In the second part of her analysis of the African consumer, Andrea Opoku advises on how to get your products and brands to market

In the first instalment of Who Is the African Consumer (ReConnect Africa March/April 2014) we briefly examined the business opportunity that is the African continent. We also talked about the seven socio-economic groups that have come about as a result of studies carried out by the research firm Nielsen.

In this instalment, I’ll further explore the business opportunity and market conditions, delving deeper into understanding the purchasing habits of various African consumers and the most effective marketing communications channels.

There are numerous reasons why Africa is all over the business media of late and so many events are being held about doing business on the continent. Studies carried out by McKinsey have uncovered a number of key factors for the enormous interest in Africa:

Africa has the fastest growing population in the world, currently growing at a rate of 2.3% a year. The continent also has the youngest population with over half of its inhabitants under the age of 20, compared with only 28% in China. 16-34 year olds are more educated, with 40% having completed high school; they also make 53% of income on the continent. As this generation ages, and its incomes increase, there will be significant changes in consumption habits.

Inhabitants of the continent are optimistic about the future and have a sense of progress - 84% of the population feel they will be better off in 2 years. This optimism is played out through consumers’ increased spending habits. The increases have been seen in the frequency and the purchase of new and more expensive products.

Healthy urbanisation - 40% of the African population lives in cities (India 30%, China 45%) and the number of cities in Africa with more than 1 million people will reach 65 by 2016 (2011 was 52). This is already on par with Europe, higher than US and India. Urban spending by governments is increasing twice as fast as rural spending and, to add to that, urban per capita incomes are on average 80% higher than that of the country as a whole – due to the higher productivity of urban workers.

Evolving retail preferences
Modern retail outlets like the large supermarkets found in the west are becoming more and more popular in Africa. The variety, lower cost, large pack sizes, quality, freshness and cleanliness are increasingly attracting more African consumers. However, ‘traditional’ retail outlets such as the kiosks still largely dominate sales.

Experience from around the world shows that retailing starts to expand when a country’s GDP per capita reaches $750 and really takes off when it reaches $3000. Current GDP per capita across Africa ranges from $25,700 in Equatorial Guinea to $400 in DR Congo (Source: www.CIA.gov. Estimated for 2013)

The biggest issue holding back faster formalisation of retail is the lack of available real estate.

An underestimated market potential
The data on the African market is growing, as is the understanding of it. However there are vast discrepancies in what the official data states and what field researchers on the ground are reporting. Parallel imports and informal sectors are not included in the ‘official’ figures, so in the vast majority of cases the size of the African market is almost always underestimated.

A better understanding of the evolving demographic and business environment is only one side of the story. Consumer purchasing habits and preferences are also changing.

Desiring International brands
African consumers know, love and are increasingly purchasing international brands – this is across all seven socio-economic groups. In many instances international brand names have become the common terms for categories of products, for example, washing powder is commonly called “Omo” in Ghana. An example of this in the UK is the naming of a vacuum cleaner as a Hoover.

Africa isn’t yet home to any local brands that truly span the continent; African brands are typically country/region specific and focused on one market.  International brands have the opportunity to build their brand advantage now while African markets are still less competitive than other regions.

Increasingly Active Users of the Internet and technology
Technology, the Internet and the access it gives to information is one of the biggest drivers of change for this generation relative to previous ones. Mobile technology in particular is helping the continent overcome its lack of broadband infrastructure issues. Internet usage and penetration is disproportionately high in Africa and is growing rapidly – More than 50% of urban Africans said they have accessed the internet in the last 4 weeks, on par with figures from urban China and Brazil.

In general, Internet penetration correlates with GDP per capita; however there are those that buck the trend. In urban Kenya, Internet penetration is at 70% propelled by affordable mobile broadband and high penetration (95%) of Internet capable mobile devices.

22% of urban Africans spend more than 10 hours a week online. In order of frequency their online activities include: use of social networks, email, watching video, listening to music, keeping up with news and searching for information. As prolific users of the Internet and social media, the use of Facebook, Twitter and LinkedIn and other sites is on the rise.

To that end, viral communication is becoming increasingly critical for reaching African consumers. Companies and brands should look for ways to leverage the Internet and social media to advertise, provide product information, create buzz to build brand awareness, and educate consumers.

Consumers cite low bandwidth rather than high cost as the primary barrier to increased Internet usage, creating an opportunity for telecoms/mobile telecoms companies.

Willing to pay for quality
The cheapest products aren’t always the winners in Africa despite limited budgets for the majority of consumers. African consumers associate price with quality and are willing to pay more for a higher quality product or products that will last longer. On average 60% of Africans feel this way. This number increases greatly in North Africa. Many will find a way to buy more expensive quality items, even if it means saving for several months.

Sub-Saharan Africans are more accepting of local brands. In Nigeria, only 11% agreed with the statement ‘International brands are more fashionable than local brands’. In South Africa the figure was 12%. This offers a huge opportunity for local companies to create and build their own brands.

Companies going into the African market cannot assume that any international brand will be a hit. A balance needs to be struck between quality, which often means durability, and price. This sometimes means that companies design products specifically for the market. Samsung did this by creating televisions with built-in power surge protectors.

Businesses that emphasize the quality of their products and reinforce the message through sampling, advertising and marketing will be the most effective. Educating sales people and storeowners who are trusted influencers at the point of sale, can also be an effective route.

African consumers use both traditional and non-traditional sources to gather information. TV remains the most frequently used and trusted, with 80% of sub-Saharan Africans saying it is a significant source of grocery information for them.Print media is also important and is used by 70% of sub-Saharan consumers, although use does vary by country.

Media penetration in Ghana for example is 95% for TV, 92% for radio and 33% for Internet. The slower penetration of print is driven by low literacy rates - 67% of the population. Penetration of newspapers (32%) and magazines (12%) in Ghana is lower than what was observed in other African countries.

Other trends also need to be taken into consideration:

In conclusion here are some points to take away on how to serve the African consumer:

Africa is a huge continent, focus where it matters
Focus on the regions/countries/cities where you can efficiently get your products or services in front of the customer. At the moment the opportunities lie in urban areas and the largest cities on the continent.

Get the timing right
Entering the market when consumer demand and income levels are optimal for your product category or service is key. This will occur at different times for products with low price points compared to luxury goods.

Develop locally relevant quality products
Quality is a critical buying factor in Africa and cannot be compromised when localising products. However, understanding what quality means to the African consumer is paramount. It can be surprisingly different to what is seen as quality in the developed world.

Ride the youth movement
Given the size of the population and its potential economic power, it’s worth paying particular attention to Africa’s youth. Focus should be on the fact that the youth are very brand conscious; the great importance of the Internet; and affordability is critical.

Build your brand right now!
As mentioned earlier African consumers are very brand loyal. Because of this, getting your brand into a consumer’s initial consideration set at an early stage will pay off further down the line.

The data in this article is only a small portion of the information gathered by various research firms. Make it a point to access the wealth of more detailed information that is available but also carry out your own ‘on the ground’ research before making any major market entry decisions.

Sources:

Top image: Chris Kirchhoff, www.mediaclubsouthafrica.com