New research into the “Top End” of the South African market has revealed a vastly more diverse and complex group of consumers than previously assumed. “Traditionally this sector of the market has been difficult to research, surrounded as they are by high walls and security systems,” explains Simpson.
Together with research partners RamsayMedia Research Solutions and sponsors Clicks, Edcon, Glacier and Growthpoint, the UCT Unilever Institute explored this seldom-surveyed sector of the local market, focusing on adults living in top-end households earning over R30 000 a month. With a sample of over 8 000 respondents, the TopEnd study represents both the largest and the most comprehensive research project ever carried out on this sector and reflects over a year of intensive quantitative and qualitative research conducted across South Africa.
“With a statistically significant sample and numerous focus groups, our results have revealed a great deal about both attitudes and consumer behaviour of the country’s highest earners,” says Simpson.
“Our findings have allowed us to create a much clearer and more nuanced picture about exactly who these TopEnd consumers are and how various factors, including age and gender, influence their consumption patterns.”
Simpson refers to this segment as the backbone of the local economy. “We are not talking about the “super rich” here, as they are only a tiny fraction of this 900 000-strong, mainly middle-class, group. We are talking about hard-working, productive citizens who comprise only 10 percent of the country’s taxpayers, but account for half of the entire country’s taxable income.”
With an estimated annual spend of over R300 billion, this group of individuals is of vital importance to the health of South Africa’s economy and their influence cannot be ignored by marketers, maintains Simpson.
“Aside from their personal contribution to the tax base, they make a significant contribution through company and other taxes, as well as through social responsibility initiatives,” Simpson adds.
The majority of these well-heeled South Africans believe in giving back to society. Two-thirds of respondents reported an obligation to “pay it forward” and cited 10% of one’s income as an appropriate amount to donate to worthy causes.
The findings also show that transformation is making its mark on the composition of this tier of society. “Black South African’s represent 37 percent of the entire segment, but have an even stronger representation at the entry-level segment of the TopEnd sample.
Simpson maintains that across the spectrum, a clear pattern emerges with regard to wealth creation and that a simple recipe for wealth creation can be derived from the findings. “First gain a tertiary education and secondly invest 10 percent or more of your earnings.”
Three-quarters of respondents had a post-matric qualification, with 40 percent having a university degree. Among the wealthiest individuals surveyed, the number of graduates increases to 55 percent.
A third key factor for creating and maintaining wealth had to do with entrepreneurial aptitude. A relatively high proportion of respondents work for themselves or head their own company.
Respondents were quizzed about their fantasies and fears. Ironically, despite their healthy financial status, the majority of participants listed financial security as their greatest concern and this influenced decisions around financial products and spending in general. “There is a definite correlation between wealth and risk-aversion with regard to one’s personal finances. This manifests itself in several ways, most demonstrably through conservative investment choices,” says Simpson.
When it came to the most common fantasy, 70 percent of those surveyed cited holiday travel their favourite leisure pastime. Questions around business and leisure travel revealed interesting attitudes to flying.
“The economic slowdown may account for the fact that the vast majority of respondents reported only using low-cost airlines,” reports Simpson. A mere one percent reported flying first class when travelling for leisure, with 96 percent preferring to fly economy class and the remainder flying business class.
Although this segment of the population was materially the least affected during the recession, the study also illustrates that consumer behaviour in this sector has fundamentally altered in the recession’s aftermath. Respondents reported significant changes in their buying behaviour, with 80 percent of respondents saying that they were generally more cautious with their spending than in the past, and buy fewer branded and luxury goods than previously.
The full research findings will be disseminated at country-wide Top End seminars in October. Seminars will be held in Durban on October 11, Johannesburg on October 13 and Cape Town on October 14.
For further information visit www.unileverinstitute.co.za or call Kulsoem Rhode at the UCT Unilever Institute on 021 650 4312.