Case Detail

Case Summary

M-Pesa and Mobile Money in Kenya: Pricing for Success

Case Number: 5-213-250, Year Published: 2013

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Authors: Sarit Markovich; Charlotte Snyder

Key Concepts

Competitive Strategy, Corporate Strategy, Economics, Growth Strategy, Innovation, Marketing Strategy, Network Effects, Pricing Strategy, Two-Sided Markets

Abstract

The Kenyan government’s announcement of a new 10 percent tax in March 2013 threatened the future prospects of M-Pesa, Safaricom’s mobile money transfer service, which had revolutionized the way money moved in Kenya. The new tax would be levied on all cash transfers but was largely targeted at M-Pesa, which controlled around 80 percent of the cash transfer market. In response to the new tax, Safaricom, the mobile communications market leader, announced a 10 percent price increase.

The case presents the structure Safaricom established in order to develop a mobile money transfer service in Kenya. As a concept, M-Pesa was unprecedented in Kenya: prospective customers had to get comfortable with the idea that a mobile communications company could provide a payment system, that transactions could be initiated through a mobile phone, and that nonbank outlets could provide cash-in/cash-out services. Even when the concept was accepted, however, customers needed a convenient network of agents to handle transactions, and stores needed to see demand from customers in order to be motivated to become agent outlets. Thus, in order to grow, M-Pesa needed to aggressively pursue and acquire both customers and agents in this two-sided market.

Learning Objectives

After students have read and analyzed the case, they will be able to:

  • Understand the complexity of pricing in two-sided markets
  • Evaluate the profitability of different pricing strategies in two-sided markets
  • Understand the effect of an innovation on the creation and capture of value
  • Identify possible threats to competitive advantage in two-sided markets as well as in developing countries
  • Understand the value of co-opetition and how cooperation with competitors and complementors can increase a company’s profitability
  • Number of Pages: 17

    Extended Case Information

    Teaching Areas: Strategy

    Teaching Note Available: Yes

    Geographic: Kenya, Africa

    Industry: Financial Services

    Organization Name: Safaricom

    Organization Size: Large

    Year of Case: 2013