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Transcript of South Africa Marketing Report
International Marketing Fall 2014BUSA 460 Professor: Sven Tuzovic
International Marketing Brooks Running Shoes in South Africa
Written by:Zach Martinson
Rasmus B. AndersenMorten Christensen
Jonas Harreskov
International Marketing Fall 2014BUSA 460 Professor: Sven Tuzovic
Contents1 Introduction..................................................................................................................................3
2 Part 1: Economic and Cultural analysis.......................................................................................3
2.1 Political System and Legal System........................................................................................3
2.2 Economic and Business Environment Analysis....................................................................5
2.3 Cultural dimensions of doing business in South Africa........................................................8
2.3.1 Religion and Language...................................................................................................8
2.3.2 Recreation and Sports.....................................................................................................8
2.3.3 Communication and business customs...........................................................................9
3 Part 2: Market Analysis and Marketing Plan.............................................................................11
3.1 The Market...........................................................................................................................11
3.2 Consumer buying patterns...................................................................................................12
3.3 Market size...........................................................................................................................13
3.3.1 Brooks sales..................................................................................................................13
3.3.2 Industry sales................................................................................................................13
3.4 Competitors..........................................................................................................................14
3.5 Marketing Plan.....................................................................................................................15
3.5.1 Target Market...............................................................................................................15
3.5.2 Positioning....................................................................................................................15
3.5.3 Distribution...................................................................................................................15
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International Marketing Fall 2014BUSA 460 Professor: Sven Tuzovic
3.5.4 Promotion.....................................................................................................................16
4 Summary....................................................................................................................................19
5 Appendix....................................................................................................................................22
5.1 Appendix A..........................................................................................................................22
5.2 Appendix B..........................................................................................................................22
5.3 Appendix C..........................................................................................................................23
5.4 Appendix D..........................................................................................................................23
6 Bibliography...............................................................................................................................24
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International Marketing Fall 2014BUSA 460 Professor: Sven Tuzovic
1 Introduction
This paper is set out to do a country analysis of South Africa, involving the political and legal
system, culture and the market, followed by a Marketing Plan. The Political and Legal system
mainly talks about how it is a young and stable country, but still facing issues as a growing
economy. The economic and business environment mainly discusses the inequality, unemployment
and how it is still an emerging market. Next, the cultural dimensions will discuss the effect
Religion, Languages and Sports have on the population and how business is usually conducted in
South Africa. For the second part of the paper, the Market will be discussed highlighting the
consumer buying patterns, consumer motivation and the competitive market. Finally, the paper will
set up a Marketing plan for Brooks in the South African Market, considering what they are already
doing.
2 Part 1: Economic and Cultural analysis
2.1 Political System and Legal System
South Africa has been a constitutional democracy since 1994, where Nelson Mandela was the first
fully representative democratic elected president of the Republic of South Africa. The Republic of
South Africa has a three-tier system of government. The constitutional democracy is divided into
the following three branches; Executive branch, Legislative branch and Judicial branch.The Chief
of State and head of government is Jacob ZUMA, who is the President of the republic of South
Africa. Jacob ZUMA has been the president of the republic of South Africa since 2009 (CIA World
Factbook, 2014). Jacob ZUMA is the leader of the Cabinet, which is the committee of ministers and
acts as executives for controlling government policies in different departments (Jacobs).
South Africa is a representative democracy, where the public elects a total of 400 members to sit on
the National Assembly. Furthermore is 10 people elected by each province legislatures (9 provinces
in South Africa), which gives a total of 90. The 90 members form the National Council of Province,
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International Marketing Fall 2014BUSA 460 Professor: Sven Tuzovic
which job is to protect regional interests, including cultural traditions and economic interest. The
National Assembly and National Council of Province is the legislative branch of the South African
democratic system (CIA World Factbook, 2014).
In the National Assembly a total of 11 parties are represented, which makes for a multiple-party
system. The larges party is the ANC (Africa National Congress). The leader of the ANC is president
Jacob ZUMA. The other parties are; African Christian Democratic Party (ACDP), Congress of
People (COPE), Democratic Alliance (DA), Economic Freedom Fighters (EEF), Freedom Front
Plus (FF+), Inkatha Freedom Party (IFP), National Freedom Party (NFP), Pan-Africanist Congress
of Azania (PAC), United Christian Democratic Party (UCDP) and United Democratic Movement
(UDM) (CIA World Factbook, 2014).
The Republic of South Africa is still a young country since it has only existed in 20 years (form in
1994). The government in South Africa has been fairly stable since the first fully representative
democratic election in 1994. Back in 1994 there was a major fear for a violent and peaceful
transition, but it has turn out to be a peaceful and stable transition to democracy. Political stability is
the key to further investments in South Africa, and it is therefore crucial that the South African
Government continue to been stable as it has been the last 20 years (Jacobs).
In April 2014 South Africa was downgraded by the AON, which produce a Political Risk map
every year. AON found that South Africa is at the moment struggling with persistent strikes. The
strikes has become a major factor in South African wage setting, and have weaken South Africa’s
competitiveness due to raising financing costs. This have a direct effect on the amount of FDI
invested in South Africa. Even though South Africa has increased the strength of it political
institutions, AON still downgraded them. Furthermore is the likelihood of war or civil war limited
in South Africa, which implies a low level of political risk (Aon, 2014).
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International Marketing Fall 2014BUSA 460 Professor: Sven Tuzovic
The last branch is the Judiciary system, which is a mixture of Roman-Dutch civil law, English
common law and customary law. The highest authority is the Supreme Court of Appeals, which
consists of the court president, deputy president and 21 elected judges.
The court president and deputy president is appoint by the president of the Republic of South Africa
(CIA World Factbook, 2014).
2.2 Economic and Business Environment Analysis
Often publicized as the 5th member of the BRICs alongside Brazil, Russia India and China, South
Africa is a major emerging market with a stable financial system, and is the driving force behind
Sub-Saharan African real GDP growth. South Africa accounted for 22.5% of total Sub-Saharan
African GDP in 2013 and ranks highly among its regional peers in the Ease of Doing Business
2015. On the downside, growth of real GDP will slip to 1.7% in 2014, down from 1.9% in 2013.
Investment and exports provide moderate support, causing the economy to grow by 0.6% during the
April-to-June period. Economic potential is estimated by the central bank to be 3.5%. (Euromonitor,
2014)
South Africa is a middle-income, emerging market with an abundant supply of natural resources;
well-developed financial, legal, communications, energy, and transport sectors and a stock
exchange that is the 16th largest in the world. Even though the country's modern infrastructure
supports a relatively efficient distribution of goods to major urban centers throughout the region,
unstable electricity supplies hinders growth. Eskom, the state-run power company, has built two
new power stations and installed new power demand management programs to improve power grid
reliability. Construction delays at two additional plants, however, mean South Africa is operating on
a razor thin margin; economists judge that growth cannot exceed 3% until those plants come online.
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International Marketing Fall 2014BUSA 460 Professor: Sven Tuzovic
South Africa's economic policy has focused on controlling inflation, however, the country has had
significant budget deficits that restrict its ability to deal with pressing economic problems. Inflation
is expected to be 6.2% in 2014. The central bank’s target range for inflation is 3-6%. (Euromonitor,
2014) After cutting interest rates several times in 2013 to help the struggling economy, the central
bank has raised rates in 2014 in an effort to combat the sharp depreciation of the rand and its impact
on inflation.
Unemployment, poverty, and inequality with a GINI index on 65.0, among the highest in the world,
remain a challenge. (World Bank, u.d.). Official unemployment is at nearly 25% of the work force,
and runs significantly higher among black youth. The jobless rate was 24.7% in 2013 and it will
slightly edge up in 2014. According to the country's latest labor force survey, two-thirds of all
unemployed are under the age of 35. The central bank estimates that GDP must grow by at least 5%
a year to reduce the jobless pool. The pace of growth should gradually improve, reaching about
3.0% in the medium term as new infrastructure projects relieve bottlenecks and private investment
strengthens. (Euromonitor, 2014) However, such rates are still much lower than required to curb
unemployment and poverty. As for the distribution of wealth, statistics indicate that the highest 10%
have over 51% of South Africa’s income and the 10% poorest have less than 1.2% of the income.
With that said, the 10% richest have a disposable income of $80,000 and the 10% poorest have a
disposable income of $427. (CIA World Factbook, 2014)
When dealing with industry contribution for employment, there are three main powerhouses,
agriculture, manufacturing, and mining. Agriculture employs about 45.8% of the work force.
Manufacturing accounts for 11.4% of GDP and employs 12.3% of the workforce. Mining accounts
for around a third of total exports and employs about 500,000 people. South Africa has diamonds,
iron ore, copper, manganese, platinum, limestone and chrome, making them one of the most
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important mining countries. The country has the world’s largest gold deposits and about 80% of
world’s platinum reserves. (Euromonitor, 2014)
The contribution of the tourist sector to the economy has doubled since the end of apartheid.
Because of its job-creating potential, the sector has been singled out as a priority by the
government. The real value of tourist receipts rose by 9.6% in 2013 and gains of 10.9% are forecast
for 2014. The government intends to raise the number of arrivals to 15 million (up from 7 million
today) by 2020 and to create a quarter of a million jobs. (Euromonitor, 2014)
South Africa’s population in 2013 totaled 52.8 million and it will reach 55.1 million by 2020. The
median age is steadily rising as well, as it reached 25.9 years in 2013, up from 19.0 years in 1980.
Fertility has been halved since 1980 and stood at 2.4 births per female in 2013 and the birth rate per
thousand in 2013 was 20.9. With a growing population, South Africa’s distribution of population
for age, sex, and ethnic groups are as follows. The age distribution starts with 0-14 years at 28.3%,
15-24 years at 20.2%, 25-54 years at 38.2%, 55-64 years at 7.1%, and 65 years and over at 6.1%.
The sex distribution is at 48.5% males and 51.5% females. The ethnic group distribution is at 79.2%
Black African, 8.9%, 8.9% colored, 2.5% Indian/Asian, and 5% other. (Global Edge, 2014)
The share of South Africa’s exports in GDP amounted to 24.7% in 2013, down from 29.6% in
2008. Exports dropped by 2.3% (in dollars) during 2013. Total exports in 2013 amounted to
86,715.5 (US$ million). Gains of 11.3% are expected in 2014. Exporters should benefit from the
fact that the rand is still relatively weak. The exchange rate per US dollar in 2013 was 9.65 and
11.12 for 2014. South Africa’s export markets are geographically varied. In 2013, China accounted
for 32.4% of the total. The EU took another 15.4% and the USA received 6.4% of the total. Basic
manufactures made up 23.9% of total exports in 2013 followed by exports of crude materials
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(excluding fuels), which amounted to 19.1%. South Africa’s export destinations in 2013 for percent
share are as follows: Asia Pacific=47.5, Europe=18.6, Africa and the middle east=16, Other
countries=8.8, North America=6.9, Latin America=1.4. (Euromonitor, 2014)
South Africa continued to depend on industrial imports. Imports totaled 101,285.7 (US$ million) in
2013.‘Machinery and Transport Equipment’ was the largest import item, accounting for 34.1% of
total imports in 2013, followed by ‘Mineral Fuels’ (22.8%). Import demand suffered in the face of
industry-related shocks in the country; 35.1% of total imports were sourced from the Asia Pacific
region in 2013, led by China at 16.2%, followed by Europe at 30.0%. Subdued economic activity in
China and the eurozone could potentially create supply shocks, thereby making imports costlier for
South Africa. (Euromonitor, 2014)
2.3 Cultural dimensions of doing business in South Africa
2.3.1 Religion and Language
Christianity is the main religion, with different variations, like Protsetants (36.6%) being the biggest
religion, followed by Other Christians (36%) and Catholic (7.1%) (CIA World Factbook, 2014).
The country, however, is officially secular. In a business context, religion is a topic rarely
discussed. South Africa is a very diverse country as there is 11 official languages, but most people
also speak English which is also the language used by government and in the media. So despite the
fact that the majority if languages spoken differs having English being used on the webpage, social
media and other advertising messages will not be a problem.
2.3.2 Recreation and Sports
The three most popular sports in South Africa is Soccer, Cricket and Rugby respectively. South
Africa hosted the World Cup in Soccer in 2010, which really brought the nation together. Sport in
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general is a topic which unites this, rather young Republic despite of race, social status or likewise.
Brooks’ South African distributor informed us that Trail Running, Park Runs and Time Trails are
increasingly getting popular, which is also why Brooks is present at these events every weekend.
Likewise, a major attraction is the Exhibitions: Comrades Marathon Expo and Two Oceans
Marathon Expo, which are attended by 45,000 people and over 11,000 runners.
2.3.3 Communication and business customs
In terms of non-verbal communication, one thing that should be considered in a business context is
eye contact. It should be maintained, but South African’s might “roam”, because maintaining eye
contact too long is seen as a “challenge” and because of the Apartheid history in the country, the
black population often do this. Likewise, direct confrontations are usually avoided by the black
population, otherwise it is fairly direct. Sensitive topics like religion, class and race should also be
avoided in a professional setting. As mentioned, sport is very popular and would probably be a
relevant informal topic. The initial contact will differ a bit depending on gender. Usually shaking
hands, smiling and making eye contact is the norm, but women might just nod their head. In any
case, one should wait for them to extent their hand for a handshake. Likewise Women should expect
condescending behavior in a meeting, as they rarely hold high.-level jobs. South Africans in general
seek a win-win situation but do not like haggling over price. They view deliver dates as fluid, so it
should be clearly determined.
Hofstede’s Model of Cultural Dimensions
- Power Distance (49): To a large extent, South Africans accept hierarchical order.
- Individualism/Collectivism (65): South Africa is an individualistic society
- Masculine/Feminine (63): It is a masculine society,
- Uncertainty Avoidance (49): Fairly low, as they have flexible work schedules, etc.
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- Pragmatism (34): They respect tradition, save little for the future and attempt to achieve
quick results
- Indulgence (63): They want to release impulses, have fun and enjoy leisure activities
If you take a look at the Hofstede Dimensions of SA and compare it the United States, there are
very similar trends. Where Individualism is the only one which differs more than 9 points, the rest
are similar. It should however be considered that these numbers are based on the White Population,
and this this picture might be misleading. As mentioned, the black population still act as
subordinates to white people in certain context (like the “roaming eyes”) and therefore the Power
Distance Dimension might be higher than shown here. Unfortunately, no other data is available.
The Hofstede analysis also shows that there is a high level of individualism, but this might not be
reflective of the rural, black population. "The coloured and more traditional Afrikaans cultures
consider their extended family to be almost as important as their nuclear family, while the English-
speaking white community places more emphasis on the nuclear family." (KWintessential, u.d.)
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International Marketing Fall 2014BUSA 460 Professor: Sven Tuzovic
Material Life: South Africans Middle-Class families tend to enjoy shopping in malls as a leisure
activity. It has also been where Brooks is currently selling most of their products. Brooks currently
sell around 12,000 shoes a year and have achieved a number 3 position in the Performance Running
market. A future concern, could be how "Many consumers are keen to enjoy the status of wearing
apparel and footwear carrying the name of leading sportswear brands but are unwilling to pay a
high price for genuine articles and have little interest in quality or design with regard to these
products." (Euromonitor, 2014) With the economic growth and a hopefully lesser level of
unemployment, those who lack affordability now will gain it in the future, but their consumption
patterns might reflect this trend as they would likely want to display their “wealth”. The lacking
affordability is a problem due to unemployment. The distributor informed us of an unemployment
rate of 60%, where we ourselves found the number to be around 25 %. In any case, a great deal of
the possible target market is currently excluded
Education: Education in SA is a status symbol. "South Africans, in general, regard education as
the most important asset in life and would be delighted if you also have experience in your area of
expertise." (Centre for Intercultural Learning, u.d.)
3 Part 2: Market Analysis and Marketing Plan
3.1 The Market
The sports footwear market in South Africa can be separated in to sport inspired footwear and
performance footwear, brands like Nike and Adidas are in the category of sports inspired footwear
and Brooks and their biggest and closest related competitors (that we will mention who are later in
this report) are in the performance footwear category. But both Nike and Adidas are now also trying
to address some of their models to the performance footwear category. The general sports footwear
market in South Africa is highly affected by the consumer who wants flashy shoes in powerful
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International Marketing Fall 2014BUSA 460 Professor: Sven Tuzovic
colors. A lot of the South Africans like to show that they have the money to buy well-known brands
and especially Nike and Adidas is very attractive and popular brands. The market is also affected by
the economy and the fact that there are a lot of poor people in South Africa and that the diversity
between the rich and poor people is really big as mentioned in the section about the economy. The
rich people love to show their economical wealth by wearing these popular brands, but the poorer
people do also want to wear this type of shoes but they can not afford to buy them, the market
therefore experience a strong competition from counterfeit products (Euromonitor, 2014).
3.2 Consumer buying patterns
Sportswear in South Africa (Euromonitor, 2014)
As mentioned above the South African consumers like flashy and colorful shoes, and if the
consumer is wealthy they tend to buy well-known brands, this is the typical pattern for the
consumers who buys sports inspired shoes, from brands like Nike and Adidas. The mentality from
South Africans is that they want to wear these brands, but they do not want to pay the high prices,
and they have a little interest in quality, so that is the reason for counterfeit products being such a
strong competitor in this market area.
Running is gaining popularity in South Africa and endurance and marathon running attracting a lot
of tourists. As an impact of the gaining interest for running also long distance running, the South
African consumer that wants to run is now more aware of the quality of the shore that is a reason for
that the performance footwear category is not as effected as the sports inspired footwear by
counterfeit products. This is really good news for Brooks.
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International Marketing Fall 2014BUSA 460 Professor: Sven Tuzovic
3.3 Market size
3.3.1 Brooks sales
From the distributor in South Africa we received the sales number from Brooks. The distributor told
us that there was two seasons every year each of them covering 6 months. Every season Brooks
sells 6,000 pairs of shoes so a total of 12,000 pairs of shoes each year. The first season is from
January until June and second season is from June to January. Brooks experience their sales peak
just after going into a new season, so in January and June. The prices in South Africa follows the
prices in USA, which put the Brooks shoes as some of the most expensive ones on the market,
especially right now because of the depreciation of the Rand against the US Dollar. The price range
for a pair of Brooks running shoes in South Africa is between 135$ and 200$ (Sportsmans
Warehouse, 2014). The distributor told us that the most popular model was the Glycerin for both
men and women, followed by the Ghost and Adrenaline GTS model. The Glycerin model is also the
most expensive model. Without knowing the exact sales number of each model we have calculated
the total sales for Brooks shoes in South Africa by taking the average price of their shoes which is
167.5$ multiplied with the total sales of 12,000 pairs the total sales for Brooks shoes is:
167.5*12,000=2,010,000$ per year.
3.3.2 Industry sales
The industry sales for Brooks can cover both apparel and footwear because they are both selling
clothes and shoes. But for this project we will focus on the footwear market. Euromonitor divides
sports footwear into three groups; Performance footwear, outdoor footwear, and sports-inspired
footwear. Brooks shoes fall into the category of performance footwear, this category is more
focused on high performance for runners and is products of high quality. In 2013 this category
generated a total sale of 5,096,800,000 Rand or approximately 459,000,000$ the total sale of sports
footwear in 2013 was 1,216,000,000$ according to Appendix A
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The sports footwear industry is experiencing a quiet high growth, from 2012 to 2013 the total sports
footwear market had a growth of 8.2% and performance footwear had a growth of 9.9% according
to Appendix B. That especially the performance footwear experiences a high growth is good news
for Brooks because this is exactly the type of product they are selling.
Euromonitor do also have a forecast for the growth in sales of sports footwear from 2013 to 2018.
As seen in Appendix C the expected total percentage growth in performance footwear from 2013 to
2018 is 7.3%. Which is also good news for Brooks because that means that their target market will
continue to grow in the future compared to for example the numbers for sports-inspired footwear
that will experience a decline of 0.3% in the same period.
3.4 Competitors
The distributor told us that Brooks’ biggest competitor in South Africa of the brands operating in
the performance footwear category is Asics. The distributor told us that Asics hold a market share
of 42% of shoes sold in Specialists Running Account stores, and hold 23% of market share in
performance footwear in all stores. This is a high number, so Asics is by far the biggest brand of the
high performance shoes. Other big competitors that our distributor mentioned are New Balance,
Nike, Adidas, and Saucony.
The competitors prices range from 65$ to 215$. Generally, for all of Brooks competitors are that
their price range are bigger and the prices starts lower than Brooks’ prices. Asics price range is from
80 to 215$, Nike range from 80 to 170$, New Balance range from 65 to 170$, Adidas from 65 to
205$, and Saucony range from 140 to 175$ (Sportmans Warehouse, 2014). Comparing Brooks and
their competitors price ranges indicate that Brooks is placed in the higher end of the price range.
Asics use different retail stores like Brooks to sell their shoes in. But as mentioned before there is
these Specialist Running Accounts where Asics holds 42% of the market share in, so Asics both use
generally retail stores and these special stores to distribute their shoes.
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International Marketing Fall 2014BUSA 460 Professor: Sven Tuzovic
3.5 Marketing Plan
3.5.1 Target Market
Because of the high, inflexible price of the product, the target market is set by the differences in
affordability. Mainly adults, 25 and older, who look for a superior quality product will be
purchasing the shoes, as they more likely have a stable income and are interested in keeping in
shape, by running. Brooks’ target is thus everybody who enjoys running and values high quality
products.
3.5.2 Positioning
Some of Brooks’ competitors also focus on other sports than running. A couple of the most known
companies who do this are Nike and Adidas, who sell sports shoes for almost every sport in the
world. Asics also operates in other markets than running, such as the production of rugby shoes as
well as sponsoring the South African National Rugby Team (Asics.com, 2014). Because Brooks’
only focus is on running, we recommend that they keep positioning themselves as a high-end
running performance shoe. For example, Asics shoe models are priced in a wider range than
Brooks’ shoes, the cheapest can be bought for 80$ and up to 215$ for the most expensive model
which can send out mixed signals about the quality (See Appendix D) Brooks should keep focusing
on running especially because Brooks is still a small competitor in the market, so it is even more
important that they send out a clear signal about their positioning on the market, so that they will be
known as this high end product.
3.5.3 Distribution
From a macro perspective there is two distribution channels, one selling through selling through
retail chains and another through small specialty stores. The leading brands such as Asics, Nike,
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International Marketing Fall 2014BUSA 460 Professor: Sven Tuzovic
Adidas and New Balance are all represented in both. Brooks should therefore attempt to get their
product into these stores. One of the retailers is Sportsman’s Warehouse who is owned by
Holdsport. “The company operates through a network of 35 sportsmans warehouse and 20 outdoor
warehouse stores. It operates around 54 retail stores in South Africa and one in Namibia.”
(Marketline, 2014) Using this distributor will be ideal, as it has a great amount of stores in South
Africa. Because South Africans like shopping in malls Brooks will need to be present in these. A
challenge is getting out to the rural areas, as the current distributor also pointed out to us, but
because of the affordability issue – and the fact that most poor people live in the rural areas, it is an
unwise decision to have distribution in those areas, especially the Eastern Cape Province, with an
GDP per captia under $4,000. (Geocurrent.info, 2014) We therefore target urban areas. Currently
Brooks have one wholesaler who works as their export/import partner and has the direct contact
with the retailers and do the promotion currently. Brooks currently also sells their product in the
Specialized Running Accounts (SRAs), which are small independent stores throughout South
Africa. These types of stores often have better service and sales personnel with greater expertise and
can therefore often guide the customer to the right shoe. In the major chain-retailers as part of our
promotion, we still want to give the customer guidance when they are buying their shoes. Therefore,
we want to put a salesperson, from Brooks, out into these stores to guide, help and promote brand
awareness.
3.5.4 Promotion
The cost of 80 TV-spots, each being 30 seconds, long costs around 33,000 USD (375,000 Rand)
(SABC, 2014), meaning TV-spots are not an option with the 50,000 USD advertising budget. Most
of the advertising and promotion will therefore be done via the Webpage, Social Media and Direct
Sales.
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International Marketing Fall 2014BUSA 460 Professor: Sven Tuzovic
3.5.4.1 Social Media in South Africa
“Facebook still remains South Africa’s favourite social media platform with 11,8m users locally.”
While YouTube has 7,2 million users, Instragram has 1,1m users, but has increased from 680,000
last year. (van der Berg, 2014) Despite these relatively low numbers compared to a 48 million
population, internet usage is increasing rapidly.
(Euromonitor, 2014)
What we propose to do is, to have photo competitions on Instagram. Instagram is a social media
driven by its users, meaning firms should limit their level of advertising on it, and rather interact
with the customers. Searching for hashtags (#) with #Brooks or #Running and replying to the users’
posts is a great way to interact with them and make them feel appreciated. It is a way to spread
Word of Mouth. The article, “SA in social media by the numbers” also concludes that firms are
heavily increasing their budgets in the next year as to Facebook and Twitter. Brooks needs to be
present here as well, with their promotion. Facebook is a place to post promotional videos, pictures
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International Marketing Fall 2014BUSA 460 Professor: Sven Tuzovic
and other advertisement, Twitter and Instagram is interactive and Brooks needs to be better at
finding these posts and giving their consumers feedback. Brooks should furthermore encourage this
interaction by doing competition on the social media, having the consumers post pictures and giving
away running gear for the winner.
3.5.4.2 Direct Sales
As customization is important when buying running shoes, some expertise and guidance is
necessary to sell product, the salesperson will have knowledge about running and knows how to
find the right shoe that fits the customer. Brooks’ core competencies lies in its superior
specifications on the shoes and the fact that it is a company, which only sells running gear.
Therefore, the customer must associate these things with Brooks as well as a Consumer Perceived
Benefit. When the customer goes to the major retail stores, they will not get the guidance they could
have gotten in the SRAs. Because there are more customers the amount of time the sales personnel
will have for each, is less than in the SRAs. That is why we need a Brooks salesperson in these
stores. He/She will help and guide the customer about the product and have them sign up on
Brooks’ webpage, creating a profile with the type of shoe fits them, so that they can order a new
pair, online when the current ones are worn out. That way we can exploit the increasing internet
retailing in South Africa as well as keep track of the consumers and their consumption patterns.
Furthermore, Brooks will have running programs, diet-plans and likewise adjusted for the
customer’s profile. That way they can be more engaged with Brooks and keep track of their own
progress.
3.5.4.3 Events
The distributor told us that they already participated in different events such like road running races,
trail races, triathlons etc. The distributor told us that they were having exhibitions of Brooks
products at two of the biggest running events the Comrades Marathon Expo and the Two Oceans
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International Marketing Fall 2014BUSA 460 Professor: Sven Tuzovic
Marathon Expo. These events are more professional but since Brooks’ slogan is “Run happy”
Brooks should look more into amateur and family events. Cause it does not matter whether you are
able to run 2 miles or a whole marathon, you can still have fun while you are running, and that is
what Brooks should look in to in the future. An example of an event Brooks could consider to
sponsor or be represented at are Onrus (Onrus 10km & 6km Fun Run, 2014) 10k or 6k fun run, this
event is placed close to the metropolitan city Capetown. At this event it is both possible to run and
walk, so almost everybody can participate in this event and that gives Brooks a broader target
group.
4 Summary
There is definitely a move to improved fitness and wellness amongst South Africans. The number
of races, walking and running, have increased substantially with events scheduled every weekend
across the various provinces in South Africa. Events are a key focus for Brooks and currently are at
events every weekend. Profiling the brand at a grass roots level gives them the opportunity to
connect with runners. As Brooks expands throughout South Africa, events will extend to Road
Running Races, Trail Races, Triathlons, Duathlons, Time Trials, etc.
Although running is becoming increasingly popular throughout South Africa, Brooks also faces a
number of challenges. Brooks is considered as a technical performance running brand. From a
pricing point of view this places the brand in the upper tear pricing category for running shoes. The
pricing strategy for Brooks in South Africa follows that of US and Europe which is to price within
the top tear pricing bracket for running shoes. The continuous depreciation of the rand against the
dollar is challenging Brooks’ competitiveness. In performance running, Asics holds approximately
42% market share, followed by New Balance (price point driven), followed by Nike (Nike Free
contributes to this success) and then Brooks, Adidas and Succony would be more or less on par with
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each other. Each of the competing brands has more than 13 years on Brooks. Currently Brooks has
the most expensive shoe in the market within the core collection. Thus, a major challenge is to
convince the market that Brooks makes the highest performing shoe among its competitors.
Considering everything up to this point, the primary challenge is affordability. South Africa has a
very high unemployment rate and the Mass Market, for the most part, is excluded due to
affordability. Outlying provinces like Mpumalanga, North West, Limpopo and Northern Cape
predominately offers a limited distribution and these areas are very price sensitive given the
economic conditions of these areas.
As for the future of Brooks, specifically for advertising, it is important that they focus on the
Brooks South Africa Website as well as Social Media channels. Advertising in Magazines will still
play a role with financial growth, and the advertising budget will increase, giving Brooks the
opportunity to get a broader spread in advertising and an increase in the frequency.
The Target Market is runners in all shapes and sizes as well, but mainly adults 25 and older, with
stable income
The Positioning Strategy has to maintain the running focus, as competitors are focusing on other
sports. Likewise, the price ranges are also more flexible by the competitors, further enforcing a
Top-quality, high-price product.
Lastly, we gathered a few fun facts from our in depth research of South Africa. One interesting fact
that aids in South Africa’s economy is that it is extremely rich in mining and materials. South
Africa is considered the world’s leader with about 80% of all the world’s platinum reserves and the
top ranked gold producing country with around 41% of all the world’s gold. Another interesting fact
about South Africa is that it was formed only 20 years ago in 1994. It is a young country that has an
emerging market and forecasted for growth in the coming years. Lastly, South Africa is rated as one
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of the most unequal countries in the world. According to the Gini Index, it is rated 4th at 63.1 out of
100. (World Bank, u.d.)
5 Appendix
5.1 Appendix A
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International Marketing Fall 2014BUSA 460 Professor: Sven Tuzovic
(Euromonitor, 2014)
5.2 Appendix B
(Euromonitor, 2014)
5.3 Appendix C
(Euromonitor, 2014)
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5.4 Appendix D
6 Bibliography
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