Limiting access to a company’s services or discouraging the demand comingfrom certain customers is not an uncommon practice. Suppliers of services andgoods often select a target market that would provide a minimum expectedvalue and exclude the rest. In the financial services sector the lower incomesegment have always been excluded on the basis that they do not provide thisminimum expected value (Sharma, 2003). In South Africa, however there is arenewed interest in targeting this lower income sector. This renewed interest intargeting the lower income sector in post apartheid South Africa is not justbecause there is value and benefits to companies who target this market(Prahalad, 2004), or the recognition that financial service development causesgrowth and poverty alleviation (Porteous, 2004; Beck, 2004), but it is also inplace to address the imbalances caused by an apartheid system.Although South African financial service providers find themselves with similarchallenges of a developing economy, the South African environment is a uniqueone. Practices of exclusion have not just segmented on the basis of income,minimum value expectations, education and status but also on race. In reenteringthis market, many providers are finding themselves unprepared for thechallenges of this once excluded sector.Whilst cost, accessibility, insufficient discretionary income and literacy havebeen identified as the key factors that hinder the consumption of financialservices, the Financial Sector Charter of 2003 identified that the South Africanfinancial sector had failed to increase participation of the previously excludedand limited access to its services (Crotty, 2005; Prahalad, 2004; Barr, 2004;Sharma, 2003). By committing to the targets of the Charter many of thesefinancial institutions, which include banks, long - term insurers, short - terminsurers, re-insurers, collective investment schemes, investment managers,retirement funds and licensed exchanges, find themselves targeting a marketwhich they previously excluded. A further challenge to financial serviceiiiproviders in South Africa is that little research has been conducted on theunique situational variables that impact the South African economy.The purpose of this study is therefore to identify and explore the challenges thatthe previously excluded market presents to financial service providers who wishto re-enter this market in South Africa. It also investigates the appropriatenessof segmentation tools and assesses how best to target this market.The research methodology employed focussed on a literature review whichaimed to identify the factors that influence financial service consumption. It thendiscusses the various segmentation models and the best strategy to target thismarket. Focus groups were used to gain insight and understanding of thismarket. Data was then collected and analysed.The findings and discussion highlight that it is imperative to understand thechanging demographics, social and cultural influences and the impact ofhistorical practices prior to providing financial services to a market that waspreviously excluded. Factors that are unique to South Africa i.e. self exclusion,crime, non traditional market instruments and costs were also identified. Thesefactors are discussed in this study.It is hoped that this study will assist providers of financial services in formulatingstrategy that would increase consumption of its products and services and in sodoing contribute to the growth of the economy whilst addressing the imbalancesof the past.
