Insights on Consumer Pricing through the Lens of Bread

I have this cousin who could eat an entire loaf of bread. Amazing right? Funny too. Well, I didn’t find it funny at the time when he almost cleared the only loaf of bread and left me with little. To make matters worse, I love bread, so that didn’t sit well with me.

I’ve had several kinds of bread, both in shape and taste. I’ve always seen bread as a source of physical nourishment, until recently, something happened, bread was involved, and I observed a thing or two which I want to share with you.

For over a year now, Nigeria has been battling inflation. The prices of goods and services have been rising – petrol, diesel, garri, rice, beans, almost everything, including bread. Some of the effects of these increased prices are that people get less in quantity for the same monetary value. They also spend only on what they can afford, and in Nigeria, you’d be surprised that even an item as common as bread has different levels to which people can afford it.

For example, a bread brand – let’s call it Bread A - had gone from 350 naira to 500 naira within two months; and another brand, Bread B – very popular with long queues at its stand - had gone from 500 naira to 800 naira within the same timeframe. At this point, bread became a luxury. To make matters worse, Bread B also started reducing the size of its bread, but Bread A did not change its size (loaf quantity). I cringed when I discovered this, and it dawned on me that someone had just made a mistake and opened the door for a competitor to capture their market share.

Anyone who knows the Nigerian economy understands how important price is to Nigerians. It’s why we make some of the best hagglers in the world (please, this data is unverified). The best Nigerian bargainers are very decorated. So, imagine my surprise when Bread B, a non-bargainable commodity, increases its price and reduces its size (loaf quantity) too. Instantly, I put the bread down and opted for Bread A from the vendor.

In psychology, this is a bias called loss aversion. The loss aversion bias suggests that the pain of losing is psychologically twice as powerful as the pleasure of gaining. To put it in context, the pain of losing 300 nairas and some amount from the size of Bread B was twice as powerful as the pleasure of enjoying it. Even though I lost 150 nairas on Bread A, it was less painful than on Bread B, where I lost both price and loaf quantity.

Bread B lost me as a customer that day, and I bet many more of their customers left also. I am not undermining the challenges most bakers and bakeries face in Nigeria’s economy today (talk for another day). However, I have listed four alternative strategies below. Please note that the company’s internal goals and capacity also matter if these are to succeed.

1. By reducing the quantity and the price, customers could perceive it as cost savings.
2. Increase the price and increase the quantity just a little bit, but significant enough to be noticeable. Customers perhaps would empathize with them.
3. Create an entirely new product line with its pricing.
4. Tweak/adjust/optimize the production process.

If they had done any of these, they would have created a barrier to prevent other newer competitor brands from picking off their customers.

In conclusion, I understand fully that the price increase is justifiable, but when it comes to your customers, do more of what hurts less or doesn’t hurt at all, and if it’s going to hurt, roll it in a ball of eba (garri) and serve it with good soup, or better still, bread and tea.

Please, let me hear your thoughts on bread, pricing, and the Nigerian economic saga. Leave a comment, and I'll respond as soon as I see it.

Cheers!