Humble shopkeepers can give lessons in marketing strategy
I recently read an article about the lives of Somali shop owners operating in a Cape Town township. They lived a very stressful life, with the continual fear of xenophobic attacks from community members, and the criminals who used the simmering xenophobia to provoke attacks and loot their stores. Insurance is not an option for them.
They described how they chose their location in the poorest sections of the communities. Residents have almost no income, and so travelling to a distant shop consumed too much of their discretionary spend, and they wanted the lowest prices for staples. Unit sales were small values, and at times a shopper would appear with a single coin. All he could buy with that would be one cigarette or a sweet. And he made the most of his purchase – choosing a sweet then changing his mind for a cigarette then rejecting the cigarette and choosing some gum.
The Somali shopkeepers treated him with dignity and patience, knowing that shopping was a rare treat for him. Many local shopowners would have chased him away. Going to a supermarket was simply not possible for this customer.
They chose their target market location carefully, selecting areas which put them in considerable danger and not very pleasant circumstances, but free of competition, and better able to service their customers. And then they gave wonderful customer service to even the least significant customer, treating him like a millionaire. How many entrepreneurs have been as visionary, and how many can say hand on heart that they treat all customers with equal respect and service?
They chose their suppliers mainly for the safety aspects of buying there. They recognised that people knew they would have cash, and an unsafe access to a supplier increased the risk of mugging to a near certainty. They knew onlookers would do nothing to help them, and not even the police could always be relied on, so strong were the community’s feelings of anger and scorn towards them.
When they found a safe wholesaler to buy from, they would all gravitate to that supplier, who developed a substantial group of customers who paid cash and made few demands. So the supplier would ordinarily give them good prices and excellent service to keep their custom.
All too frequently South Africa business people choose their suppliers on price only, and often have an adversarial relationship with their suppliers. Some change suppliers frequently to get better prices or service. Few would think of making up a buying block to make themselves desirable customers. The lessons are clear. Choose suppliers for strategic reasons, not on price. Form buying groups, even informal ones. Good prices and service are a consequence, not a goal.
These shopkeepers have recognised that their target customers are very poor and price is more important than ever. They need to have the best prices and deliver the best service, because the community does not like them, and will only shop with them if they can get what they want less expensively and more conveniently. So they stock the smallest packs of products – single cigarettes and headache remedies, tiny packs of mealie meal, tea and soap, so that the shopper can buy provisions for today with only the few coins they may have earned as a beggar or car guard that day. Their store is usually a shack and they live in the store or a part of it, to reduce costs and so that they can protect their livelihood. They open early and close late so those with an income are able to buy when they get home with money. Their stores are in walking distance of the poorest. They sell at tiny margins, not penalising the shopper who buys the smallest pack. This brings them customers, but also adds to their risk because local shopkeepers, unable to match their prices spread rumours that the Somalis are taking business away from citizens by cheating and selling unsafe products, and so the xenophobia is fed.
Price leadership is more than just the figure on the price ticket. Pack convenience without penalty, cost of getting to the store or getting goods to the customer, stock availability and hours of opening all affect the total amount of money the customer pays, and that is the real price. Buying smart and holding operating costs down have a direct effect too. You don’t have to be liked, although it helps. The customer will support the best supplier as was shown by the local community women who rose to the defence of a Somali shopkeeper, and stopped a mob attack.
We all tend to look to the famous entrepreneurs, the business schools and the celebrity authors for ‘how to’ lessons. We forget that many of the best lessons are learned from those right at the bottom of the marketing pyramid, the survivors, who are incredibly effective and smart, because they have to be. We all need to recognise their excellence and learn from them too.
Have you learned lessons from unlikely sources? If you have, please share them by leaving a comment.
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