1a Burgess Marketing in Africa Oxford Univ Press

1a Burgess Marketing in Africa Oxford Univ Press - c h a p...

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Unformatted text preview: c h a p t e r 10 Marketing in Africa Steven Michael Burgess Outcomes At the end of this chapter the reader should be able to identify: • why marketing is an organisation-wide set of behaviours that focuses on creating value for stakeholders and the firm • why stakeholders are important considerations in the African marketing context • how consumers and organisations make purchase and consumption decisions and the characteristics that influence their decisions • how national culture and other factors potentially impact on marketing effectiveness by affecting organisational structure and process • the benefits of a behavioural approach to marketing analysis, planning, management and control • why leading marketing experts are calling for research into the generalisability of marketing theories to the African marketing context. Your first impression as you walk through the door is New York’s East Side. Young, hip. Industrial. Fifty-year-old Oregon pine floors. Distressed shelving. Clothes piled on tables and hanging on S-hooks over industrial clothing racks on wheels. The concept has a vibe that makes you wonder if it could give Abercrombie and Fitch some serious competition. But this is South Africa and you begin to notice the African flavour of this new Old Khaki store. Old Khaki is the first fashion brand to emerge from South Africa’s famous Cape Union Mart retail chain, which is known for great marketing. Its Cape Union Mart stores and website offer adventure wear and gear and a feeling of authenticity that few retailers ever achieve. Cape Union Mart shoppers can test the brightness of a torchi in a cave, experiment with climbing gear on a realistic climbing wall, feel the warmth of a coat at –20˚C in a hyperbaric chamber and assess manufacturer claims for rain wear in a room that simulates Amazonian rain forest conditions. There is no better example of experiential marketing anywhere in the world. Provided for non-commercial research and educational use only. Not for reproduction or distribution or commercial use chap09-10(part02).indd 257 6/21/06 3:19:22 PM Managing Business in Africa 258 In the 1980s, Shoprite was a small, regional supermarket chain that primarily served disadvantaged communities in the greater Cape Town area. It’s handful of stores were dwarfed by larger competitors, such as Checkers and OK Bazaars. Shoprite avoided the temptation to expand nationally into upmarket suburbs where South Africa’s three largest retailers fought a pitched battle. Instead, it wisely pioneered ‘base of the pyramid’ii retailing and developed a comprehensive understanding of the consumer preferences of South Africa’s majority. Today, Shoprite owns Checkers and OK Bazaars and is the largest retailer in Africa. Its portfolio of retail brands comprises 780 outlets in 17 countries and stretches from Cairo to Cape Town and Accra to Mumbai and it has one of the world’s most impressive distribution and logistics systems.iii Shoprite is so good that The Economist magazine recently asked, ‘Who needs Wal-Mart?’, when Shoprite opened the first hypermarket in India (The Economist, 2005). Cape Union Mart and Shoprite may be retailers, and their head offices may be just a few minutes drive apart, but they differ in industry, merchandise offerings, target market segments, global expansion plans and just about every other observable characteristic. In this chapter, we explore the fundamentals that explain their success in African markets. Introduction  ����� This chapter focuses on marketing in Africa. �������� �������� ������������� ���������������� Many managers think of marketing as good salespeople or effective advertising but it is more than the product, pricing, promotion and distribution strategies of an effective marketing mix. Marketing is an interactive process in which firms and stakeholders create mutual value. It includes the systems, structures, processes and behaviours by which firms build insights into the competitive environment and understand the consequences for customer and other important stakeholder preferences and behaviour, manage the organisation-wide crafting of strategic intent to deliver superior sustainable stakeholder solutions and manage interaction with stakeholders to deliver long-term value to both parties, improve customer experiences and learn for future interactions. The marketing concept rejects the production (i.e. build a better mousetrap and the world will beat a path to your door) and selling orientations (i.e. with the right coercive techniques, you can get people to buy anything) that prevailed before it. Instead, the marketing concept is a philosophy and set of behaviours that influence concern for how people in an organisation understand and respond to customers and other   important stakeholders. Although this chapter focuses on marketing in Africa, much of it is devoted to the context of African marketing. Marketing is undergoing a chap09-10(part02).indd 258 6/21/06 3:19:23 PM CHAPTER 10: Marketing in Africa 259 historically unprecedented transformation due to globalisation, shifts in demography, migration, spending power and culture and rapid advances in information, computing and telecommunications technologies. This transition affects firms differently, depending on their location and served markets, but marketing is experiencing a ‘renaissance’ everywhere and its content and boundaries are changing (Bolton, 2005). Consequently, experts are calling on the profession to re-examine its prevailing ‘laws’ and to modify, refine or reject those that no longer apply. Why would the leading voices of marketing advise the discipline to re-assess the generalisability and boundary conditions of the theories and practices that these same experts helped develop? Context is incredibly important. Consumers make decisions within their perceived contexts and context determines the organisational structures, processes, resources and competencies required for marketing success (Luo et al., 2005; Meyer and Peng, 2005). The transformation draws attention to assumptions about context (i.e. location, time, market and competition) that are implicit in many marketing theories, tools and practices (Sheth and Sisodia, 1999), especially in less-industrialised countries. The rising importance of lessindustrialised countries distinguishes this era. These countries differ demographically, economically, socio-politically and culturally from the Western industrialised economies in which most marketing theories were developed. Consequently, firms must assess the relevance of marketing theories and practices in African markets. Competitive effectiveness requires an understanding of sources of demand, sources of supply and methods of effective management. This implies a holistic understanding of African and international markets and of own and related industries that comprise supply chains and substitute products and the effects of differences in market characteristics, such as buying power, human development, culture, product penetration, living standards, access to media, or pace of change. Only then can firms   see and respond to diversity within and between African markets. In   this vein, rather than focus primarily on the marketing mix, we focus   on important characteristics that affect marketing success in African   markets and use market-orientation theory as an organising framework   to present a behavioural approach to marketing strategy development   and implementation. Understanding African markets Previous chapters have focused on population characteristics in Africa, such as economic development. This section explores the effects of human chap09-10(part02).indd 259 6/21/06 3:19:24 PM Managing Business in Africa 260 development, economic development and culture in the African marketing context and introduces a methodology for systematically relating these effects to marketing effectiveness. Marketers traditionally have attempted to understand diversity between countries by classifying countries as ‘developed’ or ‘developing’, usually on the basis of some measure of income. This practice assumes that countries vary in something called ‘development’ and that an understanding of this variation allows a firm to reliably predict purchase and consumption behaviour between countries. Countries are thus differentiated on the basis of a mythical ‘average consumer’. Less explicitly, it assumes that all countries are ‘developing’ or ‘emerging’ toward the living standards and lifestyles of the high-income countries (HICs) of North America, Western Europe and Japan. These assumptions do not appear to hold. Unfortunately, lifestyles in Western industrialised HICs require levels of individualised transport, disposable consumption, resource use (i.e. water, energy, petrochemicals) that are environmentally and socio-politically undesirable and unsustainable in the global context. The ‘mythical average consumer’ does not exist because African markets are comprised of dual markets of ‘rich’ and ‘poor’ consumers and few in-between. In any event, even when household incomes converge and consumers reach similar levels of economic wealth (for example, Czech Republic, Israel, Korea, Portugal and New Zealand), their motivations and choices differ due to variations in culture and related factors (de Mooij, 2000; Burgess and Steenkamp, 1999). African markets differ substantially from HICs in important ways that relate to buyer behaviour and marketing strategy (cf. Batra, 1999), such as human development, household spending power, modes of communication and transport, living standards, education, spending   power and most objective measures of economic infrastructure and development. Moreover, there is considerable variation within and   between African markets. In this vein, it is possible to distinguish between two types of lessindustrialised countries using World Bank (2006) (i.e. low, middle, high income) and United Nations (United Nations Development Programme, 2005) country classifications (low, middle, high human development)iv and determine broad population segments within these countries. One way to do this is to distinguish population segments on the basis of social identity. Social identity refers to the beliefs people have about the way they are perceived by others: the groups that others put them in (Tajfel and Turner, 1986). According to social identity theory, people have a ‘digest of selves’ (for example, mother, executive, animal rights activist and book lover) (Jackson et al., 1996) and choose an appropriate social identity to chap09-10(part02).indd 260 6/21/06 3:19:25 PM CHAPTER 10: Marketing in Africa 261 direct behaviour in response to situational context (Burgess and Harris, 1999; Camilleri and Malewska-Peyre, 1997). Social identity is acquired over time through personal and social interactions and the environment and produces a set of normative attitudes that prescribe how ‘people of this type ought to behave.’ Social identity is a particularly appropriate variable for market segmentation in Africa because it facilitates an understanding of change and stability in people that relates to varied social and economic circumstances. Comprised of a consumer’s most deeply-held selfcognitions, it has meaningful and predictive relations with   consumer behaviour. The SA Tribes study used social identity to differentiate consumersv. Sixteen ‘tribes’ were identified based on social identity characteristics (i.e. on value priorities, personality traits, living standards and socio demographic characteristics, see Burgess, 2002). They differed meaningfully in respect of purchase and consumption behaviour in various product categories (for example, lifestyle interests: fiction books, recorded music, gardening, women’s clothing; brand choice: political parties, cigarette brands) and ‘tribe’ predicted brand usage with impressive accuracy. In this chapter, we will focus on four broad groups that summarise the16 SA Tribes consumer types: the Rural Survivalists, Emergent Consumers, Urban Middle Classes and Urban Elite. Rural Survivalists conduct their lives much as their grandparents did and include 43% of the SA population. Seventy-seven per cent of them reside in rural areas. Their agrarian and subsistence lifestyles are characterised by low human development. Many could not survive without financial remittances from relatives in the urban areas. A job, an education, electricity, running water and a flush toilet remain elusive dreams for many of them. Even the simplest of luxuries, dishwashing liquid, is not present in most homes. Emergent Consumers reside in urban areas (71%) and are poor but get by. Eighty-two per cent are black and 16% reported that they were Coloured. They are 37% of the total SA population. They have reached a basic standard of living that includes, almost without exception, running water, electricity and a flush toilet. There is nevertheless a substantial opportunity to raise their standard of living. For instance, only one in five homes has a geyser (viz., water heater) and dishwashing liquid was present only in about half of the homes on the day of the interview. The Urban Middle Classes do not live a middle class lifestyle comparable to that of the middle classes of industrialised Western countries. Their household income and standard of living are lower. Nevertheless, they are well off by world standards. Almost every house has a motor car, geyser, electricity, running water and a flush toilet. More than chap09-10(part02).indd 261 6/21/06 3:19:26 PM Managing Business in Africa 262 80% have a TV, hi-fi/music centre, fridge/freezer, telephone and microwave oven. They are 12% of the SA population and are comprised of people from all races but primarily whites (62%), Asians (20%) and Coloureds (14%) residing primarily in urban areas. The Urban Elite lead wealthy globalised lifestyles that are equivalent to lifestyles in countries with the highest levels of human development. Penetration rates of satellite television, personal computers, home access to the Internet and other modern elements of digital lifestyles are similar to that of Western industrialised countries for this fortunate 8% of the total South African population. (Burgess, 2003: 165–166) Low-income countries Earlier chapters noted that low-income countries (LICs), as defined by the World Bank, share a number of common characteristics. At the macroeconomic level, they generally lack free market systems, liberalised trading environments, developed infrastructure and widespread access to modern communication media and distribution. National consumption focuses primarily on basic human development needs (for example, food security, healthcare, transportation, energy and communications infrastructure), which increases rapidly with growing per capita gross domestic product (see Figure 10.1). Contrary to popular belief, LICs appear to be benefiting most from globalisation and are growing faster than other countries (Garrett, 2004). In the consumer context, LIC populations are younger, less formally educated, literate, and numerate and have larger family sizes, lower disposable income, and less product knowledge. Cultural values and religious identity often differ greatly from the HICs. Their high inequality in income distribution results in dual economies in which a relatively better educated and more affluent group of Urban Elite and Urban Middle Class consumers live amidst a much larger low-income and subsistence segment comprised of Rural Survivalists and Emergent Consumers. This dual nature of these economies illustrates why per capita measures of national income are a bad indicator for marketing strategy in African markets: extremes of wealth and poverty are too great for meaningful insights into markets. The Urban Elite and Urban Middle Class demonstrate sophisticated demand tendencies and preferences for the latest Western goods and lifestyles while maintaining many traditional cultural values (Alden et al., 1999). They comprise some 20% of the population but can be substantial markets in their own right and usually possess more than half of national wealth (World Bank, 2006). For example, the top 5% of the Indian market chap09-10(part02).indd 262 6/21/06 3:19:27 PM CHAPTER 10: Marketing in Africa 263 Figure 10.1  Human development and GDP per capita • • •• •• • • • • • • Norway Sweden 0. 9 New Zealand Emergent consumer markets • • • • •• •Croatia • • • • Latvi a United Nations human development index 0. 7 • • s • • •• • • • • Hong kong China (SAR • • • ) Cyprus • Seychelle s Bahrai n Qata r Bahamas Cuba • •• • • • • • ••• Mauritiu • •••• •••• • • • • • • •• •• ••• • ••• • • ••• • •• • • • • • •• • • • Algeria • • • • •• • • • South Africa Egypt Gabon • • • • • United Arab Emirates • Saudi A rabi • a Algeria Equatorial Guinea Morocc o Namibi a Indi a Botswana •• • Myanmar Papua New Guinea 0. 5 ••• Banglades h •• •• • •• • • •• • • •• • •• • • • d’Ivoire Côte Zambi a •• • Swaziland • Democratic Republic of the Congo • •• • 0. 3 Burundi Mali Burkina Fas Niger Low-income countries o Sierra Leone 0. 1 0 10,000 20,000 30,000 Gross domestic product per capita (PPP) Source: Burgess and Nyajeka, 2006 is comparable in living standard and size to the entire population of the United Kingdom. In contrast, Rural Survivalists and Emergent Consumer groups exhibit much lower human development, particularly in formal education, literacy, and numeracy, and have much more limited spending power. They are even more deeply rooted in their traditional culture and often participate in thriving informal markets in which barter and other forms of exchange play important roles and increase the purchasing power of constrained financial resources. Although some LICs, such as Cameroon, Ghana and Sudan, have achieved middle human development, their characteristics are much more like other LICs than emergent   consumer markets. Emergent consumer markets Emergent consumer markets (ECMs) (Burgess, 2003) are middle-income countries that have achieved at least middle human development. South chap09-10(part02).indd 263 6/21/06 3:19:28 PM Managing Business in Africa 264 Africa, Namibia, Botswana and Gabon are African ECMs. Their stage of economic and human development provides a substantial population segment with a living standard comparable to HICs. Although ECMs are important markets for major infrastructural investment projects, such as improvements to the built environment (roads, schools, telecommunications, healthcare), increases in gross national income leads to less rapidly improving human development gains (see Figure 10.1). Adoption of more sophisticated consumer and business products found in HICs by the Urban Elite and Urban Middle Class is common. Accordingly, capital markets, retail distribution channels, higher education, communications media and other indicators of human development and infrastructure are comparable and sometimes better than HICs, as the lack of legacy systems often allows these countries to ‘leapfrog’ intermediate development and adopt the most recent technologies (Hart and Christensen, 2002). Beyond ‘developed’ and ‘developing’ The incidence of the four broad SA Tribes segments varies by country type, as shown in Figure 10.2. HICs consist primarily of people with living standards and human development that is comparable to the Urban Elite and Urban Middle Class. In comparison, LICs consist primarily of Rural Survivalists and Emergent Consumers. In ECMs, approximately 25–35% of consumers are members of the Urban Elite or Urban Middle �������� classes. Figure 10.2  Hypothesised dispersion of intermarket segments across types of countries 70 60 50 Urban elite 40 30 Urban middle class 20 Emergent consumers 10 Rural survivalists 0 Western industrialised countries chap09-10(part02).indd 264 Emergent consumer markets Low-income countries 6/21/06 3:19...
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