Capitec's Market Offering and How It Differentiates Itself from its Competitors

Kaylyn Kemp

Capitec creates value for its brand and its consumers that are driven by consumer insight

Capitec bank was established in 2001 and is now a well-known South African brand (Capitec 2011: 10). Capitec describes themselves as “A unique and innovative bank that focuses on technologically driven, simplified solutions to retail banking.”

Through thorough research, the key concept that Capitec bank seemed to repeat was the idea of simple, affordable and time efficient banking. As said by Capitec themselves: “Delivery of the most simplified, accessible and affordable banking to consumers in a personalised manner.” This research helped to unveil Capitec bank’s consumer insight (Capitec 2011: 10).

An insight is an artificial description of attitudes, opinions, and values held by the brand’s target audience; more particularly known as a consumer insight (Janiszewska 2013: 12). By observing and analysing the target audience’s behaviour, a brand can often identify common behaviour within its target audience which leads to an insight. Consumer insights are often not only rational but also emotionally driven (Janiszewska 2013:12). Capitec bank is mostly driven by consumer insight, yet a market insight is visible within the business as well. Capitec saw a gap in the market for incorporating technology into the banking sector to encourage efficiency. This is a major opportunity that affected the emotional connection with customers as the use of technology simultaneously offered a more personal banking experience (Carter & Priest & Proctor 2017: 3).

From the research, I concluded that Capitec’s consumer insight was that many consumers find banking extremely overwhelming, even though it is a required ability in contemporary society which causes distrust in banks.

Capitec’s goal was to ease the stress of the consumer and to win his/her trust. Their solution to this problem was to simplify the banking process and offer needed assistance to consumers.

Capitec set up what they considered an ideal banking model to counteract all the defects visible in other South African banks and to turn their insights into actions.

Capitec's competitive advantage and how it differentiates its brand

Capitec’s consumer insight was most apparent through the solutions that they offer, and these solutions form their sustainable competitive advantage.

According to Hakkak & Ghodsi, sustainable competitive advantage is defined as the permanency of benefits due to applying unique methods to create value, while ensuring that the technique cannot be copied by competitors.

Ultimately through branding, it is what will give the brand a long-term competitive advantage (Hakkak & Ghodsi 2015: 300).

Branding helps consumers to categorise a particular product or service and associate it with a valuable identity the brand chooses to portray (Lombard 2007: 23).

Products or services can increase in value through branding. Although the product or service can be copied by competitors, effective branding is what sets one apart from the other giving one the competitive advantage (Lombard 2007: 25).

The success sustainable competitive advantage holds can be measured by four factors according to Hakkak & Ghodsi, namely, value, rarity, the possibility of not being replaced and the possibility of not being copied.

As the insights Capitec discovered are so unique and different from other banks, they have a sustainable competitive advantage. Capitec offers an exchange in value to their customers; they are the only bank in South Africa that uses this approach, and they are now a well established South African bank which will make them hard to copy or replace.

In the banking sector, it proves to be challenging to get customers to swap banks as it is a long and tedious process (Guma & Makhaya & Nhundu 2015: 30). Due to this, and the trust Capitec has built between themselves and customers, it is unlikely for Capitec to lose its customers.

A company’s sustainable competitive advantage is mostly affected by three factors, namely, target market size, access to consumers and resources and the power of the competitors (Hakkak & Ghodsi 2015: 300).

Due to Capitec’s specific target market and direct access to consumers and resources (Capitec executives being consumers themselves), they were able to take control of their sustainable competitive advantage.

Their competitors being well established made it challenging for them to break through in the monopolised market, yet their differentiating agents set them apart from their competitors as they are all run similarly.

According to Guma, Makhaya & Nhundu, consumer trust was not easy to gain due to the credibility other established banks have built up over time (2015: 30). However, this challenge was overcome through the simplicity and transparency Capitec offers its customers (Guma & Makhaya & Nhundu 2015: 30).

Capitec executives also consider the bank’s transparency and simplicity as key competitive advantages (Guma & Makhaya & Nhundu 2015: 30).

Capitec Bank’s sustainable competitive advantage does not only come from insights converted to actions but from the shift in focus of the bank to the customer, rather than the bank’s risk management and needs, explains McNulty (2009: Online).

Capitec Bank mostly caters for, but is not limited to, the mass market and the low-income sector and is also expanding to the middle market.  

Capitec made sure to know the needs and challenges of their customers in order to form the insight. By observing the banking sector, they noted that it is exceedingly sophisticated in South Africa and that the average consumer finds it challenging to understand, which leads to feeling a lack of financial control.

This is not to mention the expensive and hidden costs that come with many banks. These flaws in the banking sectors leave the consumers with a distrust according to McNulty (2009: Online).

Another indication of the shortages in the banking sector is the inefficiency of the bank as evidenced by long queues, especially at the end of each month to withdraw money McNulty (2009: Online).

How Capitec has strategically leveraged its competitive advantage

The executed insights bring value to both the brand and the consumer.

As the banking process is hugely based on trust due to the assets it deals with, the value Capitec bank derives from this process is loyal consumers who trust them.

In return, consumers have a bank that they feel confident and comfortable with, and this helps them to feel in control of their finances.

The simplicity and efficiency that Capitec bank strives to enable even average consumers to have full access and an understanding of their banking information.

Hakkak and Ghodsi‘s statement about the emotional connection in terms of insights proves to be true here (2015: 300). The consumer is won over by the idea of a simpler banking experience and puts their trust into Capitec, rather than rationally sticking to old fashioned, familiar and “trustworthy” ways.

Capitec bank geared their business for masses and focuses on customer needs rather than the customer’s income (Guma & Makhaya & Nhundu 2015: 30).

McNulty explains status-based banks as using a very “traditional approach” and classifies Capitec as “status-neutral” (2009: Online).

Due to Capitec bank’s insight into the market, they built their core principles to correct what their competitors lacked: affordability, accessibility, convenience, and simplicity.

These principles were carried through by lowering fees, having numerous branches available and also being open seven days a week; therefore, making it possible for their customers to withdraw cash at ATMs and selected retailers and discarding paperwork which makes all processes quick and simple (McNulty 2009: Online).

This is an example of how their insights are visible through implementation.

As Capitec offers many cash withdrawal options, they have not only saved vast amounts on security costs due to no armoured glass and metal gates being needed, but this also enabled them to be more interactive with customers making the banking experience more personal and pleasant (McNulty 2009: Online).

Their cash withdrawal options and their paperless system (replaced by biometrics) require less space and customers do not have to deal with long queues.

Capitec specialises in operational efficiency which sets them apart from other banks. According to Capitec bank, they would rather offer fewer services and do them well.

In contrast with other banks, Capitec trains all their staff in each service department which makes them more efficient. This all contributes to Capitec’s sustainable competitive advantage.

As discussed, Capitec’s insight into the market and the consumer can be seen through the execution of its business plan, setup and service, and it is also identifiable through the advertisements.

Due to Capitec’s insights, they have the power to communicate their solutions through advertisements directly to the consumers. This builds trust in the brand and brand equity.

According to Pullig, brand equity is the value of a brand in a marketplace based on consumer perceptions (2008: 1).

A Simpler Banking Experience

A good example of an advertisement released by Capitec is the “Bank better to live better” video where they sell experiences that are clearly associated with banking (Capitec Bank 2017: Online).

While doing this, they also focus on their core principles derived from their insights: affordability, accessibility, convenience and simplicity.

Accessibility and convenience are communicated 13 seconds into the advertisement when the woman pays the man through the Capitec application on her cellphone.

Between 16 and 19 seconds, Capitec shows how the payment is immediately transferred without any banking costs. This refers to affordability and also speaks of convenience.

Simplicity is communicated throughout the video as Capitec shows how easy and simple the whole banking experience is.

Capitec’s consumer insight (that consumers find banking extremely overwhelming and that it causes distrust in banks) is directly addressed in this advertisement. It demonstrates ease in the banking experience by placing the “true experience” (what the man/woman uses the money for) as the focus of the video.

Capitec also flaunts the gap they filled in the market based on their market insight, which is using technology to offer an efficient banking experience (Capitec Bank 2017: Online).

What consumers hate of banks

Another example of how Capitec uses their advertisements to target their audience through their insights is their “TV ad” in which they mention a list of negative traits/activities that one usually associates with banks (Capitec Bank 2016: Online).

In this advertisement, they once again refer to their core principles derived from their insights. The inconvenience and inaccessibility of banks are emphasised 10 seconds into the advertisement by mentioning the “red tape” which refers to queues typically associated with banks.

Affordable Banking

The unaffordability of banking is demonstrated in the line “You’re paying to save your money, and then you pay to get it out” (00:23s).

The lack of simplicity is shown 18 seconds into the advertisement where they refer to all the paperwork one associates with banks; therefore, linking it directly to their insight being that banking overwhelms most customers with their overcomplicated processes.  

“Their (other banks’) short banking hours” (00:33s) refers to an inconvenience and inaccessibility.

A Bank that Simplifies my Life

The setting then changes to a Capitec branch where it is cleverly mentioned: “I found a bank that doesn’t waste my money or my time; a bank that does innovative things to simplify my life.”

In this quote, Capitec refers to affordable, accessible, convenient and simple banking. The reference to “innovative” covers Capitec’s market insight that technology can be used for more efficient banking (Capitec Bank 2016: Online).

Both advertisements are engaging with Capitec’s core values which are based on their insights.

By keeping their insights clear in each advertisement will help build a name for the brand and build the brand equity.

People can now associate Capitec with these values more specifically, as it is visible in all their advertisements.  

Credit: This article was written under the guidance of The Red & Yellow Creative School of Business while I was studying there. -Kaylyn Kemp. 2019.

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Kaylyn Kemp
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