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Why big brands are too powerful to be ignored

FINANCIAL STANDARD
By Patrick Alushula | Oct 25th 2016 | 5 min read
By Patrick Alushula | October 25th 2016
FINANCIAL STANDARD
Its research, Mr Awori added, is intended to ensure the bank does not disconnect from young consumers. The lender relies on the findings to determine the type of products to launch.PHOTO: COURTESY

Her mother used to control what type of bread and milk she would consume, what clothes she would wear and where her savings would go.

It had always bothered her when she was a teenager – after all, she had her own ideas on what brands were best aligned to her needs.

Now in her early 20s, Pauline Achungo is making the big decisions on what her family eats, watches on television and even where they bank – even though her mother is still footing the bills.

“My mother sticks to old products when I think better ones exist in the market. I want my family to keep up with the times,” Ms Achungo told Business Beat.

She represents the more than 60 per cent of Kenya’s population that is now the heart of the economy.

The country’s demographics show out of about 44 million people, 29 million are aged below 25. Further, of this number, about 20 million are aged below 14, according to Countrymeters, which tracks the population of countries.

Digitas, a global marketing and technology agency, estimates that globally, young children and tweens (who are aged between nine and 12) have buying power to the tune of $1.2 trillion (Sh122 trillion) a year.

“That $1.2 trillion figure isn’t just about how much kids buy themselves – it also includes the degree to which they’re influencing their parents’ purchases,” said the firm.

“For instance, 60 per cent of all tweens today have substantially influenced their parents’ final decision on which car to buy.”

Purchasing decisions

It is this 60 per cent that can no longer be ignored by brands that hope to remain relevant as a new generation grows up.

Justus Munyoki, a marketing strategist and senior lecturer at University of Nairobi’s School of Business, added that an increasing number of youth now want to make their own purchasing decisions.

“Sometimes they put pressure on what needs to be purchased .... However, they have the information and freedom to choose what they prefer to buy and, therefore, push to be given money to do their own shopping,” he said.

Prof Munyoki added that firms are now focusing on the youth to grow with their future market. Those that leave the youth behind, he said, risk being phased out.

Safaricom, with a market share of 65.2 per cent, according to the latest data from the Communications Authority of Kenya, is one of the big brands keen to forestall a doomsday scenario.

It has created Blaze, a youth sub-brand targeting Kenyans aged 26 and below.

If a firm is thinking strategically about the future, said Safaricom’s Senior Manager for the Youth Segment, Marion Wanyoike, it must keep in mind the generation that will be at the steering wheel of the country’s economy in a few years’ time.

“You must position your business or brand by finding a way to make younger people love the brand. You won’t exist in the next 10 years if you don’t think about this segment now,” she told Business Beat.

It is with this in mind that the telecommunications giant set up Blaze, which it describes as a network meant to speak to, empower and deliver tailored products and services to the youth.

Blaze cost the company Sh700 million over about eight months to develop and launch.

Deliberate steps

The platform is now three months old, and has so far signed up more than half a million young adults aged below 26.

“The number of minutes they spend on our network has increased, meaning they are finding more meaningful things on Blaze,” Ms Wanyoike said.

Blaze engages with its audience through summits that incorporate entertainment and mentorship from young people making a living in out-of-the-ordinary ways.

And it is not just the telecoms sector taking deliberate steps to secure its future. From banking and insurance to entertainment and consumer product firms, young populations are causing firms to rethink their business models.

According to Munyoki, the youth are attracted to products that focus on them and recognise their specific needs. They are also more likely to adopt new products than older consumers.

“The youth are more likely to take risks and try new products, unlike mature people who have families and are very cautious about where they put their money,” he said, adding that innovation and creativity are now key pillars for survival in business.

The professor added that the 18 to 25 age bracket, which comprises cosmopolitan, single, income-earning youth, has higher spending power and greater flexibility with money, which makes it an attractive target for brands. Older age groups have families and monthly bills that tend to constrain their expenditure.

Barclays Bank Kenya (BBK), which has been in Kenya for 100 years, is also looking to evolve with the market. Unlike before when opening an account came at a cost, the bank now offers tailored, free products for all sorts of income and age groups.

Consumer-facing businesses

BBK CEO Jeremy Awori said the bank is also running different programmes to help it learn what the youth think of the products it has on offer.

“The way the youth consume products today is very different from how it was 20 years ago. If you really want to have products and services that are relevant to them, you have to understand their needs,” he told Business Beat .

Its research, Mr Awori added, is intended to ensure the bank does not disconnect from young consumers. The lender relies on the findings to determine the type of products to launch.

One of the key lessons for consumer-facing businesses in today’s market is that the youth are after a personal connection with brands; there is no room for impersonal engagements.

To this end, BBK has set up innovation workshops where young customers can interact with motivational speakers.

“We are investing significant amounts of money, running into hundreds of millions if not billions of shillings. Any organisation that is not investing in products for the youth is not going to survive in the long term,” Awori said.

The bank recently announced it would spend Sh68 million to roll out a youth empowerment initiative dubbed ReadytoWork.

The annual programme targets to impact at least 30,000 youth in about 120 tertiary institutions with work, people, money and entrepreneurial skills to help them achieve economic freedom.

“We are acknowledging the importance of adequately preparing young people for the world of employment or entrepreneurship, as we are aware of the difference that it could make towards shared success,” said BBK Director of Marketing and Corporate Relations Caroline Ndung’u.

However, unlike Safaricom that has a manager for youth products, Awori said the nature of the banking business does not support such model.

For banks, he said, a young client could be an individual account holder, as well as a business owner, or hold a join account with older customers, which makes strict segmentation difficult.

Nestlé Kenya, which has been in the market for 49 years, is also keen on engaging with its Generation Z (those aged 20 and below) and

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