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Chris Harrison: “Price war: Cuts Are Great For Consumers, Not For Brands”

Chris Harrison: “Price war: Cuts Are Great For Consumers, Not For Brands”
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Discounting is a short-term policy. And it places some businesses you in the last chance saloon faster than they ever would have imagined.

Chris Harrison
  • 25 january 2011

‘War! Huh, yeah. What is it good for? Absolutely nothing. Listen to me.’

But when it’s price war, maybe it’s a different story.

The business year in Kenya has opened to the clash of price cuts as prominent businesses get ‘down and dirty ‘on value in its most basic sense.

This has raised a high level of consumer excitement. Just when we thought telecoms charges couldn’t get any lower, they have. (And what does that say about historic charging practises?)

Internal airlines are signing up regional and local routes, and offering them at bargain basement prices. Insurance companies are tearing up rulebooks. New low-cost household products are populating our billboards.

People, we have to smile. There’s a real market economy developing out there, and high time too.

The Kenyan economy, like many African markets, was too long the preserve of the few. One, or at most two key players per category. Setting the rules. Regulating the pace of change. They were always easily identifiable by their shrill cries for ‘level playing field’ whenever an external threat peeped over the horizon. Level playing fields are fine, providing you can escape the roller.

And the levels below aped behaviour at the top of the corporate hierarchy. In the days when one behemoth dominated the household, personal care and much of the processed food categories, their salesmen didn’t visit their duka customers. They sat outside in their branded vehicles, and waited for the shop owner to make obeisance. Their terms were tough: ‘ No credit. And, no, you can’t have toothpaste unless you also take palm oil. Oh, and Marketing want to shift this new flavour of stock cube – you will take some, won’t you?’

And if you thought the Trade had a rough time, pity the poor consumer. The first mobile phone advertisement in Kenya offered a basic Siemens handset and line for the staggeringly affordable price of Kshs 58,000 (around USD 800 at the time). Oh, and there was a deposit for the line. I know, because we did the ad. For a department of the Post Office, newly named Safaricom.

Customer service. Nope, we didn’t really do that either. Or no more than we absolutely had to.

It wasn’t a Command Economy, because it wasn’t in any sense planned. It was plotted.

Fast forward a decade and we now have a very well developed retail sector, with brands like Nakumatt, its cousin Tusky’s and national sweetheart Uchumi all offering bigger and better pleasure domes. I’m wondering when ‘ promenading at the mall’ will replace’ going to Church’ as Kenyans’ No.1 leisure activity.

But, Kenya is still a hugely expensive place to live. Long-term efforts have been made to reduce pack sizes and price per serving for the Bottom of the Pyramid. But Kenya’s burgeoning middle class face pricier shopping baskets every week. Someone must have objective information (Millward Brown?) but my rule of thumb seems to indicate basket inflation at well over 15% in the last three months.

So, while telecoms companies slash prices to almost nothing we’ll forgive them their early Noughties advertising messages. Oh, so you have broad coverage? My, how unusual! We don’t care what you say on billboards, just so long as we call anytime for a reasonable price and for once understand what we are paying for.

Let’s see the same vigour in packaged goods, or petrol, or clothing. Let’s see the multiple retailers begin to pass on the benefits of their bulk negotiations. So that a supermarket isn’t just ‘somewhere where you get everything you needed’ but where you get deals too.

But, hearken unto this, ye choppers of price.

Discounting is a short-term policy. And it places some businesses you in the last chance saloon faster than they ever would have imagined.

If you have negligible brand equity, all you have is your price point. Which is scary.

And no matter how cheap you are, passengers wont stay with you if you fly to Ukunda, and then don’t have enough fuel to get to Mombasa (check your safety logs for December, airline CEO’s).

Chris Harrison is Chairman of Young & Rubicam Brands, Africa. This article has been republished with his kind permission

To comment on this article, send a Tweet to harrisoncj on www.twitter.com/harrisoncj

Image by dogwelder

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