South Africans will enter the December period under immense pressure, reeling from the first interest rate hike in years, which came hot on the heels of the latest fuel price increase which sent the country into record territory. However, businesses looking to be part of the consideration set of consumers in these difficult circumstances don’t necessarily have to come in the cheapest. Instead, says Ridwan Gany, CFO of Petrocam Lubricants, in times like these, value is king.
“This is not to say price doesn’t matter, of course it does,” says Gany. “However, if brands all battle down to see who can hit the shelves the cheapest, they risk pricing themselves out of business while losing something else that money can’t buy: the perception of quality and the loss of value-add to the customer.”
He explains that consumers tend to associate quality with price. “There’s no denying that consumers see value and price in a directly proportional relationship – until a certain point. After that, it becomes exclusionary, and you risk falling off the other side of the cliff.
“Hitting that sweet spot between a good, fair price for the value you offer, and being affordable enough – especially during difficult times – is crucial. If you look at our engine lubricant sector, there are entry-level providers that low-grade blends at very low prices and frankly, people get what they pay for.
“On the other hand, some of the big multinationals sell their very good products at a premium, especially in the fully synthetic lubricant range. This adds to their prestige in the minds of the consumer,” he says.
Gany adds that a challenger brand, which is able to offer a similar quality and spec product, faces a pricing dilemma: use the business agility to squeeze margins and come in at an even bigger discount and risk being seen as “cheap” or not profitable enough to continue competing, or try fight the multinational battle and come second based on existing perceptions. “On the other hand, we have determined that when you hit that sweet spot, you operate in the value-for-money zone,” he says.
This value-for-money zone, says Gany, provides the perfect opportunity to educate users about new brands and products in a wide range of industries. “In good times, when there is more disposable income, there may not be an appetite to try something new. However, given our current economic environment, consumers may well be amenable to trying new brands without feeling as though they are giving up quality for cost savings.”
He says that while this strategy has worked well for Petrocam in other African regions such as Nigeria – where it also has a fleet of filling stations – and in South Africa, where it sells direct to consumers through digital platforms such as Takealot.com as well as through a distributor network, it won’t work if the product on offer is not up to par.
“We live in 2021. We live in the era of savvy consumers who are well-informed. There’s little point positioning a brand as a quality alternative and then selling inferior product. There must be substance to the claims being made.”
