"Often, organisations do not care about this market because of preconceived ideas," Illana Melzer, founder of Eighty20 Consulting, told the audience. "But this is a very fascinating markets with amazing angles to look for," she added.
In fact, marketers' lack of basic knowledge of these markets when segmenting could be the other main reason behind the snub. Furthermore, those who have tried, as one delegate told Bizcommunity.com, have often complained of inconsistencies, so they have ended up reverting to their original markets to avoid any further waste of energy and resources.
However, Melzer's presentation titled 'Targeting Low Income Consumers' contained valuable ingredients as to how to venture in what many marketers have branded "the forbidden zone".
"When segmenting", Melzer said, "one has to take account of individuals, adult population and households."
South Africa has a population of 46.971 million, including 21% of people under the age of 10 and 34% of people under of age of 16.
Secondly, according to statistics, the South African adult total population is divided as follows: 25.9 million people are over 21; 28.8 million are over 18; and 30.8 million are over 16. The AMPS Technical Report defines a household as a person living alone or a group of people who live together but who are not usually members of one family, and whose expenditure on food and other basic items is jointly managed.
However, the breaking news is that close to 60% of South African households are poor. This is likely to raise a few eyebrows and send a chill down marketers' spines, as they might be wondering if their efforts will be rewarded and the company's spent resources will be recovered at the end of the day.
Marketers should be very careful when doing surveys on households, Melzer warned. "Look out for households which are slipping out of poverty, and those that are slipping back into poverty," she said.
While the present government's efforts to redress the imbalances of the past seem to be bearing fruits for some families, life continues to be a living hell for others who moan and believe that they were better off in the apartheid era than in the present dispensation. Bearing this in mind, Melzer recommended that when segmenting the poor, marketers should categorise them into the very poor and the near poor.
Stuart Rutherford's research on the very poor means an unemployed person who has no grant income (might qualify but does not get it), has a limited network, no liquid or financial assets, has no productive land, and no skills.
The near poor, usually called the working poor, is skilled, formally employed but earns little, has a strong social network, may have extra-household dependents, may own fertile land and livestock and may have productive assets. Most organisations (mostly banks) are now targeting this class as they firmly believe that they are not as poor as people think.
Furthermore, marketers are also urged to take account of personal income, household income, per capita income, living standards measures (LSM) as they all play a vital part in the survey and segmentation approach in the low market.
Nevertheless, three types of segmentation must be made:
In the access-based segmentation, three markets must be distinguished: the market redistribution zone (for the too poor: change strategies or lower the price to ease access to products); the market development zone (for those who do not qualify for access, cannot physically get the product due to certain circumstances and other barriers); and the market enablement zone (for potential users - these people will probably buy your product - and those do not want it... find out why they do not want the product!).
Melzer warned marketers not to be fooled by LSM categories alone because it does not always paint the real picture. "Look at LSM with a lot of scepticism," she said. "A lot of people out there have beautiful and expensive fridges which are empty."
LSM is calculated on ownership of the following household assets: VCR, DVD player, TV set, fridge/freezer, microwave oven, washing machine, computer at home, hifi, built-in kitchen, home security service, hot running water, electrical stove, flush toilets, Telkom line, cellphone and tumble dryer.
For more information, visit www.gibs.co.za/conferences/consumersegments and www.eighty20.co.za.
