From rags to (relative) riches, what does this mean for Africa’s marketing mix?
30th March, 2016
Africa’s economic evolution over the next few years will be exponential – now home to more than 1.1 billion people, continued commodity-fueled growth combined with new energy discoveries and Africa’s ever growing role as a food producer for an expanding global population will certify increases in economic output for years. These revenues will increase per capita incomes and consumption demand. How can brands unlock this market and is sponsorship the answer? Historically lucrative sponsorship deals in Africa have been confined to sports such as football and rugby with deals ranging from $100, 000 to $5, 000, 000.
What will newly rich Africans spend their money on?
In the lowest-income group, consumption decisions are based on fulfilling basic needs; people in this category typically live from hand to mouth with near to nothing for savings. As people begin to shift away from an existence lifestyle, output per person rises moving them into the middle income group resulting in their brand consciousness emerging – resulting in more emphasis placed on quality.
Food: As people get richer, they first increase their caloric intake before they begin to diversify the kinds of foods they may eat and then, later begin to attach significance to certain brands and convenience
Beverages: Alcohol consumption follows a similar suit to food. Sales of beer (the cheapest brand) expand first – then consumers start to favour branded beer, then spirits and wines begin to gain market share and imported beers gain popularity.
Household items and vehicles: In Africa television penetration is below 20% in poor countries like Malawi and Mozambique, and rates are around 90% in the richer countries like Tunisia and Mauritius. The overall household television penetration rate has gone 42.4% in 2009 to around 50.8% in 2016. Vehicle ownership begins to increase also, incomes of US $2,500 to US $12,000 show there is double-digit growth in vehicle purchases as the product becomes more accessible.
Where to begin in marketing to Africa
Africa is huge continent – finding the right customers in the market can be a laborious process with as many as 53 countries. The future of marketing in to Africa could be compared to what western brands have done in India and China as a result of increasing incomes when those countries saw per capita gross domestic product (GDP) rise quickly in the 1990s and 2000s.
Chinese Marketing in the 1900’s and 2000’s
Due to its fast economic expansion and Open Door policy, China has become a lucrative market for Western companies that are seeing a decreasing market demand in their home countries. China’s rapidly expanding middle class is expected to triple their spending over the coming years, reaching $6 trillion by 2020. Although China offers many opportunities for Western companies, the Chinese market presents obstacles to Western marketing managers too.
Many of these barriers originate from the Chinese culture, which can be difficult for Western marketing managers to understand. The culture influences consumer buying and adoption behaviours, and Western marketing managers are challenged to gain insight into the Chinese consumer. By following these 3 examples brands may not trip up in a foreign market.
- Make your brand more socially and culturally acceptable:
- Back when Coca Cola entered the Chinese market it was struggling to attract the same consumption it sees in its home markets, one idea fashioned by the company was to change the brand name. Coca Cola’s Chinese name, 可口可乐 Ke Kou Ke Le, loosely translates to “happiness in the mouth” and also sounds like Coca Cola.
- Know your market:
- The success of China’s Taobao versus eBay determines the importance of knowing your target market. Both have the same basic service in which someone can sell products to another, yet it was the platform and methods which Taobao used that captured the Chinese market. EBay required customers to pay online using a credit card, something that is standard in the west. Taobao, knowing that many Chinese do not like to use credit cards online either because of they don’t own one or because of security concerns, allows customers to pay with cash on delivery.
- Advertise through effective experience:
- Advertisements have been ineffective because they depict people and/or situations that are unfamiliar to the Chinese audience, such as a blonde family of four vacationing on a sunny California beach.
For western brands to take advantage of a growing economy they should look to emulate the marketing techniques of those in China, then they will emerge victorious within a new and expansive market.
