One can no longer ignore that market liberalisation is forcing executives and social activists to work together to develop new business models that will transform organisations and the lives of poor people everywhere. CK Prahalad's latest work suggests that many corporations have started to pay attention to customers at the bottom of the economic pyramid, and furthermore, companies and NGO's are trying to learn from and work with each other.
Marketing Opportunity: Adding value to Stokvels who are sophisticated business entities
The total amount invested annually in Stokvels is estimated to be R5,61 billion and Burial Societies another R6,42 billion. So, do you want to play a part in this R12 billion market with over 8 million members across all LSM Groups? Their propensity to 'save' is high. Their 'collective' new monthly 'cash flow' of contributions is enormous - in excess of R1-billion per month!
The marketing community expressed a need for more information on Stokvels and the UCT Unilever Institute recognised the need for meaningful information on this informal 'banking industry' and its contribution towards the purchase of consumer products and services.
UCT Unilever Institute's mission is to raise the standard of strategic decision-making and the level of strategic marketing in SA by generating marketing knowledge and theory that is specific to the SA context and making this information available to educators and marketing practitioners.
Key findings on this lucrative market and opportunities for marketers
A simple definition for Stokvels are: Group Savings Schemes that provide for both mutual financial assistance as well as social and entertainment needs. Its members contribute a fixed amount of money to a common pool weekly, fortnightly or monthly and money is drawn by members either in rotation or in time of need.
There are a large number of different types of Stokvels and marketers can identify their target market and play a role by adding value to these business entities through active participation with the Stokvel management teams.
- Contributions - members pay fixed monthly contributions and await their turn to receive a lump sum. The marketing implications are sales of 'big ticket' items and collective spending power.
- Basic/Saving Club - individuals profit from weekly, fortnightly or monthly contributions. Marketers need to be aware of building buying capabilities and that they are dealing with like-minded groups of consumers sharing brand loyalty.
- Family - profit is made for the group through investments. Here marketers should think about group networks as opposed to marketing to an individual.
- Investment Groups - Both for group and individual profit and when an investment pays out, sometimes the money is split and some is kept back for re-investment. Marketers should think about educating the market in understanding investments and finding solutions and opportunities for growth and adding value.
- Grocery - no profit but cash or grocery coupons are the end result. Marketers need to think about engendering loyalty through meeting consumers' needs by looking at packaging, delivery, special bulk offers, personal security and more.
- Purchasing - no profit, the money is pooled and rotated monthly throughout the year. This results in 'big ticket' opportunities and marketers should look at delivery services and value-added discounts.
- Entertainment/Party - has a fundraising arm. Members (sub-members) pay for entry, food, drink and music. This presents huge network marketing opportunities and marketers need to think about responsible marketing at jazz clubs and bigger parties and beware of sponsorships.
- Borrowing - leads to group and individual profit. Pooled money is loaned out with a 20-50% interest fee per month. This presents an opportunity for financial intermediaries to educate consumers about interest.
Some interesting facts
- Nearly half of the black adults in SA are members of Stokvels and Burial Societies
- Well over half of Stokvel members are women
- Half of all Stokvel members live in Gauteng and KZN
- 41% of Stokvel members and 45% of Burial Society members have no personal bank account (are 'unbanked')
- Total amount invested in Stokvels annually is estimated to be R1,3-billion
- Total amount invested in burial societies annually is estimated to be R2,6-billion
- Of the 'unbanked' sector, unemployed members contribute more
- Some Stokvels and burial societies have very sophisticated micro lending schemes
- Stokvels are already seen to be evolving into sophisticated businesses, but without losing their communal character.
- Burial Societies, developed out of Stokvels, and are informal self insurance schemes. They absorb the costs of social activities and cultural requirements of (predominantly black) funerals. The study identifies different types of burial societies, focusing on the informal, traditional and funeral schemes.
What is the future of Stokvels and how do you 'partner' with the Stokvel market?
The Study covers the future of Stokvels in looking at their attitudes to banking, HIV/Aids, cultural heritage, gender, urbanisation, youth, training and education.
Marketers should recognise the importance of Stokvels and appreciate that they are hugely efficient operations. A proactive response to this market is required in order to play a role in its future. Support them with appropriate products and services and do so in a responsible manner.
The opportunity for you to grow with Stokvels is immense.
And remember, as the saying goes: the diamonds are in your own backyard.
In the last two years, INFUSION (formerly Culture Cruizing) has conducted continuous research in 7 townships in order to better understand lifestyle trends and social dynamics in the townships.
With three major shopping centres going up in Soweto and the emergence of a consumer hungry South African middle class, suddenly business people are eyeing the townships as sources of future business growth. Expect a litany of clumsy and misguided attempts to reach into these areas, accompanied by an array of taxi ads that mean little to anybody.
Have you heard of a Grameenphone? Superb idea in Bangladesh!
Townships are a marked South African phenomenon. People that reside in them are often seen as one indistinguishable mass with little consideration as to how lifestyles, areas, mindsets and perspectives differ.