How can digital commerce cross the chasm in Nigeria?
I suspect I'd struggle to keep this post brief, but let me try...
If the NCC is to be believed, there are over 90M internet users in Nigeria. Which we all agree is a sizeable market. This is just internet-connected lines, we never even begin talk about total number of mobile lines. The Nigerian consumer is now mostly connected.
Also, in the past 5 to 10 years, there has been an outpouring of all sorts of digital services into the market. From ring tones to e-commerce to taxi booking to airtime sales. But so far, the market has not been penetrated enough.
By my back of the envelope calculations, I estimate that all of the internet-type ventures around are circling around the same set of users. The same guys who flip through deals on Dealdey are the same ones buying phones on Jumia. I stand to be corrected (if folks start sharing explicit numbers), but I strongly doubt that any online service has more than 1 million unique monthly active users. These services are only still being used by early adopters. Techies and savvy young people, mostly in Lagos. Despite all the funding and aggressive ATL marketing campaigns, regular folks are not biting. Yet. [Maybe when we combine with mobile VAS and ATM-distributed services though, we may go well beyond that].
The digital businesses have not yet succeeded in leaping over the chasm from point B to point C.
Maybe there's a way to fix that...
Geoffrey Moore's bowling pin strategy
Geoffrey Moore's book on crossing the chasm and his recommendation for companies/markets at this stage of the technology adoption lifecycle is well documented. I particularly like Chris Dixon's interpretation of it for the 2-sided content-driven product. I think the same principle can be used to drive home the adoption of digital ventures in Nigeria.
In a nutshell, the plan says:
- Build a "whole" product for a small niche. Make it perfect for them. It may alienate other people, but start from there. Market only within that niche. Don't blanket the entire population.
- After obtaining a strong foothold in that niche, use them to reach the adjacent niche. Adapt the service offering for this new niche.
- Repeat 1 and 2 till the entire market is covered.
It's probably a longer route to success, but has a higher chance of working than the "blast" marketing campaigns we are seeing which I suspect constitutes the largest chunk of these businesses' burn rates.
True, the current players seem to be trying this to an extent; e.g. Konga/Jumia trying to deepen Lagos as much as possible, then extending upcountry. I don't think though, that they finely narrowed the niche enough, nor stayed long enough within that geograpical niche before extending outwards. For instance, they could have focused on product selection that appeals only to young Lagos mothers with kids no older than 5, flog that segment to death, then add inventory that covers gifts they can give their husbands. You get the drift.
This approach does not only serve online retail. Even hotel bookings can employ it. E.g. Any of the hotel booking sites could have focused squarely on tailoring the service towards corporate bookings for Lagos businesses who have staff that travel often to Abuja and PH. Dazzall. Beat this segment like crazy, before attacking the next one. In fact, sales and marketing to this segment will mostly be a business development activity. Possibly lower communications and marketing costs.
Ditto for those of us selling airtime. Or money transfer. What if we focused on specific local remittance corridors first. Or a type of user? Then extend outwards after.
The most prominent and recent example that people give of this strategy is Facebook. Starting out at Havard, then slowly moving outwards campus by campus. Before ultimately going fully mainstream. It helped though, that Facebook had inherent network effects built in. And lots of continous funding.
Another good, recent example may be Instagram.
Maybe later, I'll attempt to articulate my thoughts on network effects. Mostly stolen ideas from 3 books. Contagious, Hooked and Platform scale.
NB: The presence of this yet-to-be-crossed-chasm is not a bad thing, it's a reflection of the opportunity that Nigeria represents.