Scaling in Emerging Markets
A copy and paste, one-size-fits-all business model will not work when scaling a business into emerging markets. This was one of the key takeouts of a panel discussion at SCALE18, the conference for growth marketing innovators supported by marketers DCMN, that was recently held in Berlin.
Manuel Koser, Co-Founder and MD of Silvertree Internet Holdings in South Africa participated in this discussion and was joined by Manan Shah, Director of Marketing in India for Truecaller and Henrik Lysgaard Jensen, Director of International at Taxify. The session was moderated by DCMN’s Tech Communications Lead, Liz Osterloh.
After introducing their businesses, the panellists quickly started delving into the pitfalls that they experienced themselves when expanding into different markets. According to Koser, some of the biggest challenges Silvertree Internet Holdings has faced while trying to scale into emerging markets such as Nigeria and Kenya are:
- Your business model in one country will not necessarily work in another country;
- having a management team that is not native is a big mistake;
- and you can only figure out if your product will fill a demand once you’re actually on the ground.
According to Jensen of Taxify, the approach for scaling in western economies and emerging markets will be more or less the same, but businesses need to develop structured processes with regards to market intelligence, research, the way you recruit your team, etc. Taxify faces a lot of competition in the markets they operate in; there are other services with very high costs, high commission rates for drivers and high price points which are not affordable in an emerging economy. Taxify found their competitive edge by adopting a ‘happy driver = happy rider’ philosophy and consistently offering better terms for drivers, which they could do through a lean setup and high efficiency in terms of capital employed.
In the case of Truecaller, they did not intentionally seek out the Indian market, but rather the Indian market found the app. It was originally designed for a different geography but then found relevance in a different market because it serves a basic utility.
Q. Is price point everything in these markets? In the Indian e-commerce market, the same product is available across various platforms and little to no loyalty towards platforms exist. They, therefore, need to offer value-added services to entice customers and they need to find the balance between the right pricing and relevant offerings.
Q. How do businesses cope with diversity in different countries? Even just within India, the markets are not the same and the same goes for Africa. Jensen believes that the reason for Taxify’s success is that they manage to capture what the local demand is and offer products that theyknow the customers want. They do this by getting continuous feedback from riders. He reiterated the importance of analysing the challenges in each city, for example, some are extremely congested and you can’t move around in cars. Businesses need to understand the local market dynamics: are there products that have been used locally in the market such as, in Taxify’s case, tuk-tuks, motorbikes or e-scooters?
When asked how their portfolio of companies address these challenges and how they assess the demand when creating something new in a market, Koser responded that a startup should launch a product, trial it, listen to customers (through mystery shoppers, trials with power shoppers, etc), improve the product and try all the marketing channels and see which are scalable. He cautioned that what works on day zero doesn’t necessarily work on day 100 and that businesses should reinvent their product and marketing approach all the time since customers are not isolated in the market and are aware of the global retail landscape.
Some more tips and advice they shared include:
- No one-size-fits-all solution will work. Create relevant offerings for the market you want to penetrate.
- Find a common problem you can solve. Listen to customers – after nine years Truecaller still talks customers directly to get feedback.
- Understand the pulse of the market and the changes happening there.
- Don’t just blast and start scaling. Do your market research properly (local legislation, safety regulations, potential customers, local dynamics), otherwise you can end up scaling your problems instead of your business.
- Do mini experiments and test it in a vacuum.
- Ask yourself the following questions about the potential new market:
- Is the market big enough? Are their economies of scale in the market?
- In the best case scenario, does the market make sense?
- Is it a lasting problem that you are solving with your product and why does it not exist in that market yet?
Test the product and trial a lot on a small scale so that you can make a lot of mistakes quickly and learn from them.
You can view the full video of this panel discussion, along with all the other talks from the SCALE18 conference, here.