June 24, 2008

The challenges of reaching the lower-income consumer

Every marketing professional I've spoken to this year has told me about the challenges of reaching lower-income consumers. Brazil is witnessing the phenomenal rise of the C/D socio-economic demographic, clearly one of the main drivers of GDP growth.  There are a few companies that are doing an outstanding job in making a real connection to a segment of the population that is finally coming of age from an economic standpoint.  Casas Bahia - Brazil's largest furniture and appliance superstore (and the country's #1 advertiser) - is one of the best examples of a company that knows how to reach out to the lower-economic consumer.  This week's Veja magazine brings a fantastic interview with Michael Klein, the genius behind the successful model.  One of the most famous campaigns from Casas Bahia asked consumers to 'name the price'.  That is, store sellers would ask how much a person was willing to pay per month for a stereo equipment, for example, and then they would calculate how many installments would be needed.  This is a company that understood before others that monthly disposable income for many consumers is more important than the total price. A long installment plan is the only way many consumers can afford to buy. The interview brings some amazing insights.  Mr. Klein explains how C/D consumers have evolved over time and how they are demanding products with strong brands instead of shopping only for low prices. Or how many of the store's customers prefer wardrobes with mirrors on the outside because they create a larger feel for bedrooms that are typically very small.  He also said that their best-selling category is mobile phones.  Because many of his customers live in communities with no public phone service, the mobile phone is the only phone.  Therefore, these customers are not willing to settle for the basic phone.  They want a cell phone with extra features.

I became a fan when we came back to Brazil last year. After shopping around for a washer, dryer and refrigerator, we ended up buying at Casas Bahia.  Prices were great, the salespeople were incredibly knowledgeable and the items were delivered exactly when we agreed.  Last week, my wife had a stove delivered to her assistant as a surprise birthday gift.  The next day, the assistant said how excited she was to see the Casas Bahia delivery truck at her door.

For those targeting lower-income consumers, this is a case study to learn from.

1 comment:

Anonymous said...

In my B-School I am doing a case on casas bahia. I have to analyse the consuer behaviour towards this store and why the low income groups prefer casas bahia .

If bottom of the pyramid is tapped it will create huge market and even at the time of recesion casas bahia was growing .