Posts Tagged ‘analysis’

Detailed breakdown of Uber’s business model in Kenya puts spotlight on weaknesses

Latiff Cherono has just published an indepth analysis of what exactly it takes for an Uber driver in Nairobi to cover the cost of doing business. Here’s a snippet,

In this post, I try to understand the root cause of the disconnect between how the customer (who defines the value), Uber (the service that controls the experience) and the driver (the one who provides the service).

He accompanies his analysis with a detailed breakdown of costs and revenues, such as the table below, and others in his post.

new-picture-2And concludes:

The incentive for any person who starts a business is to maximize their profits. As such, we should expect that Uber drivers will approach their business in the same vein. However, the data provide by Uber to the driver is limited and prevents them from making informed decisions about generating revenue. For example, drivers do not know the estimate distance of a new trip when they accept it via the app. They are also penalized for not accepting rides (even if that trip may not make financial sense to the driver). All this is by design as Uber wants to maintain a steady supply of “online” vehicles on their network. One may argue that Uber is not being transparent enough with its independent contractors.

My thoughts:

Nairobi, Kenya isn’t the only ‘developing’ country context where Uber is creating unhappy drivers (and customers, one assumes) due to the design of their system. While most of the first world challenges to the company have come from the perspective of the formal economy and its regulations and laws regarding revenue, tax, employment status et al, the same cannot hold for the entirely different operating environment where the informal sector holds sway. And taxi driving is one such service.

Kampala, Uganda has it’s own challenges for Uber, including:

  • Uber drivers are reportedly leaving the service, switching off the Uber apps or not picking calls from corporate clients and those paying with a credit card. For the first four months after its launch, Uber was offering drivers incentives that saw them earn between Ush200,000 ($57.1) and Ush350,000 ($100) a week.
  • With increasing competition, drivers say that Uber’s incentive structure has been changing. In the first four months, Uber drivers were getting Ush15,000 (about $4) per hour, but this has since been scaled down to Ush10,000 ($2.9) and to Ush4,000 ($1.1) in incentives.

There is so much to be unpacked here, including the entire section on Uber’s own perception of how the market works, upto and including how to introduce time limited incentives, that I’ll follow up on it subsequently.

In this post, I wanted to highlight Latiff’s analysis and hard work pulling together the operating costs data, even as I leave you with this snippet from the article:

Uber’s commission in Nariobi was reduced from 25 to 20 per cent following protests by drivers in August, accusing the taxi hailing service of working them like slaves.

As I wrote earlier in the year, Uber could have done so much more in these markets, particularly on the path to formalization. Instead, they’re continuing on their journey as yet another smartphone app making life even easier while squandering the potential for real world change for the less privileged members of our societies.

 

 

Africa’s Middle Class: Development economics and marketing demographics conflating the holy grail

The most developed nation on the African continent, south of the Sahara desert, is considered to be South Africa with its financial and transportation infrastructure and systems, a legacy from history. In the first decade of the 21st century, the black middle class – known as Black Diamonds in marketer jargon – came into prominence on the back of numerous economic initiatives after the fall of apartheid.

img-south-africa-consumer-goods-02The rise of the Black Diamonds was meant to be the signal of a changing rainbow nation, one whose peoples would finally be included in the social and economic advancements long enjoyed by a privileged minority. This emerging middle class was also among the first to be noticed as African consumers in their own right, and their discovery pioneered the subsequent search for the now mythical African middle class. Even then, their total number was under scrutiny for its aspirational inclusivity versus actual households fitting the conventional definition of a middle class. From The Economist writing in 2007:

The University of Cape Town’s Unilever Institute of Strategic Marketing says there are now 2.6m “black diamonds”, as it calls the black middle class, a 30% increase in less than two years. Included in the definition are working professionals; those who own things such as cars, homes or microwave ovens; university students; and those who merely have the potential to enter these categories. The survey estimates that these black diamonds represent 12% of South Africa’s black adults, and make 180 billion rand a year ($26.2 billion), or 28% of the country’s (and more than half of all black South African) buying power.

For some, such as Lawrence Schlemmer, a sociologist in Cape Town, this definition is far too broad to be meaningful. He agrees that numbers are rising fast but argues that they are still tiny. Last year, he says, only 322,000 black South Africans (less than 1% of the black population of 38m) could be deemed “core” middle class, a far cry from 2.6m black diamonds.

Still, whatever their size, the buppies are affecting the economy and the political landscape.

This week, a comprehensive new survey by the South African government shows the on the ground reality in 2016. The National Income Dynamics Study (NIDS)‚ launched by the Department of Planning‚ Monitoring and Evaluation (DPME) in Pretoria surveyed 28‚000 people who were tracked every two years from 2008 to 2015. Very similar in fact to the recent household panel survey completed in India. Even their conclusions resemble each other:

According to the study‚ those in the middle class have a tendency to drop in and out of poverty.

And the size has not actually changed much since 1993 – the year before the fall of apartheid and the election of Nelson Mandela.

The study also shows that the South African middle class is much smaller than estimated‚ sitting at around 14.5% of the total population in 2014. Women are more affected by poverty, and even those who manage to climb the ladder may slip down again.

“…It has not grown much since 1993 — growing its share by only two percentage points in the past 23 years…”

20151024_mac237And, perhaps, the real challenge we face with the ongoing search for Africa’s middle classes is the conflation that took place back then between a consumer marketing segmentation and a socio-political demographic.  By allowing the aspirational reach of the consumer marketing driven research to inflate the size of the segment classified as middle class, it has given rise to an ongoing and complex muddle across teh entire continent. As the AfDB’s former president Donald Kaberuka said last year:

“I think we are wasting too much time on the definition of the middle class and the cut off point, it is a sterile debate.

“A dynamic middle class that rises with the sea increases domestic demand, the diversity of the economy, [its] resilience, and they also stabilise the politics of a country as well, since they have a stake in the system.”

He has a point. But perhaps not the one he intended to make. Instead, if we consider disentangling consumption and demand for consumer products from the increase in political voice and “stake in the system”, we may in fact discover that there is indeed a sizeable bourgeoisie emerging even though they may not possess all the qualifying criteria traditionally attributed to a middle class per se. (Previous posts on this topic have been tagged informal bourgeoisie)

There’s the demographic segment which is the middle, and then, there’s the conceptual body of solid citizens invested in the democratic stability and economic growth and development of their countries. As Jacques Enaudeau wrote in 2013:

But fixated on wealth, the discussion on middle classes in Africa misses out on the other two pillars of social stratification: social status and political power.

As soon as those two are factored in, discussing the “African middle class” as a homogenous entity seems absurd, and so it should. Thinking that what separates the senior civil servant from the street hawker or the country head of a multinational from the shop owner is a matter of daily expenditure amounts to looking at their reality through the wrong end of the telescope: the bigger picture is that they live in different worlds.

In the developing world, the formal sector with its white collar jobs populated by university graduates may jostle cheek by jowl with the informal economy’s life lived on the street but that proximity might be on the only thing they have in common.

For here lies the rub: the material culture that the notion of “middle class” posits as shared consciousness is articulated to a strong sense of individualism, which is borderline contradictory with the idea of class. All the more reasons for the analysis to consider the representations which members have of themselves as a group and the historical context in which such groups are being shaped.

This, however, is not the post to unpack those complexities of self image and collective consciousness. It’s one which pauses to ponder the newest set of findings on the dynamic nature of poverty and wealth in the more uncertain and volatile operating environments of the still developing world. And considers the South African example introduced today:

There has, however, been considerable demographic transformation within that band of the middle class, with Africans now outnumbering whites by about two to one, the report said.  Factors driving the surge include greater access to credit, improved education levels, BEE and improved economic growth until recently.

Transformation of societies is underway, just as the Indian researchers concluded in their analysis. This might be a much larger global trend underway, whose weak signals we’re just beginning to pick up now. I’ll be following up with these musings on the blog. The people with the real problem on their hands are the consumer companies looking to justify entering the African markets, and perhaps that’s a topic to take up in the next article.

Nigerian retail transformation changing consumer expectations

0c9d4c1a267b44d04a7d5037414aa1c4c1fbbee4Drawing on insights from Adewale Yusuf’s expert observations in the heart of the Nigerian transformation, I wrote up a short piece for his tech magazine Techpoint.ng which looks at changing consumer behaviour and its implications for startups. Do take a look:

Shopping as entertainment – A trend that might bite

Sprouting mega-malls are offering a whole new way to spend the day in the comfort of air-conditioning, browsing the latest offerings on display or window shopping. And the plethora of eCommerce sites offering cash on delivery means you can experiment with ordering new products to try in the comfort of your own home or the convenience of your office without making the commitment to purchase. Retail therapy has evolved from the bored housewife’s pastime to entertainment for the entire family. The very same headaches that increasing popularity is creating for eCommerce sites are but a clear signal of this consumer trend.

Dynamic vs Static Metrics: Attributes for an African Measure of Competitiveness

worldrankingsheatmap-600x390

“No Data Available Gray Area”

For analysts everywhere, the challenge of considering each economy in its own right seems to be far too much trouble, and so they tend towards sweeping generalizations which lump all metrics under one label – “Africa”. Some find even that far too exhausting and aggregate Africa along with Europe and the Middle East.

These regional groupings might be fine for executive Vice Presidents responsible for regional sales in a globe spanning multinational but for anyone seeking to assess and evaluate the emerging opportunities sparking interest in the continent, these aggregate metrics only serve to obfuscate and confuse the issue.

Static vs Dynamic

What distinguishes the majority of the emerging African economies from the more established ones is the prevalence of informal business activities, in addition to agriculture.

informal GNP SSA 2000
As I wrote previously, from my research on the underlying rhythms of the informal, there are two forms of income – one that is static, and thus predictable, like a regular monthly salary, and one that is dynamic i.e. volatile, such as the irregular cash flows that those in the informal sector tend to rely on for their household expenses. For many households, their cash flows have a combination of both forms – a predictable static paycheck from formal employment as well as bits and bobs from informal livelihood activities.

One can extrapolate the presence of this dynamism into the larger context of the entire operating environment – when there is a significant component that is irregular and unpredictable i.e the cash flows from the informal sector, and consider this as a key attribute that distinguishes these economies.

That is, instead of seeking metrics which maybe static, could we perhaps instead seek those that convey a measure of the dynamism that’s best characterized by the hustle of the informal marketplace?

Acceleration and Growth Trends

A great example is the rate of mobile phone penetration. Here is a snippet of data extracted from the GSMA’s statistics showing just a couple of years of change in phone penetration. Can we see how fast Ethiopia’s subscriber numbers grew, almost doubling in just 2 years?

change1Here’s another chart that truly visualizes this dynamic activity

Five-Reasons-why-Africa-is-Fertile-Ground-for-Blazing-E-Commerce-Growth_Guest_Post.docx-Google-Docs.clipularAnd if this doesn’t suffice to convey the rapid pace of change happening on teh ground, then lets take a more detailed look at trends related to this mobile phone penetration activity.

SOTIR 2014 over timeThe point is that measurements that are static, or slow to change over time, aren’t conveying dynamism of the African markets nor their opportunities. With such a low base of development, static measurements lead to African nations being ranked low on indices. But when we consider the rate of change or the acceleration of growth, we see entirely different trends than if we were looking at absolute numbers alone.

I chose these measures because mobile phones are rapidly evolving into powerful and portable computing devices, while the proliferation of mobile money solutions reek of business activity, transactions, payments and the flow of cash circulating in an economy.

ecommercessaIn this table, for example, both Egypt and South Africa lead the pack in terms of size but are they the leaders in terms of opportunity for growth or ROI?

Nigeria’s e-commerce sales grew 400% in the same time period as it took for South Africa to double and for Egypt to grow by 80%. Ghana and Ethiopia grew 300% while Kenya came in close enough. Where would you place your bets for e-commerce investment?

Connectivity and Communications

The final attribute that emerges from the patterns I’ve seen in the ‘prepaid economy’ and the informal and rural markets is that of flexibility and facetime. This isn’t the post to get into those details, which are available on demand, but the point here is to look at local and social activities, fuelled by the phone, that are hallmarks of the increasingly connected emerging consumers.

mobile phone

Source: http://www.biztechafrica.com/article/mobile-africa-2015-african-phone-use-decoded/9962/

You’ll find me on Facebook” is the de facto business card of the African informal sector and/or startup, SME, telco or bank. The ability to communicate, thus negotiate, is key to the flexibility of the informal, and the perceived intimacy of social media mimics the hyper-local, social trusted networks of transactional flow and culture. As I write these sentences, I realize that embedded within each is volumes of densely packed insights that I promise myself I’ll return to in subsequent posts and articles.

These are the trends that drive adoption of Uber in Lagos and Nairobi, and the emergence of local variations for informal services. These are also connected to increasing visibility of geek culture and tech savviness among that favourite metric of demographers – the African youth.

An African Index of Competitiveness

Biashara is teh Swahili word for business, and a better descriptor of the informal trade and business sectors, as it covers the smallest livelihood activity that every family must conduct. A Biashara Competitiveness Index that could reflect the true picture, incorporating as it would the dynamic aspect of the informal sector, one that has failed most other attempts to measure and define.

Are the metrics I’ve displayed necessarily the ones that would contribute to this index? I don’t know, at this point, but I do know that when we look at the opportunity space and overlook the changes taking place and the innovative solutions in industries like financial services, cross border transactions, e-commerce etc we’re missing out on the ground reality by relying on metrics more suited for formal and/or developed economies for comparison.

If we can find a way to convey the pace of change, the acceleration of innovation and the flux, to capture and communicate the dynamism of the operating environment, we’d be better able to assess which markets offer us the best opportunities or where future growth may lie than static indicators. I’ll continue working on this.

Related posts
Questioning Convention: Comparison Metrics for Competitive African Markets
African E-Commerce: Successfully Leapfrogging The Metrics of Fail

Navigating the African Informal Retail Sector

Nigeria’s consumer market has captured global attention. A significant proportion of this emerging market opportunity is in the FMCG category. Due to historical reasons, 87% of this retail trade happens in the “unorganized” or “informal sector”.  The market is highly fragmented and inefficient.

Yet due to the nature of the informal economy, most of this economic activity has been overlooked or not captured by conventional market analysis and research.

CPG companies wishing to enter this market need a map of the landscape in order to navigate the opportunity successfully or to design the most appropriate and relevant business model for their needs.

Situation Analysis

Nigeria’s informal retail trade can be segmented into three major categories – Tier 1 (approx 5%), Tier 2 (approx 30~35%) and Tier 3 (approx 60~65%) of which Tier 1 is the most formalized with some amount of business processes in place.

The real challenge in addressing the market commercially is the unorganized nature of the bulk of the trade – Tier 3 – who tend to be market women buying and selling goods in open air markets and street corners without any business infrastructure. There is no feedback loop in place for manufacturers and distributors who have little idea on how to plan and estimate their product pipeline.

Yet, the methods and tools available in the formal economy with its information, communication and financial services infrastructure cannot be directly implemented either due to the informal, flexible, unstructured nature of the sector.

There is a gap in knowledge and in understanding of the business practices in the cash based informal economy. In order to bridge this gap, we need to begin by understanding the informal retail business from the ground up. Then we need to figure out how to use smartphone technology to map retail locations and keep a finger on the pulse of consumer demand and product sales flow.

Framework required for optimizing informal retail market research for CPG distribution

  1. Landscape of informal retail in FMCG
    1. Market survey of FMCG  retail distribution space – trends in etail, ecommerce, business models, distribution models, startups and apps.
    2. Insights on demand creation, market development, consumer behaviour – loyalty, relationships, purchasing patterns, choice of location.
  2. Identifying touchpoints for intervention – with and without technology – to improve efficiency of system with respect to: Data gathering, inventory management and forecasting
    1. Identifying attributes by which to segment and cluster retailers – Volume and/or Frequency, location, density, product categories, profitability

The basis of the optimal solution for maximizing distribution of consumer products across the vast, undocumented and fragmented informal retail sector, such as in Nigeria, would be using Pareto’s Law to cluster and identify the retail outlets to be reached for a particular product category’s target audience and thus, crafting the most cost efficient reach strategy.

Using technology to optimize data collection

ITC in India has already implemented the use of GPS in a tablet based inventory management solution which sales officers use in the remotest areas to send real time data on inventory, demand and sales back to the company headquarters using ubiquitous mobile connectivity in the remotest rural area.

NeilsonMobileRetailACM2015With the right list of outlets and channel clusters, manufacturers are better able to offer the right product format and size to meet the particular needs of the consumers who visit those particular outlets.

Crucial details such as store location, type of store, trading days, opening hours, access to power and water, the presence of a storeroom, categories stocked, and a long, long list of other characteristics should be captured during the survey. Simply knowing which stores have refrigeration can transform the business of a Guinness distributor in Nigeria, for example.

Clustering retail outlets by volume of sales as one of the attributes.

neilsonParetoretailACM2015

neilson6retailACM2015

What’s missing?

While reasons for visiting different retail formats were documented what’s missing is the frequency of visits. Also required is a chart capturing purchasing patterns seen most commonly among the majority (the prepaid or kadogo economy) who manage on irregular incomes in informal markets where over 90% of all transactions are conducted in cash money.

Those need to be mapped against buyer behaviour for a true picture of the rhythms of the bazaar, without which the CPG firms will not have a finger on the pulse of the market, just reams of numbers without a contextual framework and foundation. One element, for instance, would be seasonality, the “high season” and “low” which are commonly seen in cash dependent markets.

Also, flexibility in this context does not simply mean variety in packaging and SKU sizes or branding the product container. Flexibility refers to the flow of cash – the time and money – that allows for the management of volatility between outgoing expenses and incoming cash flow. In the retailer’s context, this would be the interplay of credit and cash, inventory and demand and of course, “fast moving goods”.

Lets see how this research initiative proceeds to understand and grapple with that critical characteristic of the operating environment and retail ecosystem that distinguish the African consumer market.

Download the Neilsen Africa Retail Labyrinth report as a PDF. Contact me if you’re curious to know more about the original thinking behind the situation analysis and research plan.

Target market strategy for upwardly mobile BoP segments

* BoP – referring Prahalad’s Bottom of the social and economic pyramid, MoP – middle

This visualization of the emerging consumer market opportunity in India is by the insightful analysts at Nomura Research Institute, Japan. When taking this in conjunction with the information collated in my previous post on the imminent boom in upward mobility currently being seen in rural India, one can instantly perceive the logic of their target market strategy.

Why stumble around in other rural areas, when the first ones most likely to benefit from the economic changes taking place will be in teh vicinity of the smaller cities which are themselves rapidly growing? And if they themselves aren’t, its likely that their local market’s shops will source new products from the nearest city. Innovation diffuses outward from the urban areas, as do new ideas and thinking. We saw this same pattern with the way the internet cafe industry was evolving across Kenya during the Village Telco project last year. And its the same pattern of diffusion for new product introductions in the informal trade – the ones who are ultimately serving the BoP customer in their rural village. Thus, this target is a focused one with greater impact than seen in the first instance.

What Nomura’s gurus have added however is a layer of nuanced caveats on this analysis – one, not to forget the fact that even as people’s upward mobility takes them up the food chain to ‘middle of the pyramid’ (their MoPs in the diagrams), this very same economic change will have visible impact on the local business environments, so stay cognizant of that, and two, that even as people migrate upward economically, they do not automatically change their system of values in terms of purchasing patterns and buyer behaviour to resemble the existing higher income strata, instead they still think like the “BoP” they were.

Thus, the emphasis in the strategies to choose how and at which point to enter the market whilst straddling both the MoP and BoP population segments. An example of all of the above comes from the recent Daily Yomiuri article about Yamaha’s activities in Asia and Africa:

Yamaha Motor Co. has started selling water purification facilities in emerging countries in Africa, Southeast Asia and other areas, as part of its so-called bottom of the pyramid business plan, which aims to generate profits by improving the livelihood of low-income earners in such countries.
[…]
Yamaha has built small water purification facilities in five locations in Senegal and Indonesia, including local water service public corporations. Each facility is designed to provide a community of about 200 households with 8,000 liters of water daily. The firm also received an order in Mauritania.
[…]
By selling its name in untapped markets in Africa and small villages in Asia, Yamaha also aims to boost its sales of outboard motors and motorcycles in the future.

Emerging evolution of global BoP markets by mindset and income

 Japan’s Nomura Research Institute have an interesting take on the evolution of the existing global population currently demarcated as the BoP (Base or Bottom of the Pyramid). While it is not surprising that income levels are expected to increase, given the signals already observed in frontier markets and rapidly growing economies, what was intriguing was their assertion that the newly emerging “Middle of the Pyramid” (or rather, emerging global middle class since that’s a diamond not a pyramid) will display an entirely different sense of value i.e. a different mindset, from mainstream consumer culture prevalent today.

This values gap between the customers at the BoP and those immersed in the global mainstream is something I’ve written extensively about previously, having identified and framed it in “Design for the next billion customers” back in 2008. It is one thing, however, to describe my observations of differences in mindset and buyer behaviour, and another, to see this aspect in terms of population and income, that too, taking the increasing upward mobility into account.

That is, what this diagram is saying is that not only is there a difference in value (and thus, mindset) between the BoP customer and his brethren higher up on the social and economic pyramid, but even as their income rises and they evolve into ‘middle income’ customers, their mindset is more likely to remain the same as when they were classified as BoP than to suddenly shift into the mindset and values of those in the higher income brackets.

That these emerging global middle classes will continue to have more in common with their rural cousins and their BoP roots.

Yes. This makes perfect sense. And to see it visualized like so offers valuable insight into the emerging consumer markets of the near and medium term future.

Opportunity spaces vs ideas – business development for the BoP markets

Inaugural Issue of Entreprenuer magazine, photo taken in Kanpur India, Sept 13, 2009

Ideas or concepts are not the same as opportunity spaces or gaps in a particular market. Exploratory user research can identify opportunities for innovation, that is, either unmet needs or gaps in the existing ecosystem which could be filled by a product or service with the intent to create and provide value. On the other hand, actual ideas for new businesses or concepts for products or services may not be the immediate outcome of such exploration. While the insights from the field can act as waymarkers for new revenue generation opportunities, they are not the actual ideas or concepts themselves.

Imho, this conflation of the two – a concept or an idea and an opportunity space or gap in the existing market – gives rise to confusion about the goals or outcomes from field research, particularly in the short term or for the immediate results. It must be noted that even insights derived from observations are usually the result of data analysis and synthesis, best done with a team after the field research has been completed. Only after this can one say with any degree of confidence which gaps or behaviours observed would translate into potential opportunity spaces for innovation or new product development leading to sustainable and sustained revenue generation opportunities. Finally, the concepts or ideas can be generated within the constraints of this opportunity space.

The potential ‘market’ at the BoP is vast, complex and chaotic and too many needs go unmet that at first glance that it may seem opportunities are indeed available  for the picking and the possibility of fortunes immense.

The first critical challenge is to evaluate which of these potential areas offer value; a return on the customer’s investment, meagre though it may be.

The next is to evaluate the time and effort any new venture among BoP customers would require before it would start showing returns.

This is not a hit and run market.

Internet penetration by population in African countries: mapping opportunity

Since we’re currently working on a market entry exploration study for Village Telco in Kenya, I’ve been taking a deeper look at the spread and adoption of internet use.  It struck me that the landscape is actually far more fragmented than it used to be – things have been changing so fast that gone are the days where you could look at the situation in one Sub Saharan country and extrapolate it reasonably accurately for many others.  This is particularly true for ICT as cheaper rates and smarter devices impact some locations before diffusing to others. While playing around with the numbers, some interesting observations emerged:

Data Source: www.internetworldstats.com (click for large) Chart: Semacraft Consulting Partners

I sorted the internet usage numbers by size of country – the chart above shows the top 10 countries in Africa by percentage of total population i.e. almost 15% of the continent’s people live in Nigeria, and then added on what percentage of that country’s population was online.

Data source: www.internetworldstats Chart: Semacraft Consulting Partners

The findings were surprising when you compare to this chart where I’ve sorted the countries by percentage of the population accessing the internet. (I’ve removed the French island Reunion  which showed up in 3rd place nudging Nigeria out of the top 5). Their proportion of the continent’s population is seen next to them.

The only countries that fall in the top ten – both by total population and percentage of population on the internet – are Nigeria, Egypt, South Africa and Algeria.  I had started out thinking that if I looked at internet penetration rates by population it would give me some clues about where the internet was being most rapidly adopted (and then perhaps, why). But instead, I found myself surprised by the gaps instead – Tanzania being the unexpected. The reality may be entirely different in Ethiopia and the Democratic Republic of Congo.  Maybe if the data is looked at again separating North African countries from Sub Saharan, a different set of clusters will emerge.  I’d also like to remove all the little island nations to see what happens.

Update:  I decided to take a look at the GDP based on PPP per capita for 2011 (IMF data) for selected countries (based on the earlier two sets) just to see if there were any correlations between that and the internet.

Now this starts to get even more interesting:- Morocco, Nigeria and South Africa show internet adoption figures very different from their relative position in the comparative economy chart. You’d think that greater economic strength would demonstrate a higher internet adoption and vice versa. But South Africa’s internet adoption is  too low compared to its economic standing while Morocco’s is outstanding compared to its economy.  In the East African region, Tanzania is still the internet laggard compared to its neighbors Uganda and Kenya.

Caution: The emerging African market PDF stampede

This  PDF report on the emerging consumer market opportunity in Sub Saharan Africa comes to us from Accenture, the most recent in the long line of consulting firm offerings that started with McKinsey’s in June 2010.  In order to differentiate themselves from the migrating herd, they offer us a single customer segmentation model for the combined population of ~ 43 countries :

Our segmentation identifies five broad consumer segments:

  • Basic Survivors are the largest consumer group in Africa and are characteristically low income consumers. They tend to make day-to-day decisions based on basic needs.
  • Working families are the second-largest consumer group. They focus their spending on their children’s needs and value stability and routine.
  • Rising Strivers value upward mobility and buy based on convenience, quality, or even more “expressive” factors.
  • Cosmopolitan Professionals are typically located in urban areas. They value pragmatic products but are also brand conscious and influenced by the media.
  • The Affluent of Africa have disproportionately high purchasing power, and are considered wealthy regardless of where they travel across the globe. This group is extremely small and very fickle.

Their segment of choice for future focus are the “Working Families” ($100 to $250 a month), described so:


Working Family Profile – The Biya family resides in a small city called Mbouda in Cameroon and has four children ages seven to 13. Francis (the father) works as a mechanic servicing local farmers’ trucks, while Calixthe (the mother) works as a housekeeping lady in a hotel. Due to both parents’ late working hours, they often make quick prepared noodle dishes for dinner and give their children small biscuit packets for snacks. They spend extra on laundry detergent for school uniforms.

I see the “consumer market opportunity too big to ignore” alright, lets see how they fare in the “African markets  in accordance with African realities”.  These insights are from their section titled Analysis, and it reminds me of Dean Roger Martin’s most recent HBR blogpost  “You Can’t Analyze Your Way to Growth” where he writes:

The fundamental reason is that analysis of data is all about the past. Data analysis crunches the past and extrapolates it into the future. And the past does not include opportunities that exist but have not yet happened. So, analysis conspicuously excludes ways to serve customers that have not been tried or imagined or ways to turn non-customers into customers.

Hence the kids being fed Maggi 2 min noodles and packets of glucose biscuits, most likely from Parle.   Martin goes on to add:

Organizationally and behaviorally, analysis and appreciation are two very different things. Analysis is distant, done in office towers far from the consumer. It requires lots of quantitative proficiency but very little experience in the business in question. It depends on data-mining: finding data sources to crunch, often from data suppliers to the industry. Appreciation is intimate, done in close proximity to the consumer. It requires qualitative proficiency and deeper experience in the business. It requires the manufacture of unique data, rather than the use of data that already exists.

I like the term appreciation but my caveat would be that appreciation of any thing, person or environment emerges from understanding.