By Oluwole Dada
In our last series, we discussed how unrealistic ROI expectations can kill a product before they mature. Since this is a very serious and well overlooked factor that has led to the disappearance of many products, it becomes pertinent to speak more about it this week. When investors are not patient enough in relation to market realities, it will lead to the products being overpriced when compared to its peers and this leads eventually to decline in sales and a gradual extinction.
Toyota’s Toyopet failed in 1950s America: underpowered for highways and overpriced against domestic alternatives. Toyota withdrew, retooled and returned a decade later with the Corona, rebuilding costs and pricing around American consumers. The decisive change was not engineering but the financial model underpinning commercialisation. Toyota’s leadership learnt that American buyers would not pay prices designed to recover investment on a Japanese timetable. Resetting the payback period was essential to aligning the product with market realities and enabling its commercial success.
Every product has an appropriate price for its market at a particular time, yet businesses routinely exceed it, usually because of investor pressure rather than market misjudgement. Pricing above what consumers will pay slows volume growth, limiting economies of scale and keeping unit costs high. Cutting prices then becomes difficult without destroying margins. The business enters a spiral: prices are too high to generate volume, while volumes are too low to support price reductions. Meanwhile, competitors with more realistic financial structures capture consumers. The resulting disadvantage reflects a mismatch between investment expectations and market realities, rather than a simple pricing error.
In the Nigerian beverage market, several premium product launches have stalled because the price required to recover investment was positioned above the threshold that the target consumer segment would routinely purchase. Guinness Nigeria’s portfolio decisions over the years reflect an ongoing navigation of this tension leading to maintaining premium positioning for certain brands while developing more accessible price points for volume brands, precisely because the financial model for each product must align with the consumer’s economic reality, not the investor’s return preference.
Business managers at every level of an organisation, not only those in finance or strategy, must understand that environmental analysis is not a box to tick before proceeding with a plan. It is the foundation on which realistic projections are built. The environment determines inflation trajectories, consumer purchasing power, competitive intensity, regulatory frameworks, and the structural cost of doing business. A financial model that ignores these variables is not conservative or aggressive. It is simply wrong.
Nigeria’s repeated naira devaluations raise local costs of foreign-currency investments, including imported machinery, technology licences and raw material contracts. A business plan using a five-year depreciation schedule at one exchange rate changes fundamentally when the naira weakens by 30–40%. Manufacturers whose investment recovery models omitted currency sensitivity faced costs their markets could not sustain. Passing these pressures to consumers through higher prices resulted in rejection, demonstrating why exchange-rate assumptions must reflect currency risks throughout the investment recovery period, not merely at inception.
This conversation is not exclusively for investors and CFOs. Every manager who builds a budget, proposes a project, or defends a business case needs to understand the commercial consequences of the financial assumptions embedded in that case. A head of department who accepts a revenue target that is built on an unrealistic price assumption has made a commercial decision, not just a financial one. A product manager who allows a pricing brief to be dictated by investment recovery requirements without challenging its market feasibility has abdicated a critical part of their role.
The discipline required is the ability to read a financial model and ask the right market questions. At what price does this product need to sell to hit these margin targets? Is that price consistent with what consumers in this segment will pay? What do the competitors currently charge? What will happen to volumes if we price at this level? If the answers to these questions reveal a gap between the financial requirement and the market reality, the conversation must happen before the product launches and not after it stalls.
An often-overlooked organisational dynamic underlies unrealistic investor expectations: acceptance reflects not only ignorance but also authority, reluctance to challenge it, or objections being overruled. A parent company board may impose a payback target; a senior private equity partner may demand an internal rate of return requiring prices the market cannot sustain; or a managing director may approve projections everyone present recognises as excessively optimistic and unrealistic. These pressures can prevail despite awareness that the underlying assumptions conflict with market realities.
All the above can lead to a product going extinct.
Oluwole Dada is the General Manager at SecureID Limited, Africa’s largest smart card manufacturing plant in Lagos, Nigeria.
