Consumer behaviour in Africa
Today, most investors and companies are aware of Africa’s enormous potential — the second fastest-growing market in the world, led only by emerging Asia. But this may come as a surprise that Africa’s growth is fuelled not by capital, but rather by a growing consumer market.
The continent’s consumer-oriented businesses have expanded by $400 billion, reflecting its single biggest market opportunity by 2020. However, due to a lack of market analysis, companies do not know how to turn this ability into practice. Nonetheless, that is changing.
This new consuming class is being influenced by several factors. The population of Africa, the fastest growing and youngest in the world, is concentrated in the urban. This new customer class consists of smaller families, is better educated and has higher earnings, and is digitally active. Africans are remarkably confident about their economic future: 84% believe they will be well off in two years.
African consumer habits that affect the localisation of foreign habits within its markets:
- Affordability and comfort: These new African customers are like their urban counterparts elsewhere in the world: they are aware of products and quality, they are searching for the latest trends, but they are searching at a budget, and they want a comfortable and attractive shopping setting. Of course, African are willing to pay for luxury brands but only if, in the process of localisation, a brand does not lose its unique individuality. If it does then it is just assumed to be a local brand selling products at a higher price than local brands within the country. Also, too inexpensive products are deemed to be of no value and are instead just seen as too easily attainable products by the consumers which are not a good look for a luxurious brand within the western markets. Also, the price difference between the north and south of the continent has to be considered (and also the northern and southern sector within one country as well).
2. Ethnic diversification trends within the continent: Demographics also play an essential part in the decision-making of customers in Sub-Saharan Africa. There is no ethnic diversity in a market like Nigeria since the black community makes up the bulk of the population. It makes it reasonably easy for, say, food producers, to target consumers as popular food culture, and the pattern of consumption can be easily established. There are fewer ethical concerns to tackle where there is not much diversity, although you notice that there are also fewer opportunities to diversify in a non-multi-racial country. South Africa, on the other hand, provides much more potential for retailers to diversify, due to the presence of multiple races. Because people are exposed to different cultures, they are more open-minded about trying out new products. Thus it is relatively easy to enter markets such as food retailers and clothing, but only with a good understanding and awareness of the market.
3. Strong cultural beliefs influence African consumer behaviour: Another aspect that influences the purchasing decision of the customer is culture because it is part of who the person is. Women are often considered to be housewives in Nigeria. They make all the buying decisions, with the ‘supervision’ of the man who is the head of the household. Nigerians have a standardized dress code that is common to most ethnic groups. Therefore, this has an effect on the types of apparels purchased by the majority of people in the country. This can also be said for the masses in Kenya who mainly eat staple food, ugali (pap). That is because people have been consuming this food as well as other traditional foods for centuries. Thus it makes it difficult for different food items to compete with this type of food, thereby having an effect on the consumer foodservice industry.
However, in a market of South Africa that has many different cultures, most consumers can easily adapt to various clothing trends and food items such as pizza, burgers, Thai food and Indian food. Retailers are therefore able to sell a variety of products on this market. Another example can be of language diversity. There are 11 official and 13 cultural group languages in South Africa whereas in Nigeria there are 389 cultural group languages- this cultural difference makes it really hard for foreign countries to establish themselves within African markets.
4. Transportation system: For most parts of Africa, the development of infrastructure is not a high norm, and thus the availability of electricity and weak road networks are an obstacle. These factors often make it difficult to distribute goods in all the countries, resulting in limited developments in terms of shopping malls and the retail landscape. On the other hand, in South Africa, modern retailing is prevalent due to the increased quality of energy supply and alternative energy supplies. South Africa also has a steady road and transport network that makes it easy to transport products across the country. Therefore, companies need to remember this difference (between north and south Africa transportation system) before launching their brands within the African markets.
When Airtel launched its global advertisement in Africa it tailored some aspects of the advertisements in accordance to the African culture (by involving African actors within the infomercial) but showing the very same actors use coins when a majority within the continent uses paper money- turned out to be a huge embarrassment for the company which could have been avoided by little research.
Societal Values and Perceptions are also essential influencers in consumer buying decisions. Customers in Nigeria and South Africa are strongly ambitious, and this reflects in their spending patterns. Social status is highly regarded, and consumers also differentiate themselves by purchasing prestigious brands of clothes, cosmetics and personal care, jewellery and alcoholic beverages.
In conclusion, Africa is a dynamic and complex market of 53 countries and over 2,000 dialects. Consumers in the North have very different interests and requirements from those in sub-Saharan countries.
Highlights: What strategies can be learnt from this African consumer behaviour?
Companies need to keep in mind the five categories of consumption that thrive within this continent; financial services, telecommunication, internet, groceries and clothing and act on these principles within these industries:
Focus on where it counts. Most companies use the ‘one fits all’ approach which is very cheap to execute when launching in the new market but what they do not realise is that by this lack of research and effort, the brand increases its chances of failing miserably in a foreign market. For example, there have been companies that have tailored their approach too much to fit within Ghanian markets that they ended up losing their unique appeal within the foreign land whereas there are others which do not localise their brands according to the target market at all. An example of just the right amount of localisation could be when KFC replaced their famous french fries and chicken to serve Kenkey (a famous staple within Ghana) and chicken, this change alone bought KFC huge success and became a well-known dish within the country.
Create locally appropriate, high-quality goods. Industries will sell better tailor goods to local markets if they understand what quality means to African consumers and know their tastes, lifestyles and everyday needs. Since many African consumers stay loyal to a brand that meets their taste, a company can thrive within the African market with good research and respecting the target consumers sentiments or emotions.
Hit the right price point. Since affordability is crucial, businesses may need to re-engineer goods to meet a certain price point. As already mentioned, Africa’s largest population portion consists of small urban families which are not attracted towards high-end luxury products. Most consumers believe in the principle of affordability and sustainability so it is much better for companies to enter the market in accordance with the African markets instead of the global brand positioning mentality. Here an example can be taken from eBay services which could not compete against Tonaton services because eBay services charged service fee and asked payments to be made via credit or debit card which Africans do not really gravitate towards as most either do not have a card or simply do not trust online transactions which the Tonaton services understood.
Connect to agencies (management consulting firms) that create strong and maintain relations between brands and consumers within the target area such as the ‘Goodman AMC’ which is a platform that connects brands to the Ghanaians market.
COVID-19 and its effects on African consumer behaviour
Consumers are using online services more due to the pandemic, which wasn’t so before. Although the pandemic led to a decline in traditional shopping trends in Africa the profits for the online market soared up which gives hope for the establishment of more such online services and might help people get used to it. This might be the year when internet retail starts getting mainstream in the African continent.
But most importantly, a short term impact of Covid-19 has been the sharp decline in income and many people losing their jobs. This prompts them to survive on bare necessities and spend as much less as they can. This affects the overall economy as a lot of companies suffer losses.
In conclusion, consumer behaviour in Africa is going to experience a sharp change as they adapt to the situation. These behavioural shifts will lead to persisting effects on the African market as more online services will be used later. Thus companies need to analyse and predict the consumer behaviour especially during this time to gauge the changes it will bring on the market.
By Prajal Narain
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