In this piece, we will cover scenarios that could lead to the failure of your product in emerging markets.
1. You product doesn’t solve a big problem
You will fail if your product is not clearly better, faster or cheaper than the competition or substitute products. You can mask your lack of differentiation with marketing campaigns or deep discounts but customers will revert to their old habits after the promotional campaign. However, sometimes a new product with better branding and positioning can be successful despite lack of actual differentiation from existing products in the market.
2. The market isn’t large enough
There are several huge countries in Emerging Markets – Brazil (200m), India (1.3b), Indonesia (250m), Nigeria (170m). If your product is launched in a low population country, the customer segment you are targeting may be too small. Products that target rural customers also have this customer sparsity problem. Targeting a “region” typically doesn’t work either, because there are different cultures, laws, etc. The countries in Middle East and North Africa share a common language and religion. Nonetheless, MENA is not homogenous since the Gulf Coast Countries (e.g. UAE, Saudi Arabia) are very different from Egypt, Morocco, etc. Similar country differences exist in Latin America (common language excluding Brazil) and Francophone West Africa (common language and currency).
3. You aren’t ready to spend money
Scaling your product in emerging markets typically involves high costs in operations and marketing. Customers are skeptical of new brands. For mass market products, you need awareness across TV, radio and billboards to legitimize your product. You also need consistent presence of brand ambassadors physically on the streets to drive trial and adoption of your product. When I worked at a Nigerian bank, the bank organized “market storms” where all the staff of bank branches go into the open air markets to get customers to signup for bank accounts.
4. The incumbent is executing well
Even if you have a better product, you will fail if the incumbent is strong in the important areas of marketing and operations described in #3. For example, Flipkart is a juggernaut in India; it doesn’t make sense to go against them unless you have a clear point of differentiation and are ready to spend big.
5. You don’t have support from top management
You will fail if your Emerging Markets product is low priority in a large organization. You will have only a trickle of resources. Uber is a good example of a large organization that is expanding aggressively in Emerging Markets
6. Your approach is one size fits all
Sometimes, Emerging Markets need a different approach. Here are some of my favorite examples
- Cowbell milk pioneered small sachets of powdered milk for people who couldn’t afford larger packs
- Tata DOCOMO pioneered “per character” billing for SMS
When launching new products in Emerging Markets, you need flexibility to adapt to the market. Bureaucracy will strangle your speed of execution if you are in an organization with one size fits all policies. To steal a phrase from one of my mentors Yariv Adan, you will feel like “an ant being crushed by an elephant”
What other factors lead to failure in Emerging Markets?
Author: Aneto Okonkwo
Date originally published: 06/01/16