[BLOG] Barry Coetzee Column: Future Product Mythology
My company recently launched an MPos product and made it available to Acquiring banks. An MPos product consists of an App on a mobile device which drives a scaled down EMV terminal via Bluetooth (the region we operate in is mandated EMV Chip and PIN). We source these EMV terminals from a UK based company which is currently the largest supplier of these terminals worldwide. As a matter of fact, there are currently only two suppliers of EMV Chip and PIN certified MPos terminals worldwide, and this is the source of the mythology that I want to share with you.
As we actually have an MPos product, we understand the realities around delivering the product and sourcing the components. However, a lot of the MPos terminals suppliers are desperate to get into the game. So at a recent payments exhibition there were several manufacturers who had (future) products on display. These (future) products were actually their main display and the thrust of their promotional activity. Obviously these manufacturers are aware of the incumbents (real products) and of the fact that most players in the terminal hardware space are racing to release products. What I found bizarre is that each one of them had chosen the exact same number as their guidance price – USD 60!
Not only had these manufacturers all independently chosen this amount, which is substantially cheaper than the two products already in the market, but this amount just happens to be identical to the amount chosen by two competitors of ours (who were not at the exhibition) who also have given potential customers guidance pricing for the future release of their products. One of which mentioned the USD 60 number as early as November 2012!
How did all prospective players in this brand new field with these brand new products all decide on exactly the same price? Especially as these suppliers are from diverse corners of the world.
After spending far too much time mulling over this bizarre co-incidence, I have come to the conclusion that it is not a co-incidence. I am convinced that it is a consequence of ultra-commoditisation. Payment terminal manufacturers operate in a highly regulated industry. They therefore produce highly commoditised products. This has been the situation for many years now. So they actually KNOW what price point a product will have to achieve in order to be successful in the market. As the entire industry is hyper-commoditised it is therefore not surprising that they all came up with exactly the same number. To support this argument we can add that most of these terminals are made in the same places using the same parts so it makes further sense that they all got similar quotes from their manufacturers.
The impact of this on the industry is staggering. If all terminals have to have the identical specifications (to meet regulations), and if all these terminals have the same manufacturing costs, and all their sales people know what the market price will be, then why are certain customers paying a lot more for terminals than others? Maybe there is another buy side mythology around what a buyer is getting for the extra costs?
Author: Barry Coetzee,
South Africa
Barry Coetzee is a regular columnist on Africa Business Communities
