Communiqué 28: Media sachetisation is real, and product pricing in emerging markets shows it
How do you price media products in a market where food is the biggest competitor for every dollar?
First, a message from our sponsor — Fincra
Fincra helps us keep this newsletter free so we can continue bringing you quality insights. If you’re a merchant, try Fincra Checkout today. It makes it easier for you to accept payments from your customers. No coding is required!
You can use Fincra Checkout to:
Generate payment links and accept payments online
Accept payments via debit and credit cards with Checkout API
Accept payments via Pay With Transfer with Checkout API
Settle payments in your Fincra Wallet or Bank Account
And now, today’s newsletter!
Media sachetisation is real, and product pricing in emerging markets shows it
How do you price media products in a market where food is the biggest competitor for every dollar? In Nigeria, for instance, food expenditure accounts for nearly 60 cents out of every dollar spent. In Kenya, it’s a little over 52 cents. In Cameroon, it’s almost 46 cents.
These three top the list of countries that spend the most on food. The other two in the top five are Kazakhstan and The Philippines. This reality affects how else people can distribute their disposable income, including what they spend on media consumption.
Last week, I wrote an article for Al Jazeera analysing the sachetisation of Nigeria’s economy. Sachetisation is a colloquial term that describes the repackaging and breakdown of products and services into smaller, more affordable sizes. It’s one of the most effective tools for penetrating markets at the bottom of the economic pyramid.
Sachetisation has become pervasive in emerging markets like Nigeria, India, and The Philippines. It is an example of a pull strategy where, according to Clayton Christensen, Efosa Ojomo, and Derek van Bever, businesses “respond to needs represented in the struggles of everyday consumers”. The idea is to “develop products that people want to pull into their lives”, and sachetisation builds on that.
In the article, I explained the economic conditions that make this necessary:
“Since 2015, Nigeria, Africa’s largest economy, has gone into recession twice, and in that time, the naira has plummeted against the dollar, losing 70 percent of its value. That put the economy in a chokehold. But things could become even worse in the coming days.
“According to a recent World Bank report, by 2022, the number of poor people in the country is projected to reach 95.1 million – more than 40 percent of the population. And even as the adverse economic effects of the COVID-19 pandemic linger, commodity prices are on the rise due to the effect of Russia’s invasion of Ukraine.”
I also explored how it impacts fintech, insurance, consumer goods manufacturing, and pension. For example, I wrote:
“The trend is also playing out in Nigeria’s tech industry and influencing how more startups are thinking about product pricing. The industry may still be in its infancy but is highly regarded around the world.
“In 2021, approximately 60 percent ($1.7 billion) of the total amount ($2.9 billion) raised by Africa-based tech startups went to Nigeria alone. But even giants bow to market forces.
“Many technology firms appeal to younger Nigerians because they ease bureaucratic and expensive processes of investing, saving, buying insurance, and accessing loans by introducing lower fees and cheaper payment plans, among other things.”
I used the examples of Bamboo — which allows Nigerians to invest in the US stock market with as little as $1; Rise — which lets its users invest in real estate and the stock market in the US with as little as $1; and Reliance Health — which provides health insurance services for as little as $7 per month.
In today’s newsletter, I want to explore how sachetisation plays out in media product pricing and user behaviour. I will focus on Nigeria, where it mainly happens in two ways — tiering and unbundling.
Let’s kick off with the most prominent example.
1: Multichoice’s tiering strategy
In ‘The subscription playbook’, I wrote that one of Multichoice’s biggest strengths is adapting to any economic and technological climate. With over 21 million subscribers across 50 markets, it is the largest pay-TV company in Africa.
In Nigeria, it operates two satellite TV services for different markets — DStv for the middle to the upper tier and GOtv for the lower tier. DStv has six subscription plans with prices ranging from $3.70 to $35.90 per month ($1 = ₦585, parallel market rate), while GOtv has five plans ranging from $1.54 to $9.40 per month.
DStv’s four most expensive plans are priced remarkably different and contain significantly more attractive options than its two cheapest plans. GOtv’s options pale in comparison to those on its sister platform, but it follows the same pricing principle.
For emphasis, DStv’s cheapest plan gives subscribers access to some entertainment and news channels, but the content is stripped to its bones. Since the channels available are likely those whose content is cheaper to acquire, it makes sense for the company to offer them “in a sachet”. The numbers add up.
Those channels with content that is more expensive to acquire then belong to the pricier tiers. Therein lies the principle of sachetisation — take something that is normally expensive as a whole, and break or strip it down into pieces that are individually more affordable. This implies that customers will forgo some quality, but it makes it possible for them to still access some benefits.
2: What can we learn from football viewing centres?
For a Nigerian football fan to diligently watch their team play every week, they need to be able to fork out $24 monthly for a Multichoice subscription. As we’ve established, not many can afford this, so they turn to other options. One of which is visiting football viewing centres.
Viewing centres in Nigeria are informal neighbourhood outlets for football fans to gather in their tens and hundreds to watch their favourite teams play during the season. Depending on their location, each person pays an entry fee of about ₦100 (17 cents) and will likely add a bottle of beer or soft drink during half-time.
The average viewing centre regular would spend about ₦1,000 ($1.7) per month on English Premier League, La Liga, Serie A, and UEFA Champions League matches, depending on the team they support. You can count on their dedication to the viewing centre because that is often their primary source of entertainment after a long week at work.
Beyond serving as an entertainment source, viewing centres also help regulars form strong social bonds. This way, the proprietors of the business can estimate how many viewers will come around and how much money they will generate per month.
3: The Kwesé TV and StarTimes unbundling experiments
When Econet’s pay-TV service Kwesé launched in Nigeria five years ago, it did so with pay-as-you-watch plans, allowing users to pay for three, seven, and thirty-day subscriptions. It also introduced a similar model in Kenya around the same time.
That same year, StarTimes, a Chinese satellite TV service operating in Nigeria, introduced ₦60 to ₦240-per-day plans (10 to 41 cents), with weekly options ranging from ₦300 to ₦1,300 (51 cents to $2.22).
Kwesé has since shut down its pay-TV, removing content it doesn’t originally own and has to pay for. StarTimes continues to operate with its subscription plans, with marginal increments to its prices in the last few years, indicating what tier of the market it’s focused on.
4: IROKOtv’s sachet strategy
IROKOtv, a streaming platform that houses Nigerian movies and TV shows, has also adopted this strategy to grow its total addressable market. In the company’s early days, it acquired and licensed existing content until 2014, when it launched ROK Studios as an in-house production unit.
Having raised significant venture capital, IROKO had to grow fast. One way was by leveraging its insight into user behaviour and product pricing in Nigeria. Emeka Ajene, an entrepreneur and tech analyst, wrote about this:
“As a venture-backed company focused on rapid top-line growth, IROKO incorporated a growth [and] experimentation mindset into its pricing strategy.
“For example, the company noticed the popularity of individually packaged CPG (consumer packaged goods) items which, while cheaper on an absolute basis, were more expensive on a per-unit basis than larger sizes. Leveraging this insight, [it] introduced unlimited weekly Android access to IROKOtv for ₦100, which resulted in 100% growth in Nigerian subscribers within the first 30 days.”
IROKO also developed a kiosk and agent network that allowed subscribers to download digitally-protected content at physical locations without worrying about Internet and broadband data costs.
5: The Netflix and Showmax mobile-only plans
In 2021, Showmax, Multichoice’s subscription video-on-demand service, reduced the price of its mobile-only plan by 20% to ₦1,200 ($2). A few months later, Netflix introduced a similar option at the same price point. Both platforms recognise the necessity of embracing this strategy to expand their user base in this market.
I wrote about this in ‘Stears’ lemonade machine and Netflix’s $3 beer’:
“Due to the high cost of data and Internet service limitations, people are more likely to download content to their phones before watching. But even downloading content often takes time because Internet speed can be frustrating. So, Netflix is adapting its offerings by creating a mobile-only plan that addresses those problems… The introduction of this plan also indicates Netflix is going punch-for-punch with Showmax (Multichoice’s SVOD property), which also has a mobile plan for that price.”
Showmax even goes a step further to partner with MTN Nigeria, the country’s largest telco. With an extra ₦500 (85 cents), users can access 2.5 GB of data to stream Showmax content or an additional ₦2,000 ($3.4) to access 5.5 GB.
Content production and acquisition are expensive line items for media companies. But to survive in emerging markets like Nigeria, most of them will have to embrace sachetisation.
As with any business strategy, sachetisation does not guarantee success, survival, or growth — however, it makes them more likely.
The lower class is far larger than the middle and upper classes, so companies will have to choose between not operating in Nigeria or adapting to reality. Some companies decide to exit, and that’s perfectly fine. But the ones who stay will certainly battle with the market forces, and we know who wins in the end.
Some good news 🥳
In addition to Communiqué, we’re launching two more publications under the CMQ Media umbrella.
The first is Creative Capital, a publication for creators who are interested in deep insights and stories about Africa’s creator economy. If you found our essay on the creator economy insightful, then you’ll love Creative Capital.
The second is Marketing Forensics, where we will dive into marketing trends and campaigns across the continent. If you enjoyed our analysis of Big Brother Naija and the Super Bowl, then this is for you.
Please, share this with your friends who are creators, investors, or who work in marketing and advertising!