Competing on price — how startups work in emerging economies (part 1)

My to-do list for the past 3 days has been crazy. From things as little as following up on a call to landing page designs, running ads, circling back to the facebook ad support team, sending newsletter campaigns and updating Strata blog.

It’s kind of a marathon…but thats whats exciting about startups: no two days are the same — today you are negotiating a deal and tomorrow you are completing a course, the next day you are making money or having that boring 2 hour meeting.

Well, to start with, I learned Facebook only charges for impressions and were not really concerned about whether or not you close a deal — their conversion tracking made possible by Facebook Pixel is just, well, pointless. After 3 hours of chat with the Facebook ad support team, I have decided to take my ad spend elsewhere, Facebook and it’s cohorts will only have around 2% of my total ad budget going forward.

Interestingly, I ran Google ads some two weeks ago, it was all leads and no sale. The sales cycle in Nigeria is often long and hard; you first have to win in the battle of getting discovered then you start battling with prospects who are only interested in making enquiries — no intention of buying!

On the side, I run a haircare products and training business with my wife, sales went through the roof 3 months ago when two things were in place

  1. Leads were directed to Whatsapp
  2. Trainings and all forms of conversations happened on Whatsapp

Then, one day, I went on and on about automating the process through a website, it took me about 3 weeks to complete the website but I did and we launched, increased prices and a grand total of zero sales came through.

Bottom line — in Nigeria (and I suspect it is so in several other markets), the sales process is a trust process. People don’t just see your ad and click through then give you their money — no! They want to put a face behind the brand, follow you on Whatsapp for a while, see your status updates and be sure you are the real deal before they give you their money. This is a pretty long process for someone like me who runs several businesses — so if you add me up and decide to follow my posts to see if I’m some sort of authority in that area, you’ll be grossly misled majorly because (1) I hardly make posts and (2) the few posts I make varies across the various sectors I operate in — investments, Edtech, web design and app dev, automobile, weddings…

Because of my vast business dealings combined with the fact that leads are trying to get to know me before making a purchase, it has been some serious work getting deals done.

Whew! How did I get here? Ok, we were on the subject of ads.

Google ads brought in hundreds of leads, depleting my ad budget rapidly but they were all asking questions and bouncing out. I need sales and the proper way to get value out of my ad budget going forward, would be to move my budget to a pay per sale advertising partner.

Here’s something I discovered, Bing ads almost rival Google ads in reach, yet they are 4x cheaper than Google ads. I’m totally getting on that ship….and I also found out that richer people use Bing for search. I deduce from my readings that while Google has scale, Bing has depth. Hello Bing, welcome to me.

I should mention I was eager to build my mailing list, using paid acquisition, I moved up from zero to 40 in a week. Thats remarkably small and thats not a number to be published, but hey, this is not a blog for finished products — its a process blog.

I pushed out my first newsletter and in an hour, 3 people opened it within 3 hours including me with just one click coming from me. Why am I pushing forward with building my list? Because ultimately, having a list of 10k subscribers will deliver an open rate around 50–70% and around 10% will take an offer bundled into those emails.

I must say though that Entrepreneurs are usually too optimistic about bright ideas and projections. Just before hitting the send button on the newsletter, I imagined an open rate of >50% but here I am with 6% after 3 hours.

The uninformed optimism of entrepreneurs before doing something new is usually at 1000%, then when they launch, they get schooled by reality (either sales blow through the roof or struggling to close even one sale), this informed reality check can either push entrepreneurs to keep pushing or crash and burn. Well, in times like this, I remind myself of a meme I saw few years back — Coke only sold 10 bottles in its first year.

Doing business is hard, you need to be gentle yet assertive.

The reality of doing business in Nigeria is that your product is more often than not, competing with peoples budget for food — and when people have to make a decision between buying food to stay alive or buying your shiny product, they’ll always choose food — because they have to stay alive first.

In Nigeria, we compete on price.

Harvard grads will tell you to compete on value — lol. Well, maybe in the U.S, you can. Everyday we learn new stuff as reality schools us, just two weeks ago I made a post telling people to compete on value, I’m going straight back to let them know we are in Nigeria and Nigeria demands Nigerian ways. We can’t import Silicon Valley ideas and methodologies into Nigeria and expect it to hit the ground running — capital is cheap and easily assessable in Silicon Valley — someone graduates from college and has an idea, puts together a really good pitch, talks to a number of investors, while doing this, he has assembled a team, currently building the mvp and by the time the map is nearing completion, he is securing funds for marketing. Raising your first 100k seed investment in the U.S isn’t that much of a big deal. He spends the cash raised on paid acquisition, hits 50k signups, throws together a nice powerpoint with the heading “traction” and secures more funding.

The reality in Nigeria is entirely different. The first time I raised cash was through grants. Then when I put together an equity pitch, it took me 14 months to raise 700k in Naira. The equivalent of that in U.S Dollars is just under 2,000 Dollars (going by the exchange rate then of $359 to the Naira).

Till next time, we keep tweaking

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Odior C Yole

Startup founder. I’ll share my journey, processes, tactics, challenges and victories till we hit 3 billion customers worldwide.