The Too Good to Be True Offer
Scaling up as a startup could be a really daunting task, hence many startups come up with what I call the “The Too Good to Be True Offer” where they clout themselves by offering very affordable services at zero percent profit margin, no profit or even at a loss. This would actually gain them traction quicker in terms of customer base acquisition. But coming from Nigeria where the popular saying “AWOOF DEY RUN BELLE” is common on the lips of every person in Nigeria, this trend has to be explained in another angle.
Nigerians no doubt like free things a lot and wouldn’t hesitate to clout, carrying out tasks the company gives just as long as the Awoof period is still on. But now for the company they are enjoying the Awoof patronage which would later run their belle in the sense that when they finally want to adjust their business models, for profitability, they end up not having those customers they thought they had initially. This is because Nigerians would rather patronize the next man if their current man hikes the price.
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A clean case sample is the platform Kudi.ai which when they first started out weren’t charging commissions from their customers, for transactions carried out via their platforms, and when they finally decided to start charging, I read an article on how the CEO stated they lost a whole chunk of their customers. That happened because they noticed that these clients were only there for the freebies; nonetheless, it helped them to re-strategize and refocus on KYC better and to further serve customers better.
The same applies to the telecoms disrupters back then e.g. Multi-Links. This company came up with the cheapest phone that could do everything back then and to top it all free calls and browsing. It initially captured the market but when it wanted to remodel, everybody dropped their phones and moved back to their respective Telco phones.
I always advise people not to grow their pages using giveaways and freebies even though they are very effective.
However MTN, Glo and Econet (now Airtel), knew this trick on-time and they exploited the offer by capitalizing on two customer acquisition models, Fear of Losing Out and Need of Urgency in the sense that a lot of people were tired of Nitel, the inefficient state monopoly.
Hence Nigerians urgently needed a fresh of breath air, and when it came, they were all scared of losing out of the offer due to their need of urgency. No wonder, reports have it that MTN achieved profitability ahead of projections.