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Editors Pick

How to standout in a saturated market

Saturated markets are everywhere.
A saturated market is an active market.

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FSDH Merchant Bank Ltd, Inflation rate, private sector loans, NBS

Key facts:

  1. Saturated markets are everywhere.
  2. A saturated market is an active market.
  3. There is always room for a unique business model in a competitive industry.
  4. The key to competition is product differentiation.

“You can’t sell sameness’’ is a major quote credited to former Coca-Cola marketing executive, Sergio Zyman, and one cannot deny that this quote holds a lot of merit in the light of product strategy and differentiation.

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You already know how it goes: Company X develops a new product or service, which becomes highly visible and eventually profitable. Others start seeing the dollar signs and decide to jump in on this cash cow. Before you know it, there are a lot of competitors coming out of the woodwork – seemingly all at once – all vying for the same customer naira.

While testing an unproven market can be expensive and risky on one hand, on the other hand, in a saturated market, there are clear signals about where opportunities lie, but it requires some strategic creativity. Here are the tips for becoming a bigger fish in an already large pond:

New products/product development

One of the most effective ways to break into a saturated or oversaturated market is by offering a product that is new to the industry or improving upon one that already exists. The goal is to offer something that will raise demand in the market and allow your business to take market share away from competitors. Be ready to look beyond what your business currently offers; you may be able to break into the industry by creating a product that improves upon one that the competition offers.

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[Read Also: Why your business should define its target market]

Lower the prices

In order to gain a competitive edge, it is of the absolute importance to lower your prices. If your products are clearly superior, it is okay if they cost more. However, you need a new plan if you offer the same product as your competitors. On the other hand, your prices can’t drop forever, because at one point you’ll start losing money.

Simplify the buying process

Simplifying the buying process can attract and retain customers because it reduces time wastage.
As a smart strategy, you are better off seeking additional payment methods like an e-commerce website or the use of a mobile app. Both approaches will ease your customers’ shopping experience and will ultimately increase your revenue.

Focus on customer feedback

Focus on staying consistent when it comes to listening to your customers, instead of investing a lot in analytic consultations and tools. Pay attention to what your customers complain the most about and have a social media management team to track the brand mentions on social media platforms.

People appreciate when they can reach and talk to your company directly and they don’t hesitate to be direct regarding all the shortcomings of your business or product. Your reputation plays a vital role in your business growth. The more effort you make to ensure customer satisfaction, the more chances you’ll have of gaining a favorable reputation. That is why you need to listen to what your customers have to say about your work and use the feedback to fix certain issues and improve your product.

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[Read Also: Gokada suspends operation in Nigeria two years after establishment]

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The key to competition is product differentiation

The worst thing you can do when entering a saturated market is to copy the strategies others use. Don’t look at an industry to see what your competitors are doing; look to see what they are not doing then find a way to provide that exact thing in a perfected manner that cannot be rivaled.

Define your strengths and what makes you different and leverage them to gain a competitive edge. Whether you’re reinventing industry standards, creating a new business model or improving a process, differentiating yourself is one of the most effective ways to thrive.

To figure out what opportunities you have to brand yourself in a way that sets you apart, answer the following questions:
• Are there any needs or desires of my target market that are not currently being marketed by any of my competitors that I could market?
• Are there any subgroups within this target market that could be focused on?
• What marketing or branding opportunities are none of my competitors taking advantage of?
• What marketing tactics or branding efforts are overdone?
• Are there any promotional, branding, or experiential tactics used in other industries that are not being used in mine?

Stay on Top of Trends

No matter how saturated the market, consumer demand is never stagnant and keeping your finger on the pulse of the industry keeps you relevant and poises you for success. Smart businesses act on these trends and update their inventory accordingly. Always keep an eye open for market changes and opportunities that may allow you to outperform your competitors. Customers appreciate businesses that anticipate their needs and provide them with surprising products or services that they weren’t even aware they needed.

Add value

Offering incentives and value-added services is another smart strategy to consider when preparing to enter an oversaturated market. Are you offering frequent buyer programs? Reward levels? Dedicated personnel? Not only does adding value attract a larger audience, it strengthens customer retention, which leads to long term growth.

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Customers want to ensure that they are getting their money’s worth, so they’re always on the lookout for the best and most cost-effective solutions. If they perceive more value in your goods than your competitors’, they are likely to pay more for your services/products. By offering small perks to loyal customers, for example, you encourage future purchases, generating growth.

[Read Also: How to get rid of ‘outrageous’ electricity bills]

Provide Variety

An old investment rule says that you shouldn’t put all your eggs in the same basket. This stays true for your business, especially if you’re competing in an oversaturated market. The competition is already fierce, so you don’t want to play all your marbles on just one product or service. By diversifying your products, you increase your chances of capturing every part of the market.

Conclusion

Penetrating an oversaturated market poses its own unique set of challenges and rewards. With each passing day, new businesses emerge, making the marketplace more crowded than it already was.

As such, staying competitive and relevant may seem borderline impossible. But, where most people see a roadblock, savvy entrepreneurs see an opportunity. Highlight what makes you different, always look for new customer needs and demands and ensure your products deliver high value and you will gain a competitive advantage.

These ideas are just a few good solutions to stay ahead of your competitors. They can be combined with others or used alone to further improve your business model. The best thing is that these ideas are very flexible and can easily be integrated into almost any industry. An oversaturated market may be a difficult environment to grow your business, but that doesn’t mean it lacks the opportunities or the potential for business growth. If you have a good strategy and a good angle to work with, you will have a chance to successfully grow your business, no matter how crowded the market is or how strong your competitors may be.

1 Comment

1 Comment

  1. Anonymous

    December 10, 2018 at 8:19 pm

    One of the best articles ever written on nairametrics. It couldn’t have been said any better! Kudos to the writer.

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Editors Pick

DEVALUATION: CBN updates website to official rate of N360/$1

The central bank of Nigeria has devalued its official exchange rate from N307/$1 to N360/$1.

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CBN website states oil price is still $61, Naira under pressure as Nigeria records poor export earnings, 4 key sectors the CBN plans to pump money into

Just as Nairametrics reported, the Central Bank of Nigeria has devalued its official exchange rate from N307/$1 to N360/$1. The apex bank has now reflected this change on its website signaling a confirmation. The bank is yet to issue a press release to this effect.

The CBN has now officially devalued by 15% moving from N307/$1 to N360/$1. Depreciation at the “market-determined” I&E window is 5% having moved from N360/$1 to N380/$1

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Devaluation: Nairametrics reported yesterday that the Central Bank of Nigeria (CBN) sold dollars to banks at N380/$1 in a move signifying a devaluation of the currency. Banks trading at the Investor and Exporter (I&E) window bought dollars at N360/$1 from the CBN on Friday, March 20, 2020. The I&E window is the official market where forex is traded between banks, the CBN, foreign investors, and businesses. The central bank typically buys or sells in the market as part of its intervention program.

The CBN has updated its website with the official exchange rate.

Nairametrics also got hold of a letter from the CBN to banks informing them of the new exchange rate for dollars flowing from the International Money Transfer Operators (IMTOs). According to the CBN, IMTOs will sell to banks at N376/$1 while banks will sell to the CBN at N377/$1. The CBN will sell to BDC’s at N378/$1 while the BDC’s will sell to end-users at “no more than” N380/$1.

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Single Exchange Rate: A report yesterday also suggested that the CBN also planned to move to a single exchange rate policy for determining the price of the dollar. A senior central bank official who does not want to be identified, said, ‘Today we allowed the rate at the importer and exporters (I&E) window to adjust in response to market developments.’

The central bank has now made an apparent u-turn after it had initially that the “market fundamentals do not support naira devaluation at this time” detailing reasons why it did not need to devalue.

Falling oil price: Oil prices fell to under $20 on Friday before climbing back up to settle at $23 per barrel. Nigeria’s Bonny light trades at $26 while the benchmark Brent crude trades at $29 per barrel. In response to the crash in oil price, Nigeria’s announced a cut to its 2020 budget by N1.5 trillion as it faced the reality of a potential drop in its revenues. Nairametrics also has information that state governments are getting jittery about their ability to sustain salary payments as a reduction in their federal allocation “FAAC” is anticipated.

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Career tips

Investment options for salary earners

Investment options for the salary earners
#Investing #Entrepreneurs #Investment #Salary #Wages

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Investment options for salary earners - bank loan

Recently, one of the readers of my articles asked to know what investment options are open to salary earners. A salaried individual is like everyone else except that he or she has a fixed monthly income. This implies that their investments and expenses have to be managed strictly according to their fixed monthly income.

Since salary is assumed to be the only source of income for the salaried, it is advisable that such an individual fortify himself financially before investing so that adverse investment performance will not have untold effect on him and his family. Therefore, if you are a salaried prospective investor, you need to:

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Get life insurance

Most families in Nigeria are single income families so much such that if anything bad happens to the income earner, the family gets shattered, at least financially. Again, given the risks inherent in capital market investments, it is only prudent to have a life insurance as a first step in one’s investment journey. It is very baffling to see many investors very deep into the market, yet they do not have life insurance.

[Read Also: Understanding the risks in bond investing]

Life insurance is and should be a basic part of any financial plan. Life insurance is a protection for loved ones against financial hardship arising from the death of a breadwinner. This is even more important today than ever before with high cost of funeral expenses, college education and medical bills. So, the first investment option for a salaried individual is to get a life insurance.

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Prepare for financial emergencies

Life is full of surprises, emergencies do happen, jobs are lost without notices, and even good investment opportunities emerge sometimes suddenly. There is, therefore, the need for a cash reserve to help weather the financial storms and emergencies when they come calling.

Cash reserves do not only provide for emergencies, they also help to ensure that investments are not liquidated prematurely or at inopportune times to cover unexpected expenses. There are no hard and fast rules on what the exact amount of the required cash reserve should be, but most financial experts and planners will advise that an amount that equals about six months of living expenses be set aside.

So, as a salaried person, your next investment should be to have a cash reserve. A cash reserve should not necessarily be in a savings account or under the mattress; it could be in an interest-bearing money market account, money market mutual funds with low to zero luck-up period or another form of very liquid investment that is readily convertible to cash without loss of value.

[Read Also: Understanding the risks in bond investing]

Know your risk appetite

As a salaried and fixed income individual, your risk appetite is most likely going to be low as well as your risk tolerance, although your extended family profile could change all that. You need to know or understand your risk tolerance before you engage in any capital market investment.

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Your risk tolerance will and should drive the type of investments you go into. Your risk tolerance depends on your psychological makeup, your current insurance coverage, presence or absence of cash reserve, family situation, and your age among others.

Patricia

Talking about family situation, it is reasonable to think that a married individual whose children are still in school will be more risk averse than an unmarried person. On the other hand, older people have shorter investment time horizon within which to make up for any losses. the reason for this is because the older you get the less time you have to work to recoup on losses.

In that case the risk tolerance of an older man will be less than those for younger folks. Again, the more cash reserve and insurance coverage you have, the more your propensity to take risk. Now having known your risk tolerance based on the underlying factors, you can then define your investment objectives

[Read Also: Important tips on how to profit in a bearish market]

Set your Investment objectives/goals

Having met those essentials above, you are now ready for a serious investment plan or program. A good investment plan starts with investment objectives. Investment objectives are the force that determines what you invest in. Investment objectives range from capital preservation, to capital appreciation and constant income generation.

Capital preservation as an investment objective implies that you, the investor, aim at minimising the risk of loss by maintaining the purchasing power of your investment. So, if you are risk averse or you will need money from your investment soon for children’s education or for building a house or you are nearing retirement, this should be your objective.

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Investors whose aims are to see their investment portfolios increase in real terms over a period of time are better suited for capital appreciation as an objective. This is better for investors that are more risk tolerant and those with more potential to recoup on losses along the way.

If you are already retired or nearing retirement, and therefore depend on your retirement plan supplemented by investment income, you need an investment that generates income rather than capital gains. In that case, your investment objective should be current income generation. It is always good to have investment goals stated in terms of risk and returns.

[Read Also: I-Invest generates over N2 billion transaction in less than 6 months]

Decide on asset allocation

Armed with the knowledge of your risk appetite and investment objective, you are now ready to decide on what to invest in, and how much to invest in any asset class. This takes you to asset allocation decisions. Asset allocation involves dividing an investment portfolio among different asset classes based on an investor’s financial requirements, investment objectives and risk tolerance.

A right mix of asset classes in a portfolio provides an investor with the highest probability of meeting his/her investment objectives. Asset allocation is the most important investment decision an investor can make in a portfolio because it demonstrates an investor’s understanding of his or her risk preferences and return expectations.

It is good to strive for a diversified portfolio. Unfortunately, the Nigerian market does not provide a lot of asset classes for optimal diversification, but diversification can be achieved across sectors or industries within the few asset classes in the Nigerian stock market.

Decide on how to invest

There are different ways to invest in the capital market. You can invest directly by making the stock selections by yourself, thanks to the online stock trading platforms that abound the world over. This implies that you have what it takes to conduct the required research and analysis of the companies whose shares or stocks you wish to buy.

[Read Also: How I Would Invest My Mother’s Retirement Funds]

It also implies that you have what it takes to know when to sell or add to existing positions. Another method is to have someone “do the heavy lifting” for you. In this case, that someone, often times called fund manager or portfolio manager, does the research and analysis and selects shares that suit your investment preferences, investment objectives, risk tolerance and appetite as well as your investment time horizon.

This route is most suitable for investors that lack the knowledge and time for the required research and analysis. If you decide to go this route, mutual funds are the best bet for you.

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Atiku kicks as Buhari spends $3.7 billion in foreign debt service since 2015

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Budget: FG completes just 31.7% of constituency projects, Nigerians react to President Buhari's signing of Finance Bill 

The Buhari led government has spent about $3.7 billion in foreign debt service since 2015, one of the highest from any democratically elected government. The highest single-year foreign debt service was in 2006 at $1.79 billion.

About 68% of Nigeria’s foreign-denominated debt servicing is in commercial Eurobonds issues over the last two years. The loans range between 5.1% and 9.2% per annum. Nigeria’s external debt stock stood at $27 billion in June 2019.

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Rising debt service: The Buhari administration has so far spent about $1.1 billion in foreign debt service this year. In 2018, the government spent about $1.4 billion in debt service, more than 3 times the $444 million it spent servicing foreign debts in 2017. The rising cost of debt service is a direct attribute of the government’s reliance on foreign loans as a means of funding government expenditure.

Debt service since 2003. Source: CBN. Nairametrics Research (C)

Foreign Loans: Nigeria’s fallen revenue following the crash in oil price has allowed President Buhari to rely mainly on foreign loans to fund government expenditure. As of June 2015, Nigeria’s foreign loans were about $10.5 billion mostly made up of multilateral and bilateral loans.

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However, by June 2019, total foreign-denominated loans were $27 billion with $10.8 billion made up of Eurobonds. Commercial loans which include Eurobonds and Diaspora bonds make now make up about 42% of total foreign borrowings.

[READ ALSO: Babatunde Fowler attributes FIRS success to technological innovation (Opens in a new browser tab)]

Critics of the government have complained about the government penchant for debts believing that it could put the future of younger Nigerians in jeopardy. Supporters of the government, however, believe the borrowing was necessary to invest in critical sectors of the economy particularly infrastructure.

Recently, Director-General of MAN, Segun Ajayi-Kadir expressed worry about Nigeria’s rising debt.

“….the rising debt profile of Nigeria continues to be a cause for concern, especially the capacity of government to effectively service it and, at the same time, meet the bursting needs and aspiration of the citizenry going forward.” 

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“Already, our budget projections for 2020 anticipates a debt service sum of 2.45trillion, an amount higher than the 2.14 trillion earmarked for capital expenditure. 

Patricia

“And even though our debt-to-Gross Domestic Product (GDP) ratio, which currently stands at 28 percent, is still below the average in Africa, our revenue-to-GDP ratio remains low.”

The Finance Minister Zainab Ahmed however, believes the current debt profile is sustainable, comparing it to our GDP.

“Currently, Nigeria’s debt is at N25 trillion; that is about $83 billion. And at $83 billion, we are just at 18.99%…so 19% debt to GDP. I hear people say Nigeria has a debt problem. We don’t have a debt problem. What we have is a revenue challenge and the whole of this government is currently working on how to enhance our revenues, to ensure that we meet our obligation to service government as well as to service debt.”

[READ ALSO: Babatunde Fowler attributes FIRS success to technological innovation (Opens in a new browser tab)]

Former Vice President and defeated PDP Presidential aspirant, Atiku Abubakar during the week piled criticism on the government’s borrowing.

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“I have said it time and again. The business of government is too serious to be left in the hands of politicians. We must all ask questions because if they throw away the future, it is not going to be their future they are throwing away, it will be all our futures.

“The fact that Nigeria currently budgets more money for debt servicing (N2.7 trillion), than we do on capital expenditure (N2.4 trillion) is already an indicator that we have borrowed more money than we can afford to borrow. And the thing is that debt servicing is not debt repayment. Debt servicing just means that we are paying the barest minimum allowable by our creditors.

What this means: Nigeria’s rising foreign debt profile should be a worry to investors and businesses and must be watched closely. The country’s ability to repay these loans will continue to be harder as it increases especially now that it is costing about 9%. The immediate risk for investors is the exchange rate which could be the first to suffer should the government struggle to repay its loans.

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