MBA 049: Marketing to the Informal Economy of Africa with GG ALCOCK

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Website: GG Alcock and Minanawe Marketing

GG Alcock

Marketing to the African mass market.

Elevator Pitch: Who is GG Alcock?

When people hear of GG who is an expert in the black or mass market they tend to expect a black woman and is instead met by a white man. GG grew up in a Zulu village and spent his life working in a township environment. This puts him in a unique position to understand the mass market.

Starting Out

GG’s parents were political activists and he grew up in a mud hut with no running water or electricity. He says he grew up as a Zulu child and from there the great understanding of the Zulu culture, language and black informal sectors in general. From there he moved into a township space. His business always sought opportunities within that space and he recognised a huge growth in the informal sector. He calls these sectors invisible to many, yet they make up a large part of the economy.

Education

He didn’t study marketing, instead his skill to communicate to that market comes from his deep understanding thereof. His value lies in being able to communicate and explain that environment to corporates. GG describes himself as an avid reader, especially of the business and news sectors. He also enjoys TEDtalks. GG spends a lot of time doing research, talking to traders in the market to better understand what makes them tick. Oftentimes people are retrospective in terms of research – they believe what happened in the past is a prediction of what is to happen in the future. GG tries to look for certain indicators of future trends.

Predicting Trends in the African Market

In South Africa, like with many other developing economies, the informality and individualisation of businesses is growing extensively. The informal sector allows retailers to supply different products that suit people in different parts of the country, which is the ultimate personalisation. The large retailers are not in such an adaptable position. About 100 000 foreign traders have moved into local informal spaza stores and research shows that that sector is now worth around R200 billion. They are growing at a rate of around 7-8% while the formal sector is at a much slower 2-3%. A retailer may need to adapt a product to different segments of the market.

Making Mistakes and Learning from Them

One assumes that your clients are visionary; that they are able to see the opportunities. In GG’s case nobody took notice when they tried to explain to them the potential of the mass market. Only after a report by UCT called “The Black Diamonds” did clients sit up and take notice of their strategy. You cannot assume that other people are able to see your vision. Opportunities are often not quantifiable and many companies miss the chance because they are fixated on the metrics of a business.

Differentiate Yourself from Competitors

GG feels you have to be particularly creative and innovative in the way that you do business. At the moment their competitors offer what they were offering a year ago. You need to keep up with the pace of change of the industry in which you are. Ideally you want to set yourself up as the expert in the field. By being the thought leaders and giving away insights and research on the market for free, GG’s company is perpetually positioned on the leading edge. Their competitive edge lies in constantly innovating what they offer and continually being in touch with the consumer.

Marketing

Establishing themselves as thought leaders in the market is advertising enough for them. They do this by talking at conferences, writing articles and distributing research. When they pitch to a client, they do not present their credentials, but rather lead with their knowledge of the market. The reason they do this is to add value to the client’s day. He recommends looking at PR opportunities to promote yourself – utilise social media and blogs for this purpose.

Entering the Township Market

If GG feels he doesn’t know enough about the market, he would go to the consumer in that market and place the product in the environment. You need to find out how suited your product really is to a specific consumer. Don’t assume you know your consumer. Start your research without preconceived ideas. From there you can determine whether your product fits the market. Secondly you need to differentiate your product from the rest – what makes it different and better? Does it fit a future trend or merely following a current trend? Customise your product for an exact sector.

Branding and Price Sensitivity

It’s GG’s opinion that price sensitivity is not so important to customers. It does however come into play when people compare brands that are all perceived to be good brands or products. He feels that the majority of people are still very brand conscious. People are looking for a premium product; even the poorest people want a product that rewards them in some way. GG reminds us that we shouldn’t think poor people want cheap things, particularly in the South African market. Buying a branded product is a “cheap” way of rewarding yourself.

Income Streams

About 40-50% of GG’s company’s revenue comes from typical marketing promotions. However, that margin is quite low, because they compete against many other companies. They try to focus their income streams where the margin is higher: having clients pay for the use of their extensive database of outlets, including schools, clinics and spaza shops. Their other income stream comes from consumer insights where they research a specific segment for a client. Although this comprises of a small percentage of their total revenue, it often leads to other business opportunities for them. They hand over the research together with a solution. GG suggests that your different income streams be synergistic for you to manage all of them at once.

Build a Database

GG didn’t build a database with the intention of selling it. With the database he is able to provide his clients with valuable contacts. He puts them in contact with the market segment they’re looking for, but he is then going to do the work. The database comprises of 30 000 outlets segmented by various criteria and access to this obviously has a premium attached to it. Building a database of this magnitude and using it for analytics is on par with the likes of Facebook and Google. This gives him a competitive edge. Effort should be taken to keep your database updated.

Reset Button: If you had to start over in a different industry, what would it be and why?

There’s a huge opportunity in support to entrepreneurs and businesses in informal settlements. This includes logistics, business support, services, point of sale systems, training and even funding. GG also advocates for changing mindsets. He talks about the credibility of a payslip, to earn a salary each month. Entrepreneurs don’t get payslips at the end of the month and are often not able to open store accounts, although earning a decent living. Being self-employed and having a fluctuating income should not be frowned upon but recognised as a viable alternative to traditional employment.

Last Words

Entrepreneurship can be terrifying! Accept that. If you aren’t passionate and excited about the industry and your business then it’s probably not worth it. Passion causes optimism which leads to success and perseverance when times are tough.

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