If startups understood how telcos use incentive marketing to their advantage, we would have had more unicorns. Whenever I see people trying to ”optimize” the informal sector without understanding that there is a formula that already works, I just watch the cash burn.

Telco airtime credit is not on credit. The first lesson I learned from telco was risk management. The assumption MTN and Econet first made about the market was that it was for postpaid customers but they quickly realized their folly as defaulting customers almost ruined them.

The prepaid model was something adopted out of necessity as they were hemorrhaging cash. Infrastructure setup was expensive and prepaid required more distribution than postpaid. Postpaid was a service while prepaid was a commodity. MTN saw the commodity nature first before ECONET

What the informal markets in Africa are good at are distribution of commodities. Coca-Cola mastered it long before FMCG and subsequently MTN. While Econet was still spending on building distribution, MTN used existing commodity distribution supply chains but with a twist.

The incentive structure of MTN is brilliant. It turns the informal distribution networks into an active sales force. They then had more resources to focus on building infrastructure and get more coverage. The time Econet came around to it, MTN was very far ahead.

Commoditization of tech products is the only way they can scale in Africa. Commodities them and incentivize a sales force who will do your customer education and conversion as they earn.

In Uganda, the initial sales force for mobile money were barkeepers. They converted like mad

You have to ask yourself if the market really needs a service or a commodity. Services are very costly to scale in Africa. Commodities rule.