Immediate Past President, National Institute of Marketing of Nigeria (NIMN), Mr. Tony Agenmonmen, in this interview with AKIN ADEWAKUN, sees nothing unusual in the ongoing price ‘war’ in Nigeria’s aviation sector, but says local brands need to gear up to survive such competition. Excerpts:
As a seasoned marketing practitioner, how will you describe the recent price war, or predatory pricing, regarding the Lagos-London flight tickets?
I think the issues are bigger than predatory pricing, price competition, or whatever. Competition in the market place is not unusual. In fact it is the norm, Any industry where there is no competition will be moribund and the consumers or the general public will not get the best of it. So as a marketing person, I encourage competition any time, any day. So, to that extent, the foray of Air Peace into international route is a very welcome development from the economic point of view. The airline, either for patriotic or strategic marketing reasons, brought their prices down to the level they brought them. I would be surprised if Air Peace did not expect that the competition, which, in this case, is every other airline, would react one way or the other, because whether you like it or not the coming in of Air Peace has changed the dynamics. And this, the foreign airlines have done, through various prices being bandied around. If you owned any of the airlines, you wouldn’t sit back and watch one new entrant enter the market, and take over without responding. That’s not marketing. You must react to competition. So I don’t think there was a meeting of foreign airlines to decide that they would gang up. I don’t believe that. What they have done is to look at the landscape, analyse the possible impact of the entry of Air Peace, and take a position on how they are going to organise their prices.
Does a brand breach any marketing rule or ethics by engaging in undercutting or predatory pricing with the aim of pushing competition out?
When we are talking about market here, I want to believe we are talking of a free market economy. To be candid, there is nothing like a perfectly free market economy. If I’m producing bed-sheet , and selling it at N20,000 per unit, and getting a margin of 45 percent. I’ve achieved fame, and I’m making gain because either the competition is not strong or there is none. But if another brand comes into the market, and decides to charge N15,000. I have 45 percent to play with. I can look at my cost, and say if the brand is waging a price war, I can cut it to N12,000. I’m still making profit, despite the drop in the margin. Don’t forget, I still have the advantage of scale because I’ve been in the market for some time, and the competition, because it is just coming in, may not have the scale to bring the price of their products to N12,000. That becomes a problem for the new entrant, it can go bankrupt, or go back to its cost profile and say if these people can sell at this price, I, too, should. I wouldn’t expect it to go and do N10,000, because if it does that I can go down further because I have the advantage of scale. You see price war is a classic marketing case that hurts everyone, and sometimes the end result is that when everybody has self-destruct, they will all come back to reality and then settle at what is reasonable. So to answer your question, there is not a marketing crime for you to price your good at the price that fits your strategy. I think what Air Peace has done is what is called penetration pricing. It is done everywhere, but you have to pay for it. I would be surprised to see competition not reacting. Who says they are making losses? But it is not always that price is the factor for everything. From the sector I come from, Heineken is much more expensive than Goldberg, Star, Gulder, but people still buy Heineken because of their value proposition. Air Peace should get off the screen and be ready for competition.
What should be the strategy for a domestic brand caught up in this type of situation?
Nigerian brands should learn, and be ready to compete in the marketplace, let’s not be crying victim, victim, victim. The marketplace is war. If you play by the rule, you’ll win, if you don’t, you lose. Star lager beer was the first locally prepared lager in Nigeria. When Harp was coming in Nigerian Breweries did not cry. It prepared for competition. So any brand that is not ready to compete should not be in the marketplace.
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