Marketing pundits say that it costs seven times more to attract a new customer than to retain an existing one.
In the same vein, what is the difference between one bank and the other or how does one Telco company differ from the other, when in reality, the services in the offing a basically the same? How can an entrant into, say, Halotel compete with Vodacom and Tigo who dominate the Tanzanian telecom industry? Why would a customer prefer Bank A to Bank B?
These and many other questions pervade the minds of many marketers. Conventional marketing, PR stunts and advertisement impacts might or might not create any tangible results – their costs most likely will be counterproductive in the long run.
Experience however has shown that in order to remain sustainable and flourish in a market with strong players, there are pertinent rules of the thumb that the company needs to embrace.
Well established companies like Sony can afford to use “skimming” as a market entry strategy. In this case, state-of-the art product, for example ultra-thin curved TV will first target premium customers sold at a very high price. By and by, the price is reduced meaning that the middle level customers can afford the TV. Finally, the said TV is reachable to the lowest customers.
Always remember that it almost impossible to outstrip the big boys in the market – they already have a large customer base, command a larger market share and have a larger capital base. One rule is that smaller companies should always avoid getting enmeshed in three-pronged frontal war. Remember, it is like a man facing an enemy, armed with a kitchen knife while the enemy carries a loaded G3 assault riffle.
To illustrate this, when Castle Larger ventured into Kenyan market, they threw themselves in hammer and tongs. Frontal war was waged including nasty hooliganism of bringing down of billboards. Castle larger lost the battle and walked out, badly wounded, licking their wounds. That is what can happen to any small company playing David versus Goliath in the market.
A price war occurs when two or more companies compete fiercely over the price of a good or service by continuously reducing their prices to gain or protect their market share or build barriers to entry.
Tigo Tanzania (then Mobitel) preceded Vodacom’s entry into the market. However, Vodacom’s presence and subsequently its market share in Tanzania were higher. Tigo’s covered Dar es Salaam, Zanzibar and Coastal Region.
Tigo waged a price war including free calls at night and cheaper call rates.
This, interestingly netted the youth. With time, Tigo has scaled down price wars and focused its energy on innovations. Price wars might have worked in a nascent market but the same cannot be said to be true today.
Telco companies, it seems, have hit the nadir beyond which they could be adversely cutting on their profitability.
What then should companies in this scenario do? They can offer value to their customers. CRDB Bank or NMB Bank may not necessarily have the cheapest charges per transaction, but they have the largest number of customers.
Equity Bank beat some older players in Kenya by going down to the lowliest customer and offering parallel value services. So long as your company offers value, customers are willing to pay for it – the cost does not matter.
Giving free gifts is in essence giving them what they did not ask for – they may not want it in the first place.
Goodies might in some instances attract those that could become new buyers but that not always the case. Some people just enjoy filling their baskets with free things but have no intention of buying from you.
This in some cases has been said to have worked but cannot be adequately be said to have worked this is even more difficult if your company offers services as compared to companies that offer tangible goods.
So, identify small things you can do given your resources. Do not overstretch the company resources. Above all, choose your market segment wisely.
THE CITIZEN GUEST COLUMNIST: Krantz Mwantepele