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Winning via Smart Pricing in Africa: DStv Case

Pricing is everything is Africa.  In the past when multinational companies used to install people with no African experience as bosses, most did not do well. Today, a good number of them are using locals who understand the local terrains better.

One area you see the deployment of that local experience is in pricing. P&G gave us sachets in detergents via Ariel. Cowbell pioneered sachets for powdered milk. The goal: make the products affordable for consumers.

That fact is this: you must balance the element of quality [value] and affordability to succeed. Business is not really about building the "most advanced product" but making a product which people can afford. Concorde was a great airliner but it was expensive for the market. Balancing the art of value and pricing is really the cardinal tenet of business. Why do you need a $3k laptop when a $600 can handle what you do? That is a question to handle as a buyer. When you become a seller, customers make the same calls on your products. No one wants to spend money on a photocopying paper that is hugely expensive, in the name of quality, when the typical papers are good enough.

That brings me to entertainment in Africa. Everyone has been talking of Premium, high quality, and super-cool contents. But MultiChoice is showing us that the money is not actually in those expensive contents, but in the affordable anything goes contents. Yes, MultiChoice is losing premium customers, but gaining subscribers in the low-end contents.

However, the number of customers on the top-end DStv Premium tier has fallen, data published by parent Naspers shows.

[...]

Overall Premium tier customers declined, however, falling from two million previously to 1.9m at the end of September. DStv Compact customers climbed slightly to just under 3.3m. The biggest jump came at the “lower end” of the market, where subscribers rose from 5.7m to almost 7.1m.

People are making decisions with their purses. Simply, if you want to compete in this video-on-demand sector, the premium category may not be the best path. You know what this means: most of the competitors coming after DStv are thinking of taking up the premium customers. They may be doing well, as the company lost 100k, but the company is expanding at the lower end, adding 1.4 million customers.

For MultiChoice, I do not think the numbers look bad. You lose 100k, you add 1.4m. I think the value may not be in making videos that mirror Hollywood in quality and pricing families out of the categories. The key is making sure the contents are affordable even before you bring the quality [value] issue.

I was taught in engineering that a solution that is not affordable is NO solution. We like good things, but when the purchasing power is not there, it makes nonsense of the energy, resources and everything invested to bring forth the good things. While thinking about the future is important, you must take care of the present, else you might not live to see that future.