According to the Small Business Adminstration (SBA), 30% of new businesses fail during the first two years of being open, 50% during the first five years and 66% during the first 10. The SBA goes on to state that only 25% make it to 15 years or more. Though the odds are better than the commonly held belief, there are still many businesses that are closing down every year in the United States. (To learn more, see: Four things you need to do as a leader of a startup business)
One of the reasons small business owners go out of business is because they keep reducing their prices due to competition forgetting that Nigerians are not looking for the lowest prices, they are looking for what they perceive as the best deal.
If your only marketing weapon is price reduction, you will run into trouble because there is always another naive business owner like you willing to lower their prices. Then you lower yours. Then they lower theirs. At the end of the day, you all go out of business.
Don’t try to copy big businesses that use low entry points to win customers over. They have the cash. They can lose hundreds of millions or even billions for years before they think of profits. You don’t have that money. Maybe your entire capital and savings is N500k.
Let’s talk about lowest prices. Take a look at the phone you are using. Is it the lowest priced phone in the market? Your watch? Your shoes? Your cap? Your glasses? Are they the lowest priced of their product category? I can bet NO. For for now, forget about the lowest price lie.
Read also : Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) Loan.
The next thing you need to know is this. There is a difference between cheap and affordable. While I understand that the buying power of the average Nigerian is low, Nigerians still want to buy and try to buy quality things, they just want to be able to afford them.
So rather than looking for something cheap to sell, what don’t you find a way of making quality products affordable. There is a difference between the two. Let’s take a look at the sachet milk example.
Whenever I teach this concept, people will say look at the sachet mill example. Sachet milk is not cheap. It is affordable. Try to empty sachets into a tin. By the time it’s full, you would have spent more than buying the tin. The sachet made it affordable, not cheap.
Another example is brand new cars and homes. A lot of people in Lagos drive cars paid for in installments. The cars did not become cheap. They became affordable. Making it possible to pay for your products in installments is better than lowering your price.
The biggest price resistance do not come from customers. They come from business owners. They have not even tried to offer their prices, they tell themselves people will not buy. Let the resistance come from customers, not from you.
Read also : why over funding can kill a startup.
Updated on 2:54-am May 31, 2023