Image source: NASA on Unsplash
This Op-ed was submitted to TechCabal by Umar Bagus, Ignacio Crespo, Anton Efremov, and Geet Kashyap.
In the last five years, the share of Africans who choose to buy goods and services online has more than doubled; that’s about 10 percent of the entire population on the continent. And while this shift has resulted mainly from the pandemic, it’s becoming clear that even as economies return to a semblance of ‘normal,’ online sales are here to stay.
The market opportunity for African businesses here is significant. Online sales in Africa are growing at around 25 percent, year-on-year – one of the highest rates in the world – with more than 10 million people starting to buy online each year. Yet online sales in most organizations are only at the beginning of their growth trajectory.
While large organizations have transitioned their sales and operations digitally and have the necessary infrastructure to make this shift, only a small number of businesses have scaled digital sales as yet. We can see this in the numbers. In Europe, the digital sales landscape is so competitive that banks will pay, on average, about 25 percent of profit per client to attract a client. However, in Africa, competition still needs to be higher so that banks can attract clients, spending at most 10 percent of the profit on that client. However, this is unlikely to last.
As the window of opportunity continues to open for digital sales on the continent, we can expect competition for banks, retail, telecoms, logistics, and more, to intensify in the race to develop their digital business and move their service offerings online.
To pull ahead, here are five fundamental principles that African businesses could consider to develop a robust digital marketing function and claim their space at the vanguard of the digital sales frontier.
Global advertising and social media platforms such as Google, Bing, and WhatsApp are disproportionately dominant across Africa. Tapping into the expertise of international specialists working with these channels will be critical.
For example, in South Africa, the share of search queries on Google is 94%, followed by Bing at 5.12%. Google dominates the search market in Nigeria and Kenya, too, at 98.6% and 97.7%, respectively, according to Global Web Index (GWI) digital marketing research for African countries. Among social media platforms, WhatsApp is the most popular for networking at 93.2% in South Africa, 93% in Nigeria, 96.5% in Kenya, 83.9% in Ghana, and 73.7% in Morocco, usually followed by Facebook, Instagram, and YouTube.
Investing in developing proprietary teams of digital customer acquisition specialists that understand these channels is likely to be a critical competitive edge. Fortunately, as remote working formats have become more common following the pandemic, recruiting global talent has become easier for African organizations. Recruiting talented employees is essential, given that there can be a need for more specialist skilled workers in African countries.
Even though they are working mainly through global channels, African businesses ignore the local context at their peril, especially if they want to scale across the continent.
Each African market has subtle differences in consumption and channel behavior that must be considered when planning digital marketing campaigns.
For example, in South Africa, PCs and tablets register higher engagement than smartphones, and time spent daily with desktops, laptops, and tablets rose to a remarkable 5 hours and 25 minutes on average in 2021. South Africa also registers high laptop/desktop ownership (83.3% of the population) compared with most other African countries. This high concentration of internet and social media users, coupled with device penetration, makes it imperative to leverage paid and organic search, social, and display advertising as effective means to reach consumers.
By contrast, Nigeria boasts high smartphone penetration (99.2%) and the highest number of absolute internet users in Africa; 82.9 percent of internet users aged 16-64 said they used social media as the primary source when researching brands. WhatsApp and Facebook can be leveraged with chat support call-to-action functionality alongside Google search to deliver instant and more tailored messaging and one-to-one services to impact that context.
While global advertising platforms create unparalleled opportunities to grow the customer base, there is potential to promote local business growth by interacting with customers on owned channels. For example, businesses could consider using mobile apps, websites, email, and social media groups or messengers to deliver targeted information and improve conversion rates. The key to unlocking these channels could be growing relevant engagement with customers.
Digital marketing deals primarily with business mathematics, where it is necessary to calculate how much each user action costs: a click, an application, or a sale. Once a business learns to measure key metrics, it becomes possible to manage channels and campaigns using these precise metrics efficiently.
To build reliable analytics, organizations could consider setting up effective data tracking and storage systems and ensuring regular reporting to give everyone involved a clear picture of digital sales status. It is equally vital to build cross-functional teams that include analysts so all participants can access data at any time and use this effectively to leverage customer insights to drive further sales.
The main principle of digital marketing is to regularly generate, test, and evaluate the efficiency of new ideas. These may relate to working with new channels, launching further communications and formats for creative solutions, and trying new audiences. The secret of success lies in the organization of a well-coordinated team and reliable processes allowing regular testing.
While there is a common misconception that only digital native organizations – such as neobanks – can be successful in this game. Our experience working with more traditional banking, telecoms, and retailers suggest that digital transformation is within the grasp of all businesses. And given the tremendous growth at stake, this is not something to sit on the fence about.
The main thing is to make going digital a strategic priority for your business and then work towards consistently building a digital function in the organization, characterized by advanced market competencies and flexible methods of operation. This method could allow you to attract a significant number of customers while achieving a good return on investment in marketing.
Umar Bagus is a partner in McKinsey’s Johannesburg office and leads the firm’s Digital & Analytics practice in Africa; Ignacio Crespo is a partner in McKinsey’s Madrid office and leads Digital Marketing in the EMEA region; Anton Efremov is an associate partner in the New York office and Geet Kashyap an expert associate partner in the London office.
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