🐷 When Gogo’s Rands Go Digital…
Hi
Cool off? Talk about the environmental impact of crypto; researchers have just shown that a single Bitcoin transaction could use as much as a swimming pool’s worth of water to cool the processors executing it. Sheez.
In this Open Letter:
- R50bn play: Stokvels when Rands go digital.
- Repo-ed microwaves, e-comm talent wars & Cell C still insolvent.
- For profit: Lowering your customer acquisition costs.
- Where we shop: The results are in.
- Tell someone: Share this & get free business tools.
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TRENDING NOW
When Those Rands Go Digital
The next wave of tech opportunities will follow
It’s Dezemba! And, for many, that means a few more weeks till summer break. But for millions of South Africans participating in grocery stokvels, it could mean Christmas grocery is on the way.
What you might not know is that the uniquely South African communal savings mechanism we call stokvel gets investments of about R50 billion per year, split across around 800k stokvels running in SA's informal sector.
![](https://cdn.prod.website-files.com/64709beba558edee242f9ec9/656e9b7aabc6e45aaa332fb1_Stokvels.jpeg)
No wonder then that many a digital entrepreneur has tried to digitise the stokvel. So far, with little success – simply digitising the process with tech doesn’t work and feedback’s non-existent since most users can’t articulate what they need ‘cos they have no banking or tech frame of reference.
What hasn’t worked
Common misconceptions around stokvels are:
- Record keeping and planning aren’t a problem – replacing pen and paper with an app adds little value since the few members in the group often know and trust each other and the calculations are simple.
- Participants mostly don’t expect more money back than they put in, so offering interest isn’t as appealing.
- There is some risk in carrying cash, but transaction fees on cash are still zero. Fact is: If you contribute 12xR100 into the stokvel you expect 12xR100 back. Interest and transaction fees confuse the equation.
- Onboarding needs to be unbelievably simple. Participants usually know the person running the stokvel. And to join, you just give them R100 or whatever and there you go. It needs to be as simple or simpler than that.
Don’t feel too bad, though. Banks haven’t figured out how stokvels work either – case in point, these are the requirements for opening a “stokvel account” at one of the major banks:
![](https://cdn.prod.website-files.com/64709beba558edee242f9ec9/656e9b7aabc6e45aaa332fb9_pasted_image_0.png)
What, no blood samples needed? Should be simple.
But R50bn in deposits is attractive
Let’s say you capture just 2% of that market. You could buy R1 billion of SA government bonds using the deposits, earning a cool ±R100m per year in interest (if those rates stay this high).
So it’s worthwhile figuring out the stokvel market…
Now, there are complicated regulatory hurdles here. But probably the biggest challenge to overcome is transaction fees.
Enter PayShap
PayShap is a rapid interbank payment protocol that allows instant transfers between different bank accounts at a low fee (or even free). Currently, each bank has its own fee structure and it’s a bit of a mess. But there is pressure from the reserve bank to make PayShap universally free.
![](https://cdn.prod.website-files.com/64709beba558edee242f9ec9/656e9b7aabc6e45aaa332fbd_1701257696615.jpeg)
Now, when PayShap goes free, it’ll become the direct digital competitor to cash, with a lot less risk of getting mugged etc.
And stokvel is just one of many applications that can take off once we get to totally digital cash. So if banks can just find some consensus on fees, there might be opportunities everywhere soon.
Tech entrepreneur, watch out for this one…. it's about to get real.
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IN SHORT
🚙 Uber 500. Would you believe Uber Technologies Inc. has been added to the S&P 500 Index? This after two straight quarters of posting some operational profits, which sparked renewed investor interest (Uber Shares gained 132% in the last year). Here’s hoping the optimism’s enough to carry them all the way.
🪑 Removable Assets. Working at Luthuli House? Warming up your lunch might be hard going forward as the Sherrif is set to attach anything and everything (even microwaves) in an attempt to settle the R100 million account run up with an events company during the 2019 elections campaign. R100 mill – that’s a helluva lot of Streetwise Twos and yellow T-shirts.
🧲 E-Comm Talent War. Looking to cash in on the e-commerce giants’ plays in 2024. Takealot has double the amount of e-commerce jobs available compared to Amazon. Amazon will be hitting SA shores early next year with its jobs portal having around 22 e-comm-related jobs, compared to SA e-comm king, Takealot, with 47.
🗼Low Signal. Despite recapitalising in September 2022, Cell C remains insolvent – as seen in its latest financial results revealed last week. The mobile operator’s assets are pegged at R5.7 billion with liabilities of R15.09 billion. Its subscriber numbers have also decreased significantly over the last 5 years from 17 million to 8 million.
🧶 Time Travelling Knitwear. Longing for the days of the Windows XP Wallpaper (you KNOW the one…)? Well, last week Microsoft dropped its “Windows Ugly Sweater: Bliss Edition” onto its Xbox store and it’s already sold out. You can still add it to your wishlist – who knows, they may just do another run in future.
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BUILDER’S CORNER
How to Lower Your Customer Acquisition Costs
OK, so you got some adoption, your usage is growing and you’re making some sales. Now, why aren’t you making any real profit yet?
![](https://cdn.prod.website-files.com/64709beba558edee242f9ec9/656e9b7aabc6e45aaa332fb5_o4-2u6NDpskyjyS-hZheR0SO05kStuYwK9woXqPpqqC4QH5ryLwnYaq60i5IJdwa_gQIjIzhh9z-InQGb6mdUFT-Rjigaezvxz_feD_MRUVZM0Cpc2nUyoG54jtbb-BECszLyw9iC_6cSYk0F-4cg1GrHWWDE1lPDH8rha11gZpURQQ8jToFceTDIN3iRw.jpeg)
Good business comes down to one thing: The money you get in (Customer LifeTime Value or LTV, i.e. revenue) minus what it costs you to get that customer (Customer Acquisition Cost or CAC) equals profitability (considering your customer servicing cost is under control, but more on that in a future edition).
Servicing costs aside, there are basically 2 ways to make more money from each customer :
- Raise the LTV — This can be done through partnerships, reducing churn or upselling.
- Lower your CAC — Acquire those customers for less.
The first one only works up to a point, I mean you can’t keep raising prices without taking pain. So, like most of us, you’ll want to focus on number 2.
5 Strategies for lowering your CAC
1. Know your numbers
The first step is to actually know what your current CAC is per channel. Build yourself an “Omega” dashboard that combines all your analytics with your weekly/monthly sales. Then looking at these costs, try different strategies in different channels while still measuring your CAC per channel.
Once you have your lowest CAC channels, A–B test and double down. Boom.
2. Build a hyper-engaged audience/community
Create a standalone, associated audience-based product (ask Elvorne to help you) – a newsletter, community, blog, tool etc. – with marketability, so you can develop high value and engagement on it.
Test acquisition costs into that product instead – it should be cheaper because it’s a more neutral, value-driven space. Build your funnel to go from audience to your main product, optimise the conversion and double down on acquiring users via that route instead.
3. Build a solid referral mechanism
Word of mouth is great (because it’s practically free!), and its digital cousin is getting current customers to refer their friends and family. If your Net Promoter Score is pretty decent, take it a step further and build a referral mechanism with a strong internal campaign – reward people with value for referring others.
4. Diversify and upsell
You don’t want to raise your prices to the point where you’re not competitive. But that doesn’t mean you can’t increase your LTV in other ways.
Remember, you only pay CAC once. Once they’re in your database, you can reach them cheaply. So why not create new products/services and upsell them?
5. Partnerships & collabs
Is another non-competing company talking to your market? Maybe there’s a chance for synergy or some other reason to collaborate. Striking a deal where you share or cross-promote products is one way to access more of the right people at a lower cost.
Got a CAC insight to share? Hit reply and let us know…
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THE RESULTS
We asked when was the last time you were in a Pep store, and would you believe Pep Home is rocking it…
🟨🟨🟨🟨🟨⬜️ 👍 All the time, baby (20%)
🟨⬜️⬜️⬜️⬜️⬜️ 👔 Just for kids’ school clothes (7%)
🟩🟩🟩🟩🟩🟩 🏠 Some good deals at Pep Home, though (22%)
🟨⬜️⬜️⬜️⬜️⬜️ 📱 Buying business phones cash at Pep Cell (5%)
🟨🟨🟨⬜️⬜️⬜️ 🛍️ Kids clothes at A.C.Kermans (13%)
🟨🟨🟨🟨⬜️⬜️ 💻 Just HiFi Corp and Incredible Connection (15%)
🟨🟨🟨🟨⬜️⬜️ 🙅 Never have I ever (18%)
⬜️⬜️⬜️⬜️⬜️⬜️ 😆 I’m there right now! (0)
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