challenges of marketing in nigeria

June 16, 2004 Olu Akanmu

Democracy, Deregulation, Digitalization and the New

Challenges of Marketing in Nigeria

Olu Akanmu

[email protected]

June 2004

June 16, 2004 Olu Akanmu Brand Wagon Lecture

What this presentation is about?

• That the combined forces of the 3Ds of Democracy, Deregulation and Digitalization is fundamentally changing structure of many industries with potential seismic effects in some…

• The nature and practice of marketing will need to adapt fundamentally to the changes


Democracy

• Five years of democracy and political stability has led to increased “Business Confidence”

• Foreign Direct Investment has increased significantly– Telecoms…MTN, Glo, MTEL– Nigeria Breweries, Guinness, Nestle– Significant national stashed-away capital is returning

through private investments (BFIG/ ALSCON)• Increased local savings (middle to top) ploughed

into investments (capital markets, right issues etc)


Democracy and Business Confidence

• Economy grew by more than 10% last year, fantastic…– A more structured approach to managing the economy

• The middle class is growing again.. With increased purchasing power– Dipstic index of economic prosperity.

• The number of new cars on the road is increasing

• Nigeria has become an attractive destination for investments



• Entry of new firms competing in old and new categories.– Many forms..

• Full entry, licensing agreements, agency

• Some firms that divested in the days of military rule are returning– Guinness divested and later taken full control by reinvestment

• Intra-category and inter-category competition is on the increase

• Nigeria no longer the place where any kind of marketing goes, new and higher standards are expected by the European HQ of multinational firms



• New investments in human capital in critical business areas like marketing

• Marketing professional standards fell in the days of military rule

• A far higher level of international exposure for marketing talents

• Change of guards to younger marketing leadership (returnees and expatriates) who could bring world-classness to marketing practice


Deregulation

• Fundamental changes in industry structure– Telecoms, Energy, Financial Services,

• Fall of monopoly power with attendant market inefficiencies

• The rise of Customer Power in old regulated industries

• An even new phenomenon of organized customer power.. (Consumerism)– GSM boycott of 2003


Deregulation and Effects on Industry Structure

COMPETITIVE RIVALRYNew Players coming in,

Protected niches are openedLow to High

Power of Substitutes

Potential for New EntrantsLow to High

•Regulatory barriers are crumbling•Market efficient pricing attracting new entrepreneurial players•Converged industries (insurance, banking, universal banking)

.

Bargaining PowerOf CustomersLow to High(More customer choices)-

Power of Suppliers


Digitalization( technology) • Digital technology most profound effects will be

in the convergence of industries and categories– Telecommunications, financial services (payment

systems), entertainment• Emergence of network industries requiring co-

operation of many players to deliver service• Leap-froging of new entrants over incumbents

with legacy systems • Digital technology enabled database marketing

and Customer Relationship Program


Technology and Effects on Industry Structure

COMPETITIVE RIVALRYNew Players coming in,

Protected niches are openedLow to High

Power of Substitutes

Potential for New EntrantsLow to High

.

Bargaining PowerOf CustomersLow to High(More customer choices)-

Power of Suppliers

Low to HighConvergence (VoIP), technology leap-froging

,


So what do all these mean?

• An unleashing of competition on a massive new scale without precedent–What are the implications for

strategy and marketing?


Strategic Positions are virtually inexistent in old protected industries? Few players competing largely on

price, all serving the same type of customers?

Broad Focus

Low Cost

Differentiation

Union Bank,Standard Bank,Coop, Wema(in the 70s)


Where do you play? How are you different in your play-group?What is your strategic position?

Broad Focus

Low Cost

Differentiation

IBTCBank L, k, JZenith, GTB

X, Y, Z,

Wema, P, Q, R, S

Bad location

?


The new Competition and the need for a Strategic Position

• Clear Business Strategic Positioning is critical to avoid the commoditization tendency under new industry structure

• How can you differentiate your business from incumbents with large assets who are likely to play a pricing game?

• What organizational assets must you build to support the strategic position that you desire?

• What trade-offs must you make to support your strategic position?


Strategic Marketing-Segmentation, Targeting and Positioning

• Which segments are attractive? That we could serve better than anyone?

• Which portfolio of services/ products shall we deploy based on the segment needs and drivers?

• How shall we position ourselves in the market to stake a credible claim that we could serve our segments of choice better than anyone?


Strategic Marketing-Segmentation, Targeting and Positioning

• How should the market position drive our internal capabilities-build and resource configurations?

• Which segments shall we not serve (or serve well) so as not to dilute our desired market position?


Is the rise of customer power a threat to business?

• GSM boycott and the new ascendancy of customer power

• Only a threat to businesses that are not customer-centric

• Real opportunity to tap into the “rising customer power” phenomenon to build a differentiating market position of “Customer Championship” in many industries

• The Customer Champion position is arguably the strongest in a competitive market ..– Not what you say but what you do in defining moments


Technology and the emergence of network industries

• Several players are needed to co-operate to bring a service to live

• Value is enhanced by the cooperation of many players allied to a system

• Emergence of ATMs…in financial services– The more places I can use my ATM card, the better the

value– Hence banks must cooperate with each other to allow

inter-connect and use of different ATM brands– Yet they must also compete with each other for market

share



• Inter-connection implies the need for agreement on “standards” in operating systems

• Yet “standards” can be tough, as it could be difficult to get everyone to agree on a common standard due to – Self interest– Legacy systems



• Traditional marketing strategy of “competition”in the context of network industries can be limiting

• Cooperation strategies are as critical • (Co-opetition)

– The skill of organizing a network of co-operation may become real competitive edge

– Yet we must also learn to compete with our cooperators– Network effects shall become more prominent in many

industries in the future


Other non traditional marketing strategies in network industries

• The network is a valuable as its size..hence build size advantages and grow fast (telecoms)– Strong economic advantage..keep the money within

your system• Switching costs and lock in…• It is not enough for a competitor to say I am better,

(traditional marketing),– I must develop strategies that will reduce the switching

cost for my target customers– Compatibility with legacy systems


Customer Relationship Management program..beyond the generic

• CRM shall be popular..shall become fashionable..pushed by hard selling IT consultants

• When everyone does it, where will be your edge?– CRM is not strategy but a tool of strategy– Without a clear business (differentiation)strategy to which

a customer management program is aligned, CRM is only a “fashion”

• Learning from the airline industries….Integrate CRM into an overall business differentiation strategy

– Unique organization culture aligned to serve the customer in unique and better ways will be far more critical than generic CRM technologies


Managing inter-category competition

• Soft drinks, beer and recharge cards…. (share of pocket analysis)

• Brands must build strong emotional positions that are bigger than their rational category.. (friendship, love etc)– How could soft drinks be greater than

refreshments? And beer bigger than “highness”– Could help to build resilience against

competition from other categories


Managing Inter-Category Competition (Media Clutter)

• Media space and supply have not increased in the same proportion with demand

• Telecoms have taken over from Soft drinks in leadership of category share of voice

• It takes more than the ordinary for brand messages to cut through huge media clutter

• Media inflation is accelerating as result of the economics of supply and demand

• Compliance level is falling..most ads on drive time are not run on the scheduled belt


Inter-category competition (media clutter)

• Share of voice in category must be measured with share of category/ total media spend

• Breaking through clutter requires a return to the basics– What is in it for me as consumer that I cannot get

somewhere else?• USP/ ESP and Relevant Consumer Insight

– Environmental friendly bank????? (good insight?)• Creative execution that brings the Ad Idea to live• Simplicity is the hallmark of great creativity


Inter-category competition (Media Clutter)

• A more excellent media planning– Not just about buying cheap but buying right– Scientific media planning based on audience

research using audience delivery ratios (technology)

– Nascent, improving..not perfect but useful for trajectory/ trend information

– Digital signature enabled media compliance monitoring


Breaking through Clutter-Sponsorships

• As media get saturated, strategically relevant sponsorships programs could provide real edge in brand communications– Sponsorship is not charity

• One that can generate positive brand associations that reinforces the intended market position

• 360” leveraging is critical..the property is valueless without it

• Create a unique brand experience…– The game is bigger than the property..it is the brand

experience that provides deepest competitive edge


Beyond tangibles..the marketing of experience (fast food category example)

• Changing lifestyles, people are eating out..busy more prosperous middle class

• Foreign brands are entering the market to exploit the new prosperity of the middle class

• Product parity..differentiation cannot be achieved at the rational level of chicken, snacks, pizza etc

• What is the experience of eating in the restaurant?


Beyond tangible..the marketing experience (fast food category)

• Take the brand beyond the rational to an emotional experiential level..(family, friendship, fun, love)

• Tantalizers.. “Have you tantalized her lately?– An eating ambience that creates the experience of

“love”– When I take the food away and eat in my office,

• What does the branded food pack say about me? • How does it make me feel?


Experience Marketing..from Coffee to friendship

• Nescafe ads have changed? – Not rational alertness but friendship– Aligned sponsorship program

• “Let do coffee in the afternoon” is like saying “lets have beer together in the evening”

• Starbucks experience…more than coffee..different from the old Nescafe

• Nescafe now has its own shops..• Fast food businesses should learn from the Coffee

marketing saga


The new competition for marketing and strategy talents

• Movement of human capital across the lagoon from Ikeja (manufacturing) to Victoria Island..(service)– Capital ultimately moves to where it is best utilized and

most valued• HR practices in Ikeja needs to be fundamentally re-

engineered to face the new competition for talents– Manage people like knowledge workers– Real empowerment of people and responsibility– Flatter organization structure and shorter chain of

command– Change culture..(reduce the Sir, Sir, Sir)


If marketing must lead the business?

• Marketing must understand the business…– Speak the language of business (finance)

• New competition demands stronger market opportunity-led business planning

• Romanticize the brand but recognize that there are other issues beyond the brand..(capability, assets, resources, systems, processes, technology, people, culture, leadership)

• Integrated knowledge of the above to lead strategy at business level


Democracy, Deregulation and Digitalization

• 3D forces on the marketing environment• New type of competition that our generation

is not used to• The new ascendancy of customer power• A new leadership opportunity for true

customer champions


•Thank you