South Africa’s Great Value-Based Branding Brawl

An Introduction to South Africa’s Retail Migration to Value-Based Branding

Africa houses roughly 1.3 billion consumers today, making the potential for future growth in consumer and retail spending bright. South Africa is one of the fastest-growing consumer markets in Africa, and Africa is one of the fastest-growing consumer markets on the globe, therefore, household consumption has increased much faster than Africa’s gross domestic product (GDP). On the one hand, Africa has recorded an exponentially rapid economic growth rate, and on the other, a substantial amount of household income levels in Africa have not been keeping up; household spending in regions has remained relatively stagnant. 

Thanks to population growth, urbanisation rates, affluence, and access to international media, Africa’s emerging economies have new and exciting territories on the rise for expansion in retail and distribution. Digital marketing agencies in Cape Town have the opportunity to track value-based branding strategies across many industries. Marketing agencies in Cape Town should aim to understand the consumer and their need to suss out value-based products.  

In this series, Unscene investigates South Africa's consumer migration to brands that personify an integral part in their lifestyles, and how this migration affects retailers’ value-based pricing strategies.

Value-Based Pricing

When referring to a product or service’s price, we refer to its value, which is determined by a complex set of calculations and comprehensive risk-taking abilities. 

A company’s pricing strategy is aimed at niche consumers and aimed against its competitors. It evaluates certain aspects such as:

• Segmentation;

• Competitor actions;

• Returns on investment;

• Market conditions;

• Trade margins;

• Input costs.

Marketing companies in Cape Town will target these key areas when working on a corporation or business' value-based marketing strategy. Let’s explore what the term ‘value’ means to our consumers, and how marketing companies in Cape Town help retailers determine it.

The Qualitative Nature of Value

Value-based pricing is a core strategy of allocating prices to products and services primarily based on a consumer's perceived value of them. This method of pricing is customer-centric, meaning companies base their pricing on how much the consumer believes a product is worth beyond its functions. It is different from cost-plus pricing and doesn’t necessarily factor in production costs. As a result of consumer self-actualisation (look at Maslow's Hierarchy of Needs) value is not being measured beyond simple utility, but also in how well the product expresses meaningful sentiment in the customer's world. Value-based pricing strategies can be determined by marketing techniques. 

For example, wellness brands solicit customer feedback, which effectively quantifies customers' perceived value of their experiences using a particular wellness product. As a result, digital marketing agencies in Cape Town can encourage sellers to use the value-based pricing approach to establish the price of aloe water going forward. 

The value-based pricing principle predominantly applies to markets where possessing an item or purchasing a service enhances a customer's self-image or feelings of joy. This consumer-perceived value, in turn, reflects the worth the customer assigns to the product or service and directly affects the price the consumer ultimately pays. 

Digital marketing agencies in Cape Town can easily recommend a value-based marketing strategy to companies that offer highly valuable and unique products and services.  

Inflation VS the People

South Africa has consistently battled with inflation over the last decade and salaries have either dropped or remained stagnant. This has consequently led to a decrease in consumers’ buying power. 

Besides, consumers are making cautious and conscious financial decisions now more than ever. Due to the nationwide lockdown, people are struggling to make ends meet, which has resulted in many living from paycheck-to-paycheck, digging into their savings and buying on credit. It comes as no surprise that consumers are altering their spending habits, cutting back on splurging, delaying purchases, and shopping around for the best deals.

Buying Power 

South Africa’s middle class (which is growing exponentially), has undergone radical changes. These changes are particularly prevalent within the upper-middle class sector. These consumers have huge buying power and are described as being key influencers with the power to make or break brands.

Digital marketing companies in Cape Town need to consider the tremendous influence that the upper-middle-class consumer has on brand reception. If a marketing company in Cape Town implements a value-based marketing strategy for a corporation, business or service provider, it is necessary to place the correct price on a product or service, else your consumer might look elsewhere for a substitute at a better rate. 

Reimagining Value 

Exposure to global media has rendered South African consumers savvy and brand-loyal (to both local and international brands). Even though buying power has decreased, exposure to globalisation has strengthened the preference for meaningful lifestyle integration, and the demand for quality products has increased. Although many still purchase from their favourite brands, self-actualisation has rendered our patrons somewhat price-sensitive. Consumers are now actively seeking out ways to save money by reimagining product value.  

Some saving strategies include: 

• Buying from favourite brands using discount coupons;

• Shopping around in search of retailers that sell desired brands at lower prices;

• Purchasing smaller quantities of brand-related products;

• Waiting until the brands are on sale;

• Finding better deals elsewhere;

• Opting for substitute brands that offer similar products or services;

• Comparing prices for the best deal;

• Seeking promotions and sales.

Consumers are also drastically adjusting their eating habits by eating at home instead of dining out, and relying on fresh produce to cook meals from scratch. 

So how do marketing companies in Cape Town go about designing an effective value-based marketing strategy? 

Value-Based Marketing 

Branding agencies in Cape Town should consider the following when designing a value-based pricing strategy:

• How supply and demand interact with customer value; 

• The complex relationships between benefits, prices, costs and quantities;

• How to develop an effective competitive strategy;

• How to manage inventory efficiently; 

• How to understand the product´s positioning within a consumer’s social and career narrative;

• The pursuit of optimal balance between customer loyalty and product profitability.

Now that you’ve gained some insights into the pre-production of an effective value-based marketing strategy, let’s look at how value has been added to various types of products.  

Forces of Supply and Demand 

Marketing companies in Cape Town will research the key aspect of ‘supply and demand’ when creating a value-based marketing strategy. Regardless of your product, value can be added to your brand. 

• Homogeneous products: We see a rise in branding value being applied to products that would otherwise be perceived as undifferentiated. Who would’ve thought that an apple-selling brand would be such a great example of how value-based branding can charge slightly more? Pink Lady Apples provides a sense of reliability and education to its customers. Another excellent example of how a brand has added value to its product is ClemenGold citrus. In their collaboration with Woolworths, they have added immense value to their citrus products by curating citrus-infused recipes. 

• Substitute products: Products that are equivalent to the consumer’s desired brand. These products directly compete with one another but are clearly distinguishable. The rise of plant-based and holistic living has given us the Beyond Burger, almond butter, and even guided meditation apps.

• Convenience products: Convenience products such as premade meal kits from UCOOK, nutrition plans, even home-cleaning services like SweepSouth, have been made available to the on-the-go consumer. These are all seamlessly accessible from smartphones. 

• Luxury goods: The top 1% has had an increase in buying power. Therefore, pressure on brands to differentiate is even higher; fashion brands are being forced to be more environmentally conscious and the hospitality industry is being pressured to cater to vegans, vegetarians and allergy-prone consumers. 

• Inferior goods: Let’s take a gander at Wish. Although not a premium brand or service, consumers regularly purchase from Wish due to them selling semi-premium goods at a very low cost. You can buy brand-related products which have been manufactured in ways that mimic premium brands. Wish has added value to their brand simply by portraying a modern design across their marketing strategies. 

Consumers are seeking to save money, and the perception of ‘money for value’ is a huge factor influencing the South African patron. Therefore, companies need to give consumers solid reasons to choose their products over substitutes or alternatives, so they make a purchase decision, and consequently, become loyal to their brand.

This perception of value is achieved by much more than low prices:

• Communication: Companies need to consistently communicate to their customers the kind of value their products carry - they need to assure their consumers that their products enable their lifestyles. The retailer will, in turn, gain credit from that value exchange. 

• Benefits: Your product doesn’t necessarily need to be in the lowest price tier, but rather, your price premium should be linked to well-positioned benefits (emotional, functional and self-expressive). This will help remind your customers about the features that make the product worth its price.

Giant retailers like Woolworths, Pick n Pay and Checkers have been battling it out for the hearts (and wallets) of consumers. How do they measure their value-based pricing strategies? Well, it boils down to a customer-centric rubric of sorts. 

The Chain Reaction

Marketing companies in Cape Town are sure to advise any business or corporation engaged in value-based pricing that they must have a product or service that differentiates and separates itself from the competition. 

• The product or service must be consumer-centric; any alterations or improvements that are enforced should be based on the needs and wants of the consumer. 

• The product or service must be of high quality if the company is looking to implement a value-based pricing strategy. 

• The company must ensure they have strong, open communication channels, as this helps with customer feedback. They can analyse what consumers are looking for and what they’re willing to pay for it.

Meet the Players 

Although buying power is diminishing, inflation is steep, and salaries are remaining stagnant, consumers’ preference for premium products are forever on the rise. And even though the Woolies shopper may have experienced a pay cut, Woolies still held the end of their brand promise by providing fresh produce and premium products to their customers - ensuring their customers’ patronage. 

Much like Woolworths, Pick n Pay and Checkers have realised the power of their brand equity (in-house brands), which has prompted exciting marketing initiatives for poaching consumers. They have respectively changed their in-house experience for customers, by renovating stores across the nation, increasing the quality of products sold in their stores and brand new product labelling. 

For the next article, Unscene investigates just how marketing companies in Cape Town have launched value-based pricing strategies, which allowed these big chains to enter a whole new matrix of consumers.