MEMORANDUM

To: Head of Treasury
From: Head of Marketing
Date: August 12, 2025
Subject: Pricing Strategies for New and Existing Banking Products

Purpose
As per our recent discussions on optimizing pricing to enhance profitability amid Ghana’s post-Domestic Debt Exchange Programmed (DDEP) recovery and ongoing economic challenges (e.g., stabilizing inflation from 29.8% in June 2022), I am outlining key pricing strategies. Drawing from Pezzullo (1993), pricing decisions impact new product launches and adjustments to existing ones. This memo details two strategies exclusively for new products and three for existing products, grounded in Bank of Ghana (BoG) regulations like the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930), Liquidity Risk Management Guidelines, and ethical practices under the Corporate Governance Directive 2018. These strategies ensure compliance, competitiveness, and resilience in a market shaped by the 2017-2019 banking cleanup and digital trends.

Pricing Strategies for New Products
New products, such as innovative digital wallets or sustainable finance loans aligned with BoG’s sustainable banking principles, require strategies that balance market entry risks and revenue goals. Below are two key approaches:

1. Market Skimming Pricing
   This involves setting high initial prices to maximize revenue from early adopters willing to pay a premium, then gradually lowering prices to capture broader segments. It recovers development costs quickly and positions the product as premium.
   • Practical Application in Ghanaian Banking: For a new AI-driven mobile lending app, launch at a higher fee structure (e.g., 2-3% above market rates) targeting high-net-worth corporates in Accra, compliant with BoG’s Capital Requirements Directive (CRD) to ensure capital adequacy. As seen in Ecobank Ghana’s initial premium pricing for its Omni Lite platform post-2019 cleanup, this built brand prestige before volume scaling. It mitigates risks like cyber threats under the Cyber and Information Security Directive 2020 by focusing on secure, high-value users initially.
   • Advantages and Considerations: Generates quick profits in volatile economies but requires BoG approval for fee transparency to avoid ethical issues.
2. Penetration Pricing
   This sets low initial prices to rapidly gain market share, attract price-sensitive customers, and deter competitors, with prices increasing once dominance is achieved.
   • Practical Application: Introduce a new contactless debit card at below-cost fees (e.g., waived annual charges for the first year) to penetrate rural markets with low digital adoption, as per BoG’s fintech regulations under the Payment Systems and Services Act, 2019 (Act 987). GCB Bank’s low-entry pricing for G-Money during the 2020s digital push exemplifies this, boosting adoption amid post-DDEP liquidity squeezes and competing with MTN MoMo.
   • Advantages and Considerations: Accelerates growth but demands liquidity buffers per BoG guidelines to cover initial losses, ensuring long-term profitability.

Pricing Strategies for Existing Products
For established products like savings accounts, loans, or treasury bills, strategies focus on adjustments for retention, competition, and profitability. Here are three effective ones:

1. Cost-Plus Pricing
   Prices are set by adding a markup to the total cost of providing the service, ensuring coverage of expenses and a profit margin.
   • Practical Application: For existing term deposits, calculate base costs (e.g., funding rates influenced by BoG’s policy rate) plus a 2-4% markup, adjusting for inflation trends (e.g., post-2022 spikes). Stanbic Bank Ghana uses this for corporate loans, aligning with Basel III operational risk standards to maintain margins after the 2023 recapitalization under Notice No. BG/GOV/SEC/2023/05.
   • Advantages and Considerations: Simple and compliant with BoG transparency rules but may ignore market dynamics, requiring periodic reviews.
2. Competitive Pricing
   This matches or undercuts competitors’ prices to maintain or gain market position, based on ongoing market analysis.
   • Practical Application: Adjust fees on existing current accounts to align with peers like Access Bank Ghana, e.g., reducing overdraft rates by 1% in response to fintech competition. Post-2017 collapses (e.g., UT Bank due to governance lapses), banks like Barclays (now Absa) in Ghana adopted this to rebuild trust and share, ensuring BoG liquidity compliance.
   • Advantages and Considerations: Enhances competitiveness in saturated markets but risks price wars; integrate with value-added services for differentiation.
3. Value-Based Pricing
   Prices reflect the perceived value to the customer rather than costs, charging more for high-value features like personalized advisory.
   • Practical Application: For existing investment products, price based on benefits like higher returns or risk mitigation, e.g., premium fees for ESG-linked funds under BoG’s sustainable principles. Fidelity Bank Ghana applies this post-DDEP, valuing client recovery support, drawing from global models like HSBC’s client-centric pricing.
   • Advantages and Considerations: Boosts profitability and loyalty but requires customer data compliance under the Data Protection Act, 2012, and BoG directives.

Recommendations
I suggest a cross-departmental review to implement these strategies, incorporating BoG approvals for fairness. For new products, prioritize penetration in digital segments; for existing, use competitive adjustments amid 2025 recovery. Let’s schedule a meeting to discuss integration with treasury operations for enhanced resilience and ethical profitability.

Regards,
Head of Marketing