Brazil and BoP consumer behaviour in Brazil

I was influenced and inspired by one of my lecturers to explore the topic about Brazil. Why? One of the reasons is because I saw this picture below – from March 2012. Then I just got curious about Brazilian market and then accidentally we had a guest lecturer from Brazil :)

Well.. I knew some things about Brazil, but I never explored it as much… So I will probably write a few posts about it, since I am so interested in this topic.

I will start with the BoP.

Brazil is one of the main emergent markets and its population is over 190 million people.

The base of the pyramid (BoP) market has become of increasing importance in recent years.

‘BoP’ is defined as people who live on less than US$8 a day.

 

The notion that those on a low-income also form an important market and that the poor could be sees as consumers is not new. So what are characteristics of these people?

-        A substantial proportion of the urban poor in developing countries is willing to pay for a designer label as a symbol ( designer labels as symbol of status and integration in society and it is a kind of differentiation from the extremely poor).

-         Poor people ten to be more loyal to branded products because they cannot make mistakes (the financial risk is too high, so they make a rational purchase to assure the expected delivery).

The low-income classes highlight the idea of ‘inclusivity’ – suggesting an access to a ‘middle class’. Whereas upper classes stress the idea of ‘exclusivity’.

Importance of dignity

The BoP group demonstrated a high concern about maintaining their self- respect and being treated with dignity. – ‘I am poor but I am clean’ or ‘I am poor but I am honest’ – honesty is intense notion, as police officials exercise the prejudice against low-income pedestrians and they are more frequently stopped than those from the upper classes.

Whenever they are able to choose, their aspirations expand greatly, and the last thing they want is a product/service or a shopping exercise that reminds them of their poverty status. They want to fulfil their symbolic aspirations.

Personalised relationship

Brazilian low-income people tend to create a stronger sense of community and social network, based on mutual help – a more informal and friendlier relationship in BoP markets is predominant.

Some characteristics:

• They want a personalised service

• They mistrust large corporations (bank ‘swallow their money’ and are just for rich people)

• They want face-to-face contact (they want to know from who they are buying and better understand what they are buying, door-to-door sales-people have a competitive advantage because low-income customers are willing to pay a higher price because of the relationship).

Value proposition configuration

What differs among low-income and upper-income consumers is the way they perceive the value proposition of brands, products or stores: that is, the relation between how benefits and costs are perceived.

The meaning of abundance

Low-income consumers have a very positive perception of abundance and they are used to crowded places. Therefore, retail stores in low-income neighbourhoods present an environment where there is an abundance of products and people. When a store is too clean and without many colours, low-income consumers don’t feel attached to the store.

However, Brazilian social classes are moving. Brazil’s ballooning middle class is transforming the South American country into a global competitor. Obviously, it provides great opportunities, however companies also need to be quick and understand how to capture their new customers.

For example, in the past, travelling by plane was basically for the richest people from “classes A and B”, who top the Brazilian consumer pyramid.
Nowadays, the base of the consumer pyramid is increasing with the economic growth of classes C and D. Thousands of people from these lower economic classes are now potential customers.

Brazil’s largest airline now faces the challenges of remaking its brand for these new travellers.

10.7 million Brazilians are set to hit the skies for the first time in 2011, 8.7 million of whom belong to the “emerging classes” C and D.

 

Also companies as savvy as Sears and Wal-Mart have sought to do business in Brazil but failed. Casas Bahia, though, successfully developed a model that serves the Bottom of the Pyramid in that country. The company succeeded in serving the large, lucrative market represented by the poor through innovation and the right financial approach.

It is not uncommon to find household with a television or refrigerator yet lacking basic infrastructure, such as toilets and telephone lines. Those at the bottom of the pyramid spend based on their needs. In a tropical climate, a refrigerator is a necessity. Everyone, regardless of class, feels the need for entertainment. For the poor in Brazil, that comes in the form of television and radio (plus because of their low educational level, advertising is repetitive)

Casas Bahia took an innovative approach and devised a unique financing model to serve this market. Part of the solution is the now famous carne, or passbook, that allows its customers to make small installment payments for the merchandise. Payment schedules range from 1 to 15 months.

However, not everything is that simple. An estimated 16 per cent of customers applying for credit are denied. When customers enter a Casas Bahia store, they hope to fulfill a dream. When you tell a potential customer ‘no’, you effectively destroy that dream. But it is an inevitable decision for a company that understands Brazilian market.

There are many more examples, so I would recommend to read a book written by Prahalad C.K. (2010) ‘The fortune at the bottom of the pyramid’ and an article by Barki E., Parente J. (2010) 'Consumer Behaviour of the base of the pyramid market in Brazil'

I am sure there will be more posts about Brazil in my blog. Now I am interested in the differences between low-,mid- and upper-classes as well as how is digital perceived in Brazil. Finally, I am curious about the marketing in the Brazilian way.