What works well in Kenya might not work so well in Uganda
THE diverse nature of the African consumer requires that businesses heading into Africa adopt a local approach rather than just a continental approach, a new study shows.
A recent report by Nielsen titled The Diverse People of Africa aims to shed light on the different African consumers and how best to reach them.
Nielsen's business leader for strategy development in Africa, Graham Marshall, says most companies have a continental-wide strategy for Africa. But the local level of execution was even more important than this. "What works in Kenya won't necessarily work in Ethiopia," he says.
Consumer spending and shopping patterns differ widely across countries, the study finds.
"Nigerians spend the most on consumer packaged products whereas Ethiopia, Uganda and Kenya spend least. In Ethiopia, only daily essentials like tea, coffee and cooking oil have high penetration and consumers are likely to shop for products on discount."
The study shows that Tanzania has the highest number of categories with penetration above 75%, and consumers are likely to keep up with the newest trends in fashion and technology.
In all countries, traditional retail formats dominate, though modern trade is showing strength in Kenya.
"Although they are very diverse there are common themes among them," Mr Marshall says.
The price-availability matrix is crucial in Africa, and one of the biggest challenges for businesses is getting goods to the target market and the right price.
Long viewed as an impoverished continent with little discretionary spending, Africa's middle class is growing at an astounding rate and the gross domestic product (GDP) per capita has grown 26% in the past 10 years, according to World Bank data. It is this steadily rising income that makes Africa key for companies seeking growth.
Africa has eight countries with a higher GDP per capita than China and about 15 higher than India. This study by Nielsen focuses on Nigeria, Ethiopia, Kenya, Uganda, Tanzania, Zambia and the Democratic Republic of Congo.
While diversity defines the African consumer, traditional attitudes and beliefs centred on family, affordability, loyalty, colonial history and planning for the future are core themes that permeate the lifeblood of the African consumer and strongly influence buy-and-watch behaviours, the report says.
"Affordability and brand loyalty are key purchase drivers, this is why it is important for companies to get in first," Mr Marshall says.
"The mobile phone has become a cornerstone for connection among 86% of respondents who use the technology primarily for text messaging. Print and online sources are far less popular and are mainly used by more affluent consumers," the study shows.
Nielsen identified seven consumer segments based on demographic and attitudinal differences to bring a unified understanding of "how to reach consumers in this vast continent".
Three tiers emerged from the seven segments based on monthly income and average spend on consumer packaged goods.
Tier one are wealthy urban, well-educated Africans with high income and consumer goods spend. They drive modern trade, print and online penetration and are more open to costly and new brands. This group represents about 28% of the population and controls 47% of the income and 40% of the consumer packaged goods spend.
These consumers are more open to buying expensive and exclusive value-added products and can be reached using more advanced media campaigns such as the internet or social media.
Tier two are middle-aged, mid-income Africans with average consumer goods spend. They are heads of households, shop for their family and are focused on affordability. Making up 27% of the population, they account for 28% of spending in packaged consumer goods.
Tier three is Africa's biggest tier, comprising consumers who spend much less than average on consumer packaged goods.
Largely young and lower class, they are a diverse group ranging from increasingly modern students to conservative housewives. Collectively making up 45% of the population, the sheer size of this group makes them an important consideration.
The different tiers require different messages and product offerings, the study says.
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