In Nigeria right now, it is about pricing innovation. If you do not pay attention to your pricing playbook, you will struggle in that business. Yes, getting customers to open their wallets, and pay for products, requires a lot of work. If you think otherwise, you will be making a big mistake. Simply, consumers are smart. Daily, they have to deal with opportunity costs in a world where they have limited resources to meet their largely unlimited needs.
Yet, there are many ways to get customers to open their wallets and buy from you. Over the years, I have noticed one technique that works. I call it the Car Salesman Pricing Strategy. Most car salespeople in the U.S. do not give a price as a whole amount when you visit dealers for car shopping. Rather, they give you the price based on your estimated monthly payment installment amount, for cars, that will be financed. They do not want you to be thinking of committing to a huge amount with all the associated burdens of paying back. The monthly payment is very manageable, in your brain.
This Car Salesman Pricing Strategy is not new. It has been part of the retail industry especially where the companies offer financing. You want to offer the pricing in ways that customers get to sign the papers as quickly as possible. Apple deploys that as it works to obfuscate the very fact that its iPhone smartphones are expensive.
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Always remember that it is not the amount that matters, but the customer’s perception of value derivable. So, just changing the price point without improving how customers see “value” on your product will be a huge mistake. In other words, are you improving on the psychological aspect of pricing?
Rebrand and retool that product and have three specs: Small, Medium and Large packages. Put the prices as N2000, N4000 and N5000 respectively, and if you do it well, you could improve the sales of the Large package, since by your model, you are going to bias customers to go Large. And it is possible that you have a better margin at Large. Customers feel good because they got “Large” at N5000 when medium is N4000!
Of course, do not forget sachetization which we use a lot in Tekedia products and the thing works. It works because it makes it possible for people to pay faster since you have broken the decision phases for them.
As I read annual reports of startups from Nigeria, picking insights on the state of the economy, I have questions for all makers: What is your pricing strategy? How do you price? Does pricing bring competitive advantage in your business? You must innovate on your pricing model because in Nigeria right now, Price is KING!
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The products will also need to be positioned as ‘essentials’, because with limited resources, luxury becomes extravagance. You don’t just need to price right, you also need to continually show why your product is a must-have.
Innovation means different things to different peoples, depending on what constitute pressing and dire situations. You cannot afford to standstill in a constantly moving environment.