Strategies to adopt when managing your IP in Nigeria
Managing your IP in Nigeria requires the right approach and strategy. Let us start by having a clear understanding of the word name when applied to a brand. A name is a word or group of words by which a person, place or product is known. In the product market economy, a product is known by its brand name. The brand name distinguish one product from the other even when the products does the same function. A brand name is the name given by the manufacturer to distinguish its products as produced or sold or may be used and moreover protected. Such name becomes an intellectual property of the manufacturer.
Some brand names are well known and usually highly regarded by consumers or end users while some other brands name are not well known. Building a brand name that stands out and that is synonymous with great value to consumers requires huge financial and long time investment. These investment had created a long term associated value in the heart of the consumers and end users. These value factors could be product quality, product ease of use, product warranty, after sales support services etc. These brand associated values are what make a product marketable in any market economy. When the associated values are compromised or counterfeited, this leads to loss of consumer confidence in the brand name and hence loss of revenue for the product originator or manufacturer.
Destroying a brand name does not require huge financial and long time investment or loss by those involve in the racket. Rather those involved in this operation steal from where they did not sow. Originally, it is noteworthy that real manufacturers or originator companies are usually known with huge amounts being spent to develop the quality and brand image and attention needed. The counterfeit electrical products are of lower quality, it confuses customer about the quality of the originator’s guarantee or warranty and hence reduces the premium they command.
Thus, the counterfeit might have been trading on the name and the quality of the originator’s products, which is as a result of imitation of an invention in the absence of patents. The electrical products counterfeiters in Alaba are free riding. As observed over a long time the counterfeiter does not incur the costs of branded product, as the counterfeiter takes part of their market and pays no royalties. Many times the reason could be for economic reasons by those involved in the counterfeiting racket. But it seems that there are more reasons to this racket as we have observed, destroying the brand names. This could mean making the brand name irrelevant in a competitive market. But in all times the reasons are simultaneous.
Counterfeiting a products for economic reasons also leads to destruction of the value and trust associated with that brand and hence rendering that brand irrelevant in the market. This makes it easier for new brand names to spring up and compete favourable and in most cases becomes the leading name in that industry and in that market. Our research had proven that this could be the major motives as we suspect that the Alaba International Market product counterfeiters are so well networked and so well funded all the way from Asia (China and Malaysia to be precise). The counterfeit products are well made and even for instance a someone working in ABB production line might find it difficult to distinguish the fake and the original ABB product
In 2014 South Africa relinquished its status as the largest economy in Africa to Nigeria. At an estimated US$828bn, Nigeria’s GDP became roughly 1.3 times bigger than its Southern African peer, accounting for 20% of Africa´s total purchasing power. There are 18 other noteworthy countries with market sizes greater than US$30bn – Algeria, Morocco, Tunisia, Sudan, and Libya; Ethiopia, Kenya, Tanzania and Uganda in East Africa; Ghana, Cameroon, Chad, Ivory Coast, and Gabon in West Africa; the DRC in the central Africa; and Angola, Botswana, and Mozambique in Southern African. Independently these countries comprises a fraction of Nigeria’s total market size but are considerable when taken as a whole equating to US$714bn. Of the remaining 32 countries,seven are larger than US$20bn, less than a third are between US$10bn and US$20bn while the remaining 15 makes up a mere 1.7% of Africa’s total market share.
The larget economy in Africa had became the source and dumping ground for fake and substandard products. According to standard organisation of Nigeria (SON), 40% of Goods in Nigeria are substandard and counterfeit. Those severely affected are electrical manufacturing companies or electrical brands that are well known or has gain high reputation in the Nigeria markets such as ABB, Legrand, MEM, MK and Tenby. These brands lose over US$72bn yearly to counterfeiters in Nigeria.
Product counterfeiting include trade mark infringing goods, as well as copyright infringements. It also includes copying of packaging, labelling and any other significant features of the electrical product. In Nigeria as at today, the scale of this problem is not well documented and hence under estimated, but it is a common knowledge that there are enormous counterfeit electrical products. Nigeria is now African hub for all counterfeited electrical products. Threat this pose to end users and consumers are enormous. Apart from distributing the fake electrical within Nigeria through whole sellers and retailers, 99% of counterfeited electrical products found in other West African countries originate from Nigeria while 57% of the fake electrical products found in other African countries excluding West Africa also originate from Nigeria.
The product counterfeiters in Alaba and other markets in Nigeria are getting bolder everyday and even most times they indirectly force consumers to purchase the fake electrical products. “They will say this is fake (AkuruKu) and this is original. The fake is very cheaper and still does the same function as the original products”. Most times the fake electrical products are 75% cheaper than the price of the original products. Majority of end users want to save money and they will definitely prefer the fake products. Also electrical products installation contractors, when they visit Alaba to purchase products for clients, many of them already have agreement with the counterfeiters, the contractors will assist convince the buyer that the fake electrical products are even better and cheaper. It is really a free ride for all these counterfeiters in Alaba.
On Thursday 19th May 2016 as part of SON efforts to rid the Nigerian market of sub-standard electrical goods, the Standards Organisation of Nigeria (SON) seized substandard foreign electric cables worth millions (more than 11 millions of naira) of naira in Jos/Bukuru metropolis of Plateau State, sealing off affected shops. According to Mr. George Musa, Plateau Coordinator of SON, who led the raid on the shops, said that the exercise, which would be continuous, was aimed at ridding the country of fake and substandard products, noting that the organisation started with electric cables because electric cable is one of the products categorized as life-endangering. Electrical product counterfeiting in Nigeria had been of the increase. It is really hard to determine or say how much loss to counterfeiting but the effect had been enormous. The major issue is that electrical product counterfeiting is real so as the dangers pose by the fake electrical products.
In December 9, 2015 the defunct Nigerian Telecommunication, NITEL building in Lagos Island Local Government was damaged by fire, property was damage which worth could not be ascertained. Investigators said that the cause of the fire was fake electrical products that was use in the building. Also in December 22, 2012, Fire razed NAFDAC`s Warehouse in Lagos. According to Mr. Abubakar Jimor, the deputy director public relations, NAFDAC, the cause of the fire was the use of fake electrical products. The Akwa Ibom State Fire Service Department said on Sunday that the government lost property worth N897.13 million to fire in the state in early 2015. The Director of Fire Services in the state, Ndareke Ukpe, told the News Agency of Nigeria in Uyo that some of the incidents occurred in 71 residential buildings. Ukpe said that others occurred in 59 market stores and 42 government buildings. He, however, said the department was able to save property worth N94.06 billion during the period. He attributed the cause of the fires to the residents use of fake or substandard electrical materials in the buildings. To mention but a few fire and death incidents caused by fake electrical products, they are enormous. Many life are loss daily in Nigeria and other West African countries due to the use of the fake electrical products in homes and facilities.
It is hard to come across an original electrical product in Nigeria, without not seeing the counterfeiting products alongside. This trend has also been noticed in drugs or better put pharmaceutical products. In any case, there comes the need to consider some actions to get rid of the fake electrical products in Alaba and seal off all the shops that are involved in this operations. Keeping silence by the brand owners does not in anyway give any moral justification for the issue. Many end users that bought these fake electrical product did that out of ignorant with the hope that they bought original electrical products.
According to Bosworth and Yang, 2002, (i.) trademarks and branding lead to higher future consumer welfare because they encourage discretionary investments such as RPD, advertising and training and also (ii) counterfeit goods cause confusion and therefore reduce consumer welfare. Over the years we have experienced and observed a trend, – about 3 to 4 years ago, Nigeria electrical whole sellers imports the fake electrical products branded in China to Nigeria. These fake electrical products also came in three different grade. The first, then second and then third grade were all substandard. The importers sold the fake electrical products same or sometimes little lower price to the original electrical products. The 99% end users / consumers could not distinguish a fake electrical and the original electrical products. About 2 years ago, the dealers now imports the product to Nigeria unbranded. The branding and labelling of these counterfeit products are now professionally done in Nigeria. The counterfeiters had over the years become well skilled and organised in their operations
ABB, MEM, MK, TENBY, LEGRAND, SCHNEIDER are the electrical products brands commonly affected. The originator’s brand image are been damaged, thereby reducing the company intangible assets, market valuation and their returns on discretionary investments . From the research result carried out in Alaba recently by investigators, the consumer confidence for these brands are fading. 70% of consumers prefer some China electrical products brands such as Chint and AKT. 6 out of 10 consumers sampled claimed that they prefer Chint brands over ABB, legrand, MK, MEM Tenby and Schneider because the it is very difficult to see fake of these brands in Alaba. 60% consumers sampled said that they do not see any difference anymore between ABB, MEM, MK, TENBY, LEGRAND, SCHNEIDER and the China electrical brands in the market. According to one importer in Alaba who want to unanimous,he said that they are same these days, no difference again between China made electrical product to those made in Europe and America. Also we sampled some of the electrical dealers in Alaba market, 7 out of 10 of those interviewed claimed that the electrical products sales from original ABB, MEM, MK, TENBY, LEGRAND, SCHNEIDER had declined because consumers are loosing confidence in these brands especially the originals and even prefer to purchase the fake. The group claimed that consumers complain of the numerous fake of these products and hence prefer to purchase the China electrical brands such as Chint brand. The consumers claim that Chint brands does not have any known fake in the market at the moment.
There are 11 biggest electrical market in Nigeria, all these 11 markets gets its electrical products supplies from Alaba. The markets are Alaba Market, Onitsha Main market, Ariaria Market, Idumota/Balogun Market, Kurmi market in Kano state, Oja Oba Market Ibadan,Jos Main Market, Ogbete Main Maket Enugu, New Market Aba, Nnewi Market Anambra and Bodija Market in Ibadan. Managing your IP in Nigeria requires a deep understanding of these markets dynamics.
Alaba Market is the hub where all the traders in all other major Nigeria markets gets supplies of the counterfeit electrical products. The research had shown fading of these major electrical brands (ABB, MEM, MK, TENBY, LEGRAND, SCHNEIDER) as a result of the prevalence of counterfeiting in Nigeria. The research showed that the Alaba electrical counterfeiting ring are preoccupied to fake what other companies have originally produced in a substandard manner. This implies that very soon and if care is not taken, most of the originator companies of the identified counterfeited electrical products would be displaced in the Nigeria market, and could extend to other West African countries in general. Consumers willingly buy fake electrical products. It had became a buying culture embedded into almost all fabrics of Nigeria economy. Every shop in Nigeria has a fake type displayed alongside an original counterpart. In most cases all the types will be fake. Poorly financial status of most Nigerians and West African consumers had made counterfeiting trading to thrives very well in Nigeria and other Africa countries.
A key to combating fake electrical products in Nigeria lies with understanding why people buy them. Our study here in Nigeria has shown that two types of counterfeiting takes place in the electrical products business.
In Deceptive Counterfeiting, a customer does not know he has purchased a counterfeit product. He is deceived into believing that he is being offered the original product. 85% of buyers fall into this category. In Non-deceptive Counterfeiting, the customer willingly buys the counterfeit product and knows he has bought a counterfeit product. About 15% of buyers fall into this category.
From our research, Nigerians buy counterfeit products due to the following reasons:-
The relatively lower price and a strong desire to cut cost of acquisition of electrical products. This is particularly common among skilled workmen and contractors who want to maximize profits at the expense of their client.
A strong desire to demonstrate “status” and “class” usually when they do not have the funds to buy genuine products.
A negative attitude towards BIG/GENUINE brands. This may be due to the fact that they feel BIG/GENUINE brands charge unfair prices.
Therefore in this type of market, brand owners should have band protection strategies that is consistent and contain synergistic package of measures to ensure the protection of their IP and brand image.
We therefore recommend a strategy which is hinged on three approaches when managing your IP in Nigeria:-
In a complex electrical products market like Nigeria, campaign and public awareness targeted at the consumers and buyers of electrical products will demobilize counterfeit activities and significantly reduce (about 55%) the purchase of counterfeit electrical products by the Nigeria public, thereby increasing the purchase of genuine products.
This is an effective approach when managing your IP in Nigeria for complex markets like Nigeria
It is either to remain competitive or go into extinction. The choice is YOURS.