South Africa, particularly in life insurance, has a very well developed financial services industry. The customers of this industry, until fairly recently, have been limited to those earning the highest incomes, with the vast majority of the population under-served because they are viewed as less profitable and harder to service. Change has come from two sources: legislated changes such as Mzansi banking and Zimele insurance, and proactive changes, where companies have worked out how to service this market successfully.
When creating something for the mass market in South Africa, there are really only two things to get right. One is what you offer, and the second is how you deliver it. This is, of course, a bit like saying that there are just two things to get right in a relationship: everything you say, and everything you do. The key is in unpacking these two things in a structured way, thereby arriving at a solution that works.
In order to create an attractive proposition, you cannot simply lock a selection of executives and consultants in a room and feed them coffee until they come up with something. Before working out what the value proposition looks like, “step zero” is to understand thoroughly the market and its needs and characteristics. There are many academics and researchers who can provide insights into South Africa’s entry level market, but the much harder thing to do is to take that information and distil it into the key elements that are relevant for a given company and its capabilities.
In this stage of a project, we seek to understand the nature of the market by probing its characteristics and behaviour. Drawing on the experience that we and others have gained in South Africa and elsewhere, we can identify where opportunities lie, and what our client needs to do to exploit them.
Based on a rigorous analysis, the first step – design of a value proposition – becomes much easier. Rather than just speculating on what might work, we use the insights gained from our understanding, within a structure that ensures that all elements of the product offering are addressed. Any market buys what it wants, but is sold everything else – including sometimes what it needs. For the entry level market, their financial services wants are funeral insurance and savings products, but the needs are deeper and encompass various types of security and enabling products such as banking, home loans, and short term insurance.
The selling of these products inevitably incorporates an element of education for the customer, and very often also a change in mindset on the part of the financial institution.
The business case for the mass market is by definition built on achieving scale, and on finding ways to do things more efficiently. This brings us to the next step in the process. Delivery of the proposition that has been created is probably the hardest thing to do.
The key profit drivers in the mass market are those that impact directly on the – necessarily thinner – margins, such as servicing efficiency and premium collection. The paradox is that this market needs and appreciates face to face contact, but that is an expensive way to do things. Many institutions have found ways of aggregating the market by groups, whether targeting specific employers such as the government, or working with existing groups in the entry level market, such as burial societies or church groups.
A similar option is to partner with an organisation that brings scale, such as a retailer. Each approach brings its own challenges, but we are experienced in identifying the best solution to complement our clients’ skills and capabilities.
Now that you have your analysis, your offering and a delivery mechanism, it just remains to get out there and sell it. Our approach to this is one of partnership, ensuring that our client’s staff are deeply involved, and come to own the solution. Knowledge transfer is a key part of this process, as is providing the structures and management mechanisms for successful strategic delivery.
We often find that piloting the solution is the best means to iron out any kinks, then progressing to a full roll out from there. As you learn about the way that implementation works, so your roll out gathers momentum.
Adding on to the two big things to get right, there are four stages in a process that we have proven to work with several clients:
– Understand the market, its needs and other characteristics intimately, and from a strategic perspective;
– Create a compelling value proposition so that the market understands and relates to the benefits it offers;
– Deliver it to the market in the right way, via the right channels and distribution mechanisms;
– Build scale, roll out and embed the solution in the business.
Serving the entry level market in South Africa is difficult, but the rewards are significant for those who get it right.