How to Retain Africa’s Customers in Retail

It’s a turbulent time for African customers and even more challenging for owners and managers of retail-facing businesses. As consumer purchasing power drops, retail-facing companies in Africa continue to cut or use the same budget to promote various products and services in the same campaign. Unfortunately, the results are dismal.

Consider the case of Krent Pharma, one of Nigeria’s growing pharmaceutical companies. The firm invested 6 per cent of its annual revenue in retail sales promotions but failed to achieve the expected results as of the third quarter of 2022. Similarly, A & L Restaurant in South Africa invested 2% of its annual revenue on geo-targeted online ads and 6% on personal selling and support services without substantial lead conversion. Enlil, a key player in Kenya’s oil and energy industry with a network of 115 service stations, invested about ksh200 million in national, cooperative and local advertising yet recorded a 9%, 14%, and 18% drop in sales in the first three quarters of 2022, respectively.

Why do retail marketing investments attract but fail to retain customers in Africa?   Insights from in-depth interviews, mystery shopping, and focus group discussions involving retail experts representing telecommunications, non-alcoholic beverage, hospitality, Oil and Gas, marketing communication, and social development sectors suggest that retail-facing businesses make failed investments because of their short-term and reactionary approach to marketing activities. Three common mistakes hinder wise retail marketing investments on the continent.

Investing in the Wrong Data:  Reliable data is expensive to find in Africa. Yet not all data collected is helpful for marketing decisions. Some retail professionals collect the correct data but don’t know how to draw meaningful insights from them. Other times, the data is not granular enough to identify target customers’ needs.  Other retail businesses purchase data from global market research companies operating on the continent but later discover that the data lacks integrity. These data challenges lead retail-facing companies to make the wrong investment decisions targeted at the wrong audience.

Targeting Customers Alone: The buyer does not operate in a vacuum. Every buyer is part of an ecosystem involving consumers, influencers, deciders and purchase gatekeepers. Retail-facing businesses often fixate on spending to attract customers without realising that it is the buying ecosystem that retains existing customers. By ignoring the buying ecosystem, enterprises design promotional campaigns with the wrong messages.  Consumer-centric marketing investments serve the entire buyer ecosystem rather than the customer alone.   A McKinsey study shows that making consumer-centric marketing investments delivers 5 – 8 times the ROI on retail marketing spend and lifts sales to 10 per cent and above.  Another problem dimension is that retail marketers tend to launch promotional activities to augment sales during low peak seasons rather than adopt a systematic approach. The campaigns target and attract brand switchers looking for short-term wins rather than loyal customers.

Competing with your outlet:  Retail outlets (whether virtual or physical) unintentionally encourage competition within the outlet when they run sales promotions of similar brands simultaneously. A common occurrence in Nigeria is finding multiple manufacturers of competing brands of the same stock-keeping unit (SKU) running in-store campaigns in the same outlet simultaneously.  These simultaneous campaigns confuse customers’ minds and erode loyalty to the outlet or platform.  Competition within outlets is even more fierce among businesses operating in Africa’s traditional retail sector, which is the backbone of the continent’s commercial activity.

These insights suggest that maximising retail marketing investments involves shifting from sporadic spending to strategic planning with the customer’s lifetime value in mind. Here are three steps retail stakeholders in Africa can take to build customer retention through retail marketing.

1. Map your retail ecosystem: Africa’s retail landscape is changing continuously, and it is necessary to keep up with the trends. Experts from our focus group discussion point out that traditional and digital retail converge, but e-commerce does not display the standard retail formats. Traditional retail remains the recruiting ground for employees in modern retail, entry barriers remain low, and tax and regulatory regimes remain fragmented. Understanding the entire retail ecosystem encompassing your business can prevent a lot of wasteful spending and highlight areas that demand resource commitment.
2. Invest in in-service experiences, not just price promotions: Insights from mystery shopping in Nigeria suggest that retail businesses invest more in sales promotions than in-store creativity to improve service experiences. Setting up in-store promotions for short-term gains is easy, but customers look for transformative experiences. The ambience of your outlet can have a transformational impact if you empower your sales employees and improve the look and feel of the outlet. For example, GB supermarket grew its market share in Nigeria by focusing more on in-store experiences than sales promotions. Transformational service experiences keep customers longer than price promotions do.
3. Invest in insightful data generation: capturing your consumers’ data is not enough. It will help if you draw meaningful insights from the data. This may involve setting up or sourcing a cross-functional research team. Remember that data is only as good as the problems it helps you to solve in business
4. Leverage user-generated content: user-generated content (UGC) is fast becoming an effective way to retain customers in retail businesses. User-generated content refers to those firsthand brand-specific content created by customers and shared on social media and other communication channels. You can request it from your customers or allow them to share content organically on your retail chain using a known hashtag.  For instance, Wayfair, an online furniture store using the #WayfairAtHome hashtag, has seen customers post and share their experiences through pictures and videos of how and where they place Wayfair products. You can also have your customers capture, post and share their shopping moments in your store in an online challenge while tagging your chain’s social media handle. UGC drives customer retention because it builds trust, demonstrates empathy and triggers purchase intentions and brand visibility.

It is time for retail-facing businesses to rethink their marketing investments. Customers will stay with companies that understand the retail ecosystem and deliver transformational service experiences rather than short-term gains.

Authors

Uchenna Uzo, Professor of Marketing and Academic Director, Africa Retail Academy, Lagos Business School

Ephraim Nwokporo, Research and Teaching Assistant, Lagos Business School

Jubril A. Salaudeen PhD, Executive Director, Marketing and Sales, Citiserve Ltd.