e-spaces

Marketers and others are ignoring a large and growing segment of South Africa’s consumer market, one that is relatively immune to the interest rate cycle and resistant to recession.

August 11, 2008 

By Ethel Hazelhurst

Johannesburg – Marketers and others are ignoring a large and growing segment of South Africa’s consumer market, one that is relatively immune to the interest rate cycle and resistant to recession.

In a presentation on Friday, John Simpson, the director of the University of Cape Town Unilever Institute, identified a market with a combined income worth at least R300 billion, which he dubbed “prime timers” – the 1.98 million people in living standards measure (LSM ) population groups 7 to 10, who live in cities and are over 40 years of age.

The LSM is a measure devised by the SA Advertising Research Foundation to segment the population, largely according to household assets and access to services such as electricity. People with little or nothing in the way of household utilities are in LSM 1 and those with the most possessions in LSM 10.

Simpson said the prime time market had increased by 10 percent since 2004, mostly due to growth in the segment of the market identified by the institute in earlier research as “black diamonds” – the growing black middle class.

“Growth among whites is virtually static (a population of about 890 000), while blacks in this segment grew 29 percent (to about 500 000),” he said. “So black diamonds now make up more than 25 percent of the prime time market.”

The institute’s findings are based on face-to-face interviews with 1200 people, 12 focus groups and a number of strategic workshops.

Simpson said prime timers made up 6 percent of the population but accounted for 20 percent of the spending. They “own 30 percent of the cars on the road, hold 30 percent of all university degrees and represent 30 percent of those who invest in the JSE”. The research reveals a unique feature of this market: nearly half are debt free, thus protected from the 5 percentage point rise in interest rates since June 2006. “In fact, they may even have benefited from higher interest rates,” said Simpson, referring to their ability to save.

The phenomenon was a global one that Simpson described as the “biggest generation bubble” in human history. But the research shows that in South Africa, prime timers feel “disregarded, ignored and marginalised”.

Marketers and others ignoring the changing demographics “are likely to miss a key opportunity”, Simpson concluded.