Low cost home internet taking shape in Kenya

By Victor Magunamu, Kenya

Kenyan internet consumers prefer low cost internet from smaller firms than high speed from large firms which end up including their huge operational budgets in data cost, a poa! Internet study has revealed.

According to the survey conducted in August and released today, four out of five respondents to the social media poll conducted by poa! Internaet in August 2018 said they did not want to cover the cost of lavish headquarters, executive entertainment, or hefty marketing budgets in their own internet subscription.

This preference for low-cost services is rising, as consumers find their budgets further squeezed by extra taxes and higher costs across multiple goods, including fuel and airtime.

"The association that Kenyan consumers typically have between high price and high quality is still there – as we saw in our poll from the 17 per cent who wanted to cover the extra HQ and marketing costs in their Internet subscription,’’ Andy Halsall, chief executive poa! Internet said.

He added that customers have started to view home internet as an essential utility and seek only speed, reliability and service, without paying a premium for a grand brand.

For the larger brands offering premium price home connections, hefty brand and glamour budgets are typically adding several hundred shillings a month to customers’ internet bills.

In 2017, for instance, one leading internet provider with a premium consumer home internet service spent Sh6.3bn on advertising and Sh1.5bn on property rental, transport and extra accommodation for its staff, generating billions in costs that needed to be recouped in its product pricing.

By contrast, poa! Internet, which is Kenya’s most rapidly growing internet provider, has opted for subdued offices and scant marketing in a bid to offer a top-quality technical service for minimal pricing.

This faster growth for low-cost suppliers has also been found globally, with Harvard Professor Nirmalya Kumar concluding that low budget companies tend to pull ahead of competitors because they deliver the basic product for lower prices thanks to superefficient operations that keep costs down.

In the UK, for example, 2017 research by GlobalData, a market intelligence company, shows the country’s retail market will be dominated by discount retailers by 2022, with low-cost sellers set to gain £9bn (Sh1,215bn) in sales over the next five years as consumers look for bargains.

 

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