Brands ignoring huge audience

11 February 2011

NEW DELHI: Marketers could gain major benefits from creating innovative products for the "forgotten" shoppers with low levels of disposable income across the globe, a report has argued.

According to consultancy Booz & Co, over 1bn people earn between $2.50 (€1.84; £1.56) and $7.50 a day, but this audience is often neglected in favour of the $15 to $75-per-day middle classes.

"[The] segment includes more than 1.5bn people and represents a new and surprising opportunity for companies bold enough to innovate to meet their basic needs and smart enough to execute profitably," it said.

"This opportunity is not right for all companies. Eighty percent of companies will have little to do with this segment."

More than 60% of Indian households, and over 50% of their Chinese counterparts fit this profile, Booz suggested.

However, it has been estimated the 286m poorest residences in China boast combined annual earnings of $691bn.

The 171m Indian homes sharing the same status accrue $378bn a year, and Brazil's 25m least well-off households claim $73bn.

Low-income shoppers are generally "oblivious" to the goods sold by multinationals, as they sit considerably beyond a realistic pricing tier.

The group might use tooth powder rather than toothpaste and substitute homemade clothes for branded apparel, while having limited or no access to cars, washing machines and TV.

D.Light sells solar-powered LED lanterns in several Asian and African countries, charging $10 per lamp, and helping customers avoid dangerous substances like kerosene.

The company expects ship 50m units, and hit $500m in revenue, by 2015, even though it only started trading two years ago.

"Solar-powered consumer electronics are an entirely new category for most of our customers," Sam Golman, its founder, said last month.

"As a result, a significant portion of our marketing efforts are in customer education, explaining what solar power is, how the product works, and why it's a worthy investment."

Food group Danone sells 50-gram pouches of its drinkable yoghurt for 10 cents in Senegal, and offers cups of water for 15 cents in Mexico.

The organisation has increased the proportion of sales attributable to emerging nations from 6% a decade ago to over 40% at present.

"To put it bluntly, when poverty is on the rise, my own growth prospects shrink. Which means that combating poverty is good for my business," Franck Riboud, Danone's ceo, said recently.

Hindustan Unilever has a similar strategy for India, where around 30% of personal care goods are purchased in single-use sachets costing roughly 2 cents each.

Under the Project Shakti initiative, HUL has trained 12,000 female entrepreneurs to sell items door-to-door in 50,000 villages, also helping participating individuals finance these schemes.

"The profile of the consumer today has changed drastically," said Nitin Paranjpe, ceo of Hindustan Unilever. "The need is to recognise changing societal trends, wants and values."

Similarly, Procter & Gamble is now targeting what it calls the "$2 a day" customer base, for example by developing shampoo and body wash that deliver the desired results despite a lack of hot water.

"Our innovation strategy is not just diluting the top-tier product for the lower-end consumer," said Robert McDonald, P&G's ceo.

"You have to discretely innovate for every one of those consumers on that economic curve, and if you don't do that, you'll fail."

Data sourced from Booz & Co; additional content by Warc staff