Other parts of this series:
How to understand the four kinds of digital customer in South Africa
Customer churn is costing SA companies billions. In fact, research by GSMA found that between 2016 and 2020, companies will have lost R638 billion in potential revenue due to switching. When I first saw this number, my first thought was that there was no net gain or loss for individual companies provided customers are churning more or less equally across different suppliers.
But it turns out that’s not the case. Of the R638 billion in lost potential revenue, more than two-thirds – 68% – is due to customers being disgruntled with their current suppliers’ digital efforts.
That means there is a net transfer of customers from digital laggards to digital pioneers — to the tune of R438-billion over four years.
Companies’ market share is changing more rapidly than they realise, as the companies who embrace relevance start accelerating the market share they have gained at their competitors’ expense.
If you look at the app downloads for Android and iOS platforms in South Africa, the apps for only two banks rank in the top 10 – one in each platform’s store. And one of those isn’t even a traditional “Big Four” bank!
Both have strong digital plays and have been aggressive in being increasingly relevant to customers.
So how should South African companies respond to catch up?
The perception is that South Africans are not as up-to-date with technology as the rest of the world. That may be true. But a 2019 study found that in the number of hours spent online every day, South Africa ranked sixth in the world! It’s tempting to joke that this is because of slow connectivity, but that’s clearly not the case. South African Internet usage is more advanced than we sometimes think.
Back in 2017, the GSMA research found that mobile adoption was already over 70%. In 2019, there is on average more than one mobile device per head of population.
What to make of this?
Our research shows that South Africans fall into four distinct digital profile segments, each moving at a different speed with varying “digital intensity.” Digital intensity is defined as the adoption and frequency of digital behaviours and preferences in a digital-physical omni-channel context.
The four digital profiles are:
- Traditional: People who rely mostly on traditional channels and interactions but leave digital traces. These are people who may research a purchase on-line but go to a traditional store to complete the purchase.
- Transitional: Consumers who selectively engage in digital for utility value, discovering how the experience improves. These consumers have switched to digital for certain select purchases and may plan to conduct more of their business digitally in the future.
- Experimental: People who strive to leverage digital more broadly and experience new digital and physical combinations. These consumers are actively looking for ways to use digital more in their lives.
- Digitally Savvy: Mobile-enabled consumers who make digital technology a part of all dimensions in their lives. They have all the transactional apps on their phones and would rather never visit a traditional outlet again.
Unsurprisingly, the Experimental and Digitally Savvy profile segments are growing, while the Traditional and Transitional groups are shrinking. That’s good news for companies that have invested in digital technologies and demonstrate an ability to evolve with consumers’ changing needs. But a lot of work remains. I’ll discuss this in the next post in this series – I hope you’ll join me.