Clear, Strategic Goals
Before pricing your product, you should first evaluate your company’s competitive position in the Nigerian market, as well as your strategic business goals. The creation of your business goals should be done by first assessing the profitability of your product, how much it will cost to maintain the market share, and how any revenue received will translate once converted into your home country’s currency. While you may have to forgo one of the aforementioned factors during the process of constructing your goals, ensuring that at least two out of the three inform your strategic planning will put your company on the path to substantial growth in this emerging market.
Create a Cost-Management Strategy
The cost of conducting business in Nigeria can be high due to the various regulatory roadblocks and infrastructure issues that frequently arise. Therefore, creating a cost-management strategy for your business is a must. Doing so will allow you to figure out ways to manage your operational costs in an effort to provide products at a feasible price point for Nigerian consumers.
Pay Attention to Product and Market Segmentation
Another pricing strategy deals with identifying the different characteristics of the market and coming up with descriptions for each consumer segment in an attempt to market to them accordingly. This tactic will help you better identify the various consumer groups in the market so that you can effectively price your products as a result. Furthermore, offering products that encompass a varied price range will allow you to navigate around the income disparities present in your target consumer base with the intention of bolstering your sales revenue.
Incorporate Education into Your Marketing Strategy
Your marketing strategy should inform your pricing strategy and vice-versa. Since the average Nigerian consumer is very price-sensitive, it is important that when you market your product that you are also educating the consumer about the product’s value. This marketing approach will help you set a price that reflects the quality of your product, as more consumers will be aware of how investing in a high-quality item with a longer lifespan is a more cost-effective purchasing decision.
Work with Local Companies and Align Incentives
Products in the Nigerian market are often distributed via traditional channels, which means that the operation tends to be smaller in scale. With that said, as a multinational company, it is imperative that you tailor your pricing to the distribution channel at hand and ensure that both your manufacturer and distributor work together to determine an ideal price point. Also, you should be prepared to make necessary investments in local retailers to ensure that your product reaches the end-consumer.
Moreover, when it comes to settling on a pricing strategy, make sure you plan in accordance with your business goals and utilize pricing methods that will incentivize those goals. For example, if your business goal is to grow profit margins, look into setting a price that is towards the top end of what your customers are willing to pay and make sure your sales targets are based on revenue earned rather than the number of sales made.
Consider Staging Your Pricing
After doing sufficient due diligence to understand the competitive landscape, you may want to introduce your product into the Nigerian market using a staged pricing strategy. This strategy usually incorporates three stages: introductory, growth, and maturity. As a new entrant in the Nigerian market, you may want to introduce your product at a lower price, relative to your competitors, so that you can show its value immediately while reducing the barrier of product adoption by consumers.
As consumers become more familiar with your product’s quality and the value it provides, you can then steadily begin increasing the price to match its actual value. This strategy is used to quickly capture your target customer base and the initial market share. However, use caution when executing this strategy, as it can easily backfire if the market believes your product to be of low quality during the initial stage.
Executing effective pricing strategies in Nigeria involves a great deal of research and planning, as the views of multiple stakeholders must be taken into account and used to inform your overall pricing process. By doing your due diligence beforehand, you will be more likely to settle on a pricing strategy that fits your company’s needs, functions well in the Nigerian market, and ultimately furthers your business’s success.