It’s becoming increasingly frustrating for managers, business owners and salespeople to manage premium brands in Africa. Staying premium is not cheap. Significant investments go into delivering superior quality, exclusivity, and brand equity. Yet, African consumers continue to demand for premium offerings at the lowest possible prices. If you are in this situation right now, you are probably wondering how to stay premium without running out of business.
A common approach to selling premium products or services at rock bottom prices in Africa is “sachetisation”. The process involves making bit-sized and lower priced versions of existing brands. Sachet offerings are not a recent phenomenon in Africa or elsewhere. However, the continent’s economic hardships, the COVID-19 pandemic, regulatory controversies and shrinking purchasing power have exacerbated the presence of these offerings. Just about everything is packaged into a sachet. Internet bundles, consumer goods, DSTV subscriptions and even mini-MBA programmes have been created in bit sizes across Africa.
Sachetisation can be risky for business. Risks associated with products, regulation, adoption and brand erosion can cripple efforts to bundle in sachets. However, sachetisation has the potential to support stakeholders managing premium brands to increase consumption habits and change the nature of consumer engagement. So, how can stakeholders effectively use sachetisation to stay premium while selling at the lowest possible prices? Here are three stages to achieve the goal.
Understand the Job Your Offering Will Perform for the Consumer
There is a mistaken view that all African consumers prefer to purchase products or services in sachets out of poverty and survival. The reality is quite different. Different segments of African consumers purchase in bit sizes for diverse reasons. There are survival consumers like those belonging to the Kadogo economy of East Africa. Kadogo means “little”, and the name refers to making it possible for poor customers to buy small quantities daily at the lowest divisible price. Kadogo dominates the women’s food stalls sector in East Africa and the retail sector in Kenya . Safaricom also serves survival customers in East Africa’s Kadogo economy by offering the smallest mobile airtime bundles in the market. Survival consumers dominate the informal sectors of the continent.
Trendy consumers are social, aspirational, fickle minded and always willing to try new brands and formats. These consumers are more concerned about how others perceive them when consuming brands than price considerations. Trendy consumers swap between premium, low-priced, and bit sized packages to project messages about their social status to peers. For example, trendy consumers in Nigeria may purchase Hennessy brandy to drink with friends in a club and later purchase sachets of Bailey’s Irish cream (a premium brand) to drink privately when at home. Bit sized purchases for this segment meet their lifestyle and not survival expectations.
Rationalisers are those with shrinking budgets who are re-prioritising purchase necessities. These consumers spend more on staple foods, transportation, airtime and health; and spend less on discretionary items such as luxury products and out-of-home entertainment. These consumer segments “recruit” bit sized products or services to do different jobs. Disaggregating the nature of jobs done by segment is a critical element of success.
Select the Sachet Strategy that Fits the Consumer Segment
After disaggregating the jobs for the consumer segment, the next step is to select the appropriate sachet strategy. We can use football terminology to describe some possible sachet strategies. The defensive sachet strategy focuses on protecting market share in the light of reducing consumer disposable income and competition from cheaper variants. Examples include sachet SKUs of ostensibly premium brands such as Dettol antiseptic liquid, Morning Fresh dishwashing liquid and Power Oil in Nigeria.
The midfield sachet strategy looks at opening new opportunities for new consumer segments to play the purchase game. For example, some businesses bundle sachet products or services with a regular premium brand. Paygo in Kenya uses smart meter technology bundled with a mobile money service to facilitate customer payments for LPG in little quantities. Another opportunity is bundling existing insurance products with new covers for hotel lodging, mobile phone damage, refrigerator repair, and short flight delays.
The attacking sachet strategy focuses on growth by expanding consumer patronage through inclusive offerings. For examples, small bank loans and peer-to-peer lending platforms offer the opportunity to break down loans to minute levels that suit short-term borrowers. Choose the strategy that works for you and determine the levers of consumer engagement before investing in sachet products or services.
Make Your Sachet Strategy Work
Sachet strategies fail when stakeholders do not review the entire business model before making the investment. It is necessary to answer a couple of questions before investing in your strategy.
- What will your cost and price structure look like?
Risks associated with sachet products are costly. These costs can ruin your margins and profitability. Sachet strategies can end up being more expensive than envisaged. It is therefore important to have a budget ceiling and to test pricing scenarios before going into the investment. Ensure that critical consumer price points are identified, and low-priced offerings do not cannibalise revenue, erode profitability.
- How will your route to market evolve?
Transiting to sachet products or services requires thinking differently about routes to market. Analyse the market to evaluate whether there is a gap in the market or a market in the gap. Scope the size of the opportunity and growth potential. Breaking offerings to bit sizes offer opportunities to review and deliver new channel benefits for sustained competitive advantage. Consumers may choose to buy bit sized offerings in ways different from how you imagined, and it is important to prepare for the change.
- How will you train your sales and marketing staff?
Selling sachet offerings requires a different mindset from selling regular premium products. Unprepared salespeople or marketers face the risk of underselling premium offerings when in bit sizes. Preparing to sell sachet offerings involves understanding the consumer segments, the sachet strategy and tailoring the message to suit the target audience.
- How will your brand equity evolve?
Sachet strategies may not adversely affect brand equity when the quality is sustained, and customer expectations are satisfied. For instance, Milo, Bournvita and Peak have been in sachet for decades without losing their premium status in the consumers’ minds.
- How will your sachet strategy affect your corporate values?
Sachet offerings have implications for the environment, sustainable practices and corporate codes of ethics. It is necessary for organisations to evaluate these implications before making any investment.
- What will success look like?
Set key performance indicators for every bit sized offering based on the predetermined role of the offering in your product or service portfolio. Measure what you manage, and your chances of success will grow.