Ridhwan Khan has the shiniest shoes and the biggest desk imaginable. But don’t let the gloss fool you, he is the roll-up-your-sleeves, hands-on founder of mobile device supplier Mobicel, which manufactures affordable phones and tablets specifically for the South African market.
While Khan may not have set out to create his own brand, establishing Mobicel eight years ago has positioned the Polokwane-born entrepreneur well to service Africa’s love affair with mobile. Increasingly, research into the growing African consumer market from the likes of McKinsey, Millward Brown and Nielsen talks of a market which is not only brand loyal but favours products tailored to their needs and preferences.
In fact, in a 2014 report from global marketing research firm Nielsen (Why marketing to consumers, not the masses, is the key to brand success in Africa) the researchers noted: “An analysis found that products developed or tailored specifically for Africa’s consumers achieve a success rate of 40%, well above the standard 10%.” When you drill down into the Mobicel story, and the customers it services, the reasons why Africans like home-grown brands becomes even clearer.
Prior to 2007, Khan’s business focused on refurbishing phones. He started out in the UK in 2001 and, in 2002, moved back to South Africa where he decided to concentrate on the informal market, the poorest socio-economic group and one which economists call the bottom of the pyramid (BoP) and marketers term LSM 1-4. In South Africa this market represents some 22% of all households, with the next band – the emerging middle class (LSM 5-7) – making up more than 52% of the market in 2014, according to research from Urban Studies.
By 2005 he was selling more than 50 000 refurbished units a month. However, Khan recalls that servicing this informal market was challenging. “We found it very difficult to build a brand in the informal market,” he told Acumen. “You have spaza shops and small stores and they are just interested in selling a product, not building a brand. We found it difficult to get them to grasp the concept of a warranty and after-sales service. I witnessed it myself; that’s when I decided to change.”
He got out of the second-hand phone business almost overnight and self-funded a new venture: the creation of a sub-R1 000 phone designed to local market specifications. Mobicel was born.
Looking back, through all the risk-taking and the bootstrapping, Khan admits that securing key distribution contracts with big retailers quickly was significant. His first stop was retail group Edcon; and he struck it lucky. “It’s quite difficult for them to buy into a brand that’s just come in,” he admits. “With devices and entry-level, tier-three devices you have this stigma of Chinese and ‘fong kong’ (fake brands), that’s something we fight on a day-to-day basis. It was a game changer when Edcon decided to list the product, but we also had to sell our souls to give it to them: we had to pack the product and we gave it to them on a consignment basis. It was the first time Edcon had bought on a consignment, and they only paid us for what they sold.”
But, again, Khan took the risk. “We believed in the product. Fortunately they sold more than they expected and it just grew from there. Once we had Edcon, the other retailers opened up, the likes of Foschini and Massmart. The big one was MTN; having a network backing your product is amazing. Now we have Cell C and we’re in discussions with Vodacom. So, in the last four years we now have listings with every major retailer in the country,” he says. The group also has a presence in Botswana, Namibia, Lesotho and Swaziland and Zimbabwe, where a local distributor handles distribution and logistics.
The PEP connection
More recently, the big coup has been Mobicel’s tie-up with PEP, which operates more than 1 870 retail stores across Southern Africa and, according to the company “sells almost 50% of all pre-paid cellphone handsets in South Africa; 8.5 million cellphone handsets in the last year”. PEP also claims to sell “over 170 million airtime vouchers a year – that’s nearly 1 000 vouchers every minute (and 17 every second) during store opening hours”.
PEP, says Khan, is a highly strategic partner: “Like us they take their brand very seriously. We have a good relationship with them.”
As critical as distribution has been – after all, no distribution network means no business – it’s just part of the puzzle. The real game-changer is customer service. He explains: “I think the most important thing for us is after-sales service. As an entry-level brand, our end-users need a guarantee. If they are taking R500 out of their pocket, they need to know who to contact if they have a problem. In our box we have a warranty card and a hotline which they can contact, and online support. We take this seriously.”
A lot of companies talk about service, but Khan believes for the BoP it’s essential. “For my customers R400 is a lot of money. If that guy has a bad experience, then word of mouth can be damaging.” They might not get it right all the time, and yes, he admits, there are arguments between his call centre and stores over trying to turn around device repairs in seven working days, “but we try. I actually think our service is better than a lot of other products out there.”
Khan is, he explains, cced on Mobicel call centre’s hotline email “and I go through everything. Sometimes at night I’ll reply to customers myself. After-sales is important. My philosophy is: Don’t chase the sale if you can’t look after the after sale.”
In this respect, he takes his hat off to his new partner, PEP, for top product knowledge and after-sales service. “Just as I’m linked to my after-sales, their head of procurement is the same. It filters right down. They are serious about business and the perception of their brand. They have extremely loyal customers. And, at the low end of the market, brand loyalty is a lot more than at the top end.”
Building a brand
Ultimately it is brand loyalty that Khan is after; and he feels he’s picked the right market in which to build a local brand. “The top-end of the market is brand conscious, not brand loyal,” notes Khan. “The bottom of the market isn’t like that. They want value, (but) affordability is not only thing we offer. We’re offering a product, value add, after sales, and we can upsell you onto something better when you are done with that product. We’re building a brand.”
The market he really wants on board is the brand conscious youth market, from 14 years upwards. “We want to build a Mobicel family within which they can grow. The youth are very brand conscious, so we’re trying to build some very cool products; because cool sells, not price. In 2016 we want to start playing with trendy stuff and funky colours… that’s going to be really exciting. It’s a big space for us, because the youth are trendsetters.”
And youngsters will lead their parents to the brand too, he believes. “Our aim is to try and put as many devices in as many South Africans’ hands as possible. Every year we get closer and closer.” At the moment that translates into a market share of around 2%. But Khan is ambitious: “Our aim is to be at 5% by next year February. It’s a tall order. It’s a very tall order. But I’m going to get there.”
Khan, it seems, is putting his faith in his products and – just to be sure – a new brand-building marketing strategy incorporating above-the-line TV as well as youth campaigns, shopping mall activations, road shows, outdoor media and, of course, social media. “For the first time in many years we’ve actually seen a lot of traction on the product. I think the market is finally taking it in,” he says, “so we’re talking to the market. We saying we aren’t a small brand and we’re here to stay.”