I moved to Gbagada, Lagos Nigeria, a few years ago and I still remember clearly what “The Prince Superstore” was. The Prince used to be the only supermart in the locality. The business was simple – sell the basics. However, in recent years, I have witnessed a deliberate attempt by the business owners to diversify revenue streams. The question is – “if I have ten thousand people walk into my store daily, what else can I offer them?”.
Over the years, The Prince has included the village market where they sell tubers and other food items. The store now has a smoothie bar! In this day and age, where people are more conscious of their health, a smoothie bar within the store is not a bad idea. Recently, I saw a vanity store, where women can buy all their accessories from human hair to jewellery amongst others.Surprisingly, they added Suya, Shawarma, pepper soup and other snacks to their service offerings. I concluded that the owners of this business are trying to ensure that their 10,000 customers have all they require from one spot.
How to retain your clientele
It is important for your startup to think about what else to offer to its range of clients. The best way to view this is to understand the space your business is playing in. Then you seek to understand the behaviour of your customers and see what complementary services you can offer. Imagine you are in a food business. Consumer behaviour suggests that people that buy food might also request drinks. Then you can offer drinks to these sets of customers.
A number of startups have expanded their business using this strategy. Hotels.ng started as an online hotel booking platform, but now, it has transited gradually to become a foremost online travel agent by adding other service offerings to its hotel booking business. Now on its platform, you can buy airline tickets or book a holiday package.
Cars45 is another example. It started as a platform for used car sales, now you can trade in your old car for a different one. Again, I applaud this quality of thinking. People want to buy a newer car, but they currently drive one. What typically happens is that the buyer will first have to look sell his current car, add a few hundred thousand naira to buy a new one. What Cars45 has done is that it has taken away that stress of you looking for a buyer for your old car. You can complete the transaction all on a single platform.
SureRemit just concluded an ICO to leverage Blockchain technology for remittance services to Africa. I believe that this offering is from learnings from its existing business – SureGifts. Relatives abroad want to send in cash for specific purposes including food for the family, relatives’ school fees or medicine for the grandmother. But a lot of times, some of these monies are misappropriated by the uncle that received the cash, hence the need to buy the value (through a gift card) rather than send cash. This same rationale can then be extrapolated to people trying to send cash to specific people.
Flutterwave started by providing payment infrastructure for businesses and other payment gateways, but now, through Rave, it is competing with some of its own customers. To stay relevant in this business, you have to own your value chain. Your business is as strong as its weakest point, please remember that.
I can go on and on about examples of Nigerian startups already doing this, but I think EVERY startup should look for ways to ensure that they add a lot more value to their current list of customers. So, in the coming days, I will expect PiggyBank to offer loan services at least to its consistent savers. This will no doubt serve as an additional incentive to save on the platform.
Defending your Turf
You, however, need to be careful that your startup is not an extension of another. This is a tricky point and it is dependent on how fast you grow. For instance, Facebook wanted to consolidate its position as the leading social media site. Based on consumer data, users prefer images and really short videos, hence the need to incorporate that into their business. Rather than building their own product, Facebook acquired Instagram. In other to deepen engagement with the younger generation, Snapchat was another interesting acquisition target. However, the founders of Snap were not willing to sell, hence Facebook was compelled to build its own Snapchat features on all of its platforms including Instagram and WhatsApp.
If your startup is an extension of another, you have to grow quickly enough to be a potential acquisition target. If not, you might just lose that space to the bigger company who will just build the feature on its own platform, thereby killing your startup.
In conclusion
- You need to diversify your revenue stream by ensuring that your customers have access to all they might need within that vertical from your platform. I am not saying that Hotels.ng should add online retail to its business. But I am saying that if it has Hotels listed, Holiday Packages, Airline Ticket, why not add a taxi service at least for airport pick up and drop off.
- Be careful if your business is an extension of an already existing (larger) business. This is because the larger business can just add the feature to its own. But if you grow fast enough, you can just be an acquisition target, or you might expand your operations to compete with the larger business. Anything can happen!
- It is all about creating value for the customers and ensuring that your business stands the test of time.
Happy Entrepreneuring
