*CYBERTORIAL: Since 1994 the South African economy has nearly doubled in size, the number of graduates has doubled, and the black middle class has grown to 4.2 million, yet the vast majority of its citizens still live in households with an average income of less than R3 000 a month. Wanele Mngomezulu reports.
This is the scene set in a recent UCT Unilever Institute study co-sponsored by the SABC, ‘Connecting with Survivors’, one of the most comprehensive studies of South Africa’s mass market.
Researchers found that most South African marketers were failing to connect with what they term the country’s most misunderstood market of ‘survivors’ – 70% of South Africans – living in households with a collective income of less than R6 000 a month.
While researchers found that many marketers were failing to connect with the country’s largest market, most respondents surveyed felt that the SABC was one of the few media organisations that made concerted and sustained efforts to connect to them.
SABC’s total radio audience is 24.3 million daily listeners (AMPS2014BA) out of the total South African population of 37.7 million adults. The SABC Radio audience as measured in 2014 comprised 24% LSM 1-4, which has decreased from 51% in 2004, 63% LSM 5-8 which has increased from 41% in 2004, and 13% in LSM 9-10 which has increased from 8% in 2003 (AMPS2004/5 & 2014BA).
The Unilever Institute study discovered a vast unmonitored and unrecorded informal sector. Although millions of South Africans are considered economically inactive, the Unilever Institute’s research associate, the Sustainable Livelihoods Foundation, found that in the poorer areas they surveyed, one in 10 households operate some form of informal trade or service. If this trend is extrapolated country-wide this could represent well over one million small businesses.
This vibrancy of the informal sector, combined with the dramatic growth in the number of people living on government grants since democracy has led to substantial growth in ‘survivors’ incomes. In 2014 the government will spend over R135 billion on social grants, while in 2015 spending on grants is expected to increase to R145 billion.
Due to the nature of the informal sector and the difficulty in regulating and monitoring it, income is often unrecorded and comes from micro-enterprises such as taverns, hair salons, construction, appliance repair, agriculture, educare, recycling, health services, phone shops and takeaways.
In some cases researchers found a massive difference between recorded and unrecorded figures. This has important repercussions for companies in the formal sector who are basing their sales and marketing strategies on recorded figures.
While some suppliers and retailers are still performing well, many are doing so by default, warn researchers. They caution that one of the most significant changes lie in the route to market, with a growing trend of independent traders controlling routes to market.
Arriving at ‘survivors’ (people living in households earning less than R6 000pm) total spending power presents a challenge as estimates vary. According to the National Income Dynamic Survey, ‘survivors’ are estimated to have R300 billion in formal declared annual spending power. One thing cannot be disputed however – that the mass market presents vast potential for a savvy marketer that can tune into the zeitgeist of this market.
To understand the potential in this sector one need simply look at the formal retail market in South Africa compared to the informal sector. A total of 2 500 ‘chain stores’, compete with 18 500 independent traders and more than 80 000 spazas. On closer inspection less than 40 000 people per day visit high-end Claremont shopping centre Cavendish Square, compared to 150 000 consumers per day that go through Bree street taxi rank.
Marketers need to also get in touch with ‘survivors’ buying patterns if they are going to successfully service this market. Most “Survivors” expenditure is still found at top outlets, Shoprite, Pick n Pay, Spar and Boxer at the beginning of the month. Taking full advantage of monthly discounts and other specials, three-quarters of ‘survivors’ undertake one bulk shopping spree a month to minimise repeat travel and to stockpile.
From the middle of the month onwards, local spazas are ideally placed to service ‘survivors’ needs. To a large extent this is because fast moving consumer goods, especially food supplies, dwindle by mid-month. Both rural and urban consumers step up their visits to spazas at this time, as spazas accommodate their needs with smaller pack sizes and other innovative sales methods to meet consumer needs and tightened purse-strings.
Researchers describe these consumers as ‘austere but demanding’ and urge marketers to make the time to understand what drivers dictate ‘survivors’ decision-making and to research and develop products and services that answer ‘survivors’ needs.
The Institute believes that marketers can connect with this target market by building trust, speaking clearly, being mindful of both message and tone, and thinking about shared value.
While English remains the language of marketers, it is not necessarily that of the markets’. Miscommunication and misunderstanding can easily ensue if this is not taken into account. Research results clearly indicate that marketers should also ‘mind their language – with language driving both television viewership and radio listenership.
‘Survivors’ are prime time TV addicts and they favour local content. The most popular channels remain SABC 1 and SABC 2 – even if respondents had access to satellite dishes and limited bouquets. Their favourite programmes include Generations, Mofolozi Street and Soul City which screen on SABC 1.
The findings show radio advertising must be in the target market’s mother-tongue, and be locally relevant, to have maximum impact. The SABC African Language Service (ALS) bouquet of radio stations remains the best platform from which to connect with this market in their language of choice. But radio consumption is also evolving, with many households reporting that they have both the radio and television on at the same time, with the TV volume turned down.
While many marketers and businesses are still failing to properly service or connect with the majority of ‘survivors’, the Unilever study demonstrates that businesses which strategically service this market – from product development and production, to the supply chain and route to market, right through to pricing and point of sale – will build brand loyalty, see a long-term increase in sales, and generally enjoy the opportunities for growth that the mass market provides.
Wanele Mngomezulu is general manager of Business Intelligence at the SABC.
*Cybertorial is paid-for content.
