July /2010

Myths and Realities of Low-income

Markets

Notes from Brazil

CONTENTS

1. Social mobility in Brazil

2. Behaviour of BoP population

3. The movement of companies

4. What about classes DE?

Moment of huge social mobility, with reduction

of DE families and increase of class C families

Overall

Context

Social Mobility

PlanoCDE Study (from the consolidation of IBGE data, PNAD 2002 and 2008)

* Deflated by IPCA Jul./2008 values. MW in 2002 indexed by IPCA (51,7%)

High growth of C group in Brazil

Group C went from 13 to 19

million families

A large proportion of increase in

national income is in class C

+ Us154 billion dollars of

purchase power of groups BC

+ 23 billion dollars of

purchase power of groups DE

In the last 5 years...

Class Differences in Brazil

REGIONAL Differences

CLASS Differences

It is not possible to

think of a strategy

for the Northeast

without considering

the significant

participation of DE

classes:

72% of

households

AGE GROUPS Differences

Children(0 to 9 yrs)

1 AB 10,6 CDE

Young adults(20 to 39 yrs)

1 AB 5,8 CDE

Each specific segment whithin the BoP requires

consideration; each has different needs and

undergoes distinct consumption moments

Overall

Context

The way the BoP population defines themselves may be

very different from the parameters used by companies

of other social classes

• No social class identifies themselves as poor

• For classes DE, poverty is a condition, a

circumstance in life

• Oscilation in the social scale is due to:

– Greater presence of informal work

– Vulnerability (diseases, job loss)

• Increase in purchase baskets of class C,

which include services:

– Low cost private schools

– School transport

– Interest in closed condos

– Health services

Social Mobility

Only 21% of the population

of Recife and São Paulo

define themselves as poor,

and these are poorer and

had less formal education.

PlanoCDE research published in

Valor Econômico

Fonte: Narayan, Ptrichett and Kaapor. Moving out of poverty. Palgrave MacMillan and World Bank 2009.

Different experiences and realities generate different consumption logics

Social Mobility

Focus on the concept of INCREASE of

consumption and COMFORT

Focus on the concept of ACCESS to

opportunities and services

Focus on the concept of INCLUSION in the

consumption universe(basic)Social classes

E

D

C

B

A

Focus on the concept of DIFFERENTIATION

personalization

Far from having circumscribed and linear

practices, consumption within the BoP

population is social and modern and operates

within the logic of social networks

Overall

Context

Types of assets and capital

Types of assets relevant to BOP:

• Physical capital: housing, building materials, durable goods

• Financial/ productive capital: safety at work (type of work), productive goods (car, sewing machine, etc), income from rents and other sources.

• Human capital: education: higher degree of schooling increases chances of access to other forms of capital

• Social capital: at home and in the community –the capacity to mobilize these networks of relationships to their help

Economic relations are embedded in social networks

Source: Moser, C. (1998) The asset vulnerability framework: reassessing urban poverty reduction strategies. In: World

Development, vol 26, No 1, pp 1-19.

The social capital may have

a greater weight than the

financial capital

Social networks

Community network

• 60% socialize purchase

opportunities

• The network ‘knots’ have a

strategic role: circulation of

information inside and

outside the community

• Network knots, who are

they:

– Door-to-door salespeople

– Small retailers

– Tour organizers

– Hairdressers, manicures,

etc.

Family network

• Multinucleated families

• 42% have relatives living in the

same neighbourhood

• Consumption units

• Require specific consideration for

using products and services:

telecom, cards and financial

services

BoP Practices Brazil

nó

rede

Virtual networks

• 170 million mobile phones:

85% are prepaid

• 18 million Internet users in

class C

• 48% of users connected in

100 thousand Internet cafes:

82% in classes DE

Sources: McCann Erickson, CDI Lan, CEBRAP .

Source: O Estado de São Paulo/ Sept 2009

Aline Benavente

Resident in Vila Carrão, Zona Leste

Avon Rep

With the help of social medias such as Blog in the company’s portal and Twitter

• Her income per campaign was doubled

“I used to sell R$400,00 per campaign and, last month, I sold R$1,000”

• Increased the clients’ portfolio: Other cities

•New Selling Strategy:

Blog: promotions and campaigns.

Twitter: new arrivals or new promotions.

Avon website: access to electronic catalogue

E-mail: place an orderHas 150 followers in Twitter, all clients.

• Payment: awaits the voucher and then posts the order

Example

Moment of great experimentation where

companies are testing different strategies

in the BoP market

Overall

Context

ways:Different

Emergenta.Strategy

Deliberateb.Strategy

Top down:2. Strategy Adaptation of business models AB to the base

of the pyramid

Companies that have always operated on the

base of the pyramid without formalizing a

specific project for the BOP

Companies that have decided to formally

position themselves to the BOP

(Brazil: especially class C)

Bottom up:1. Strategy Migration of business models CD to the top of

the pyramid

• Network of beauty saloons (9) located

in BOP neighbourhoods in RJ and ES

• 43,000 clients served/ month

• Development of products directed to

women with curly / afro hair

• Information and focus on women’s

self esteem

From the BOP to the Top of the pyramid

New services and products for the BOP

From BOP

toTOP Bottom up:1. Strategy

IpanemaBaixada Fluminense

• Branch in Heliópolis

• Shop in Paraisópolis

Emergent Strategya.

Shop

positioning in

BoP

neighborhoodTop down:

2. Strategy

Emphasis on the product:

sub brands

Deliberate Strategyb.

• Developed exclusively for the North and

Northeast

• Provides whiteness, perfume and

economy at an acessible price.

• Ala Tablete version (bar soap) providing

abundant consistent foam to meet the

needs of CD women

• OMO Tanquinho

• Ideal Powder Milk

• Dolca

• Low cost and adapted to BoP taste and

habits

Emphasis on the product:

new brands

Top down:2. Strategy

Emphasis on the channel

Community Marketing: using social networks

• Door-to-door

• Product tasting

• Information about nutrition

• Training for young people: Retail lessons

• Partnering with local small retailers:

business plan and managing

• Micro credit

• Digital inclusion

Deliberate Strategyb.Top down:

2. Strategy

a flooring manufacturer, developed a business

model to reach the low-income population, in

partnership with social organizations.

partnering with a social entrepreneur,

Colceramica was able to link with

community leaders

community participation helped the company

recruit sales people, gain valuable marketing

insights and generate consumer acceptance

for its product

usage of existing networks in the community

ability to reconcile the world of conventional

business with BoP informal reality

easy financing

Emphasis on the channel

Project Shakti uses innovative distribution

methods that allow products to reach rural

consumers in remote country regions.

uses a network of 27,000 entrepreneurs

and is currently is present in 82.000 villages

in India.

connects self-help groups with business

opportunities

creates income-generating for BoP women

by providing a sustainable micro-enterprise

opportunity.

supported by micro-credit

Community Marketing: using social networks

Deliberate Strategyb.Top down:

2. Strategy

• Generate actions of approximation with the

community

• Rethink the value chain

• Educate the consumer

To operate in the DE markets requires reinvention

of the business model in greater depth

SynthesisIn

This means not only to do business, but

to contribute to social inclusion

www.planocde.com.br

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