The Informal Market

The Informal Market | Point | Your marketing services

The Informal Market

Insight

Leveraging the consumer spend of the grey economy

For as long as we can remember, the informal market has been significantly neglected by big-brand marketers due to failure of understanding this market.

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Recent research by leading agencies has identified that informal trading can make up north of 40% of the economy in some regions, raising a few eyebrows from big brands who are looking to get their piece of the informal market pie.

In this edition of Point Forward, we dissect the informal market and share insights on how your brand can leverage the power of the “survivor market”.

The Informal Market

The informal economy is made up of multiple trading disciplines that range from:

The Informal Market | Point | Your marketing services

Walk-in outlets

The Informal Market | Point | Your marketing services

Counter service stores

The Informal Market | Point | Your marketing services

Table-top hawkers

The Informal Market | Point | Your marketing services

Walking street vendors

The informal market has notable job creation and income generation opportunities, as well as the means to meet the needs of consumers who fall under the Lower LSM bracket by providing cheaper and more accessible goods and services.

Notable drivers of informal trading include:

  • Excessive cost and regulatory barriers of entry into the formal economy
  • Limited educational and training opportunities
  • Increasing demand for low-cost goods & services
  • Migration motivated by economic hardship and poverty in foreign countries
Did you know? Half of the world’s informal economy is in 7 countries which as USA, China, Japan, Italy, India, Russia and Brazil.

Big Brands vs. The Survivor Market

Big brand marketers often ignore traders outside of formal retail chains because they struggle to classify them.

420

US dollars income per month

The survivor market encompasses people who live in households with a total income of less than USD$420 p/m, and like everyone else, the market also seeks premium products that will reward them in some way or the other.

Thirty-four million South Africans fall under the Survivor Market segment.

The stigma that consumers under the survivor market only seek cheap products is not wholly true. Price sensitivity only comes into play when consumers compare brands that are perceived to be quality brands or products. Learn consumer purchasing decisions of the survivor market and the dynamics of brand loyalty versus price sensitivity.

Research has shown that the informal market buyers associate society status with certain brands and their perceived quality, hence consumer demand exists for premium products that are ordinarily targeted towards higher LSM segments.

The Top 5 commonly purchased items in informal trade: Bread, Airtime, Cigarettes, Drinks and Sweets.

It’s not Formal vs Informal, it’s Formal + Informal

The “Us vs Them” and “PLU effect” (People like us) are narratives that have been at the helm of differentiating the formal and informal sectors. This differentiation has resulted in unequal marketing efforts that lean more towards the formal sector, leaving the informal sector neglected. Brands need to make strides to ensure that these sectors co-exist, and that marketing efforts are spread out relatively evenly.

Not sure where to begin? Consider these approaches if your brand is looking to tap into informal market:

  • Build trust by fostering close relationships with informal traders
  • Understand the needs of the market (Find out how suited your product is for the market & customise it accordingly)
  • Think longevity. Product lifespan is a major factor in informal consumer purchasing decisions
  • Be cautious of the “Us and them” mentality
  • Understand what media the informal market consumes and push your marketing communications through that media. Choose the language of your marketing communications strategically
  • Engrave your brand in the minds of the next generation of breadwinners from an early age

Want to know more on integrating the informal market into your marketing strategy? Contact us to continue the conversation.

The Informal Market | Point | Your marketing services
Point Forward
pointforward@pointgroup.biz

Point Forward is a thought leadership article intended to spark conversation and explore new ideas, technologies and trends in the world of marketing collateral. At Point, we actively encourage collaboration, problem-solving and reimagination because innovation is ingrained in our culture and mindset. There is always a better way to approach design, business, technology, and everything in-between, and Point is committed to finding it within ourselves, partners, suppliers and clients.