Brand strategy and the bottom of the pyramid

We’ve been considering the relevance of a brand at the bottom of the pyramid or the low income segment of the emerging markets and an interesting observation led to many questions on how branding works in this environment.

It has been observed that ‘churn’ is high across many product categories among low income consumers – cost becomes their only criteria for many products. But a closer look seems to show that there is actually an bifurcation that takes place in consumer behaviour that is very different from that observed in developed or higher income markets.

Traditional marketing has always placed a high value on building brand equity and thus customer loyalty. Millions of dollars are spent in advertising to achieve just such these ends. However, at the bottom of the pyramid, cost is the ultimate decision maker. Thus churn is high and brand loyalty low or non existent. You have a limited budget and are simply looking for the best deal.

Yet interestingly enough, what happens is that unlike consumer behaviour in developed markets where the loyalty to a brand is more or less the same regardless of whether the product is a durable or a perishable, this difference creates a divergence in behaviour among those with very limited or uncertain income. A customer with regular income at a certain level will, if loyal, always buy the same brand of paper towels – a perishable product and also be loyal to a brand for a durable product like a Nokia phone or a HP computer – that is, always preferring to buy their choice regardless of the life of the product. Witness the iPod.

But at the BoP, durables are expected to last much much longer before replacement is considered, a cellphone would never be replaced on a whim or fancy for example, simply because of the investment involved with respect to the customer’s total income or purchasing power. Yet for perishable commodities, be they a sachet of soap or a prepaid airtime card – where brand really doesn’t make any difference but price does, especially at the moment of purchase, they will simply choose to buy the cheapest product.

There are exceptions of course, and these have to do with reliability, trust and reputation – for example Coca Cola is a perishable, but even at the BoP level, you’ll buy a Coke rather than Random Cola because you’re buying a “Coke”. Or may choose airtime minutes on a prepaid card from between certain service providers who are known to provide reliable service – they cannot afford for the purchased product not to work – rather than going for simply the cheapest if its an untried or unknown service provider.

Now what this means for traditional marketing and branding activities with respect to those who wish to penetrate these markets, I am not wholly as sure yet. But the very fact that consumer behaviour at lowest income segments in emerging markets is very different from that in developed or higher income markets is enough to give pause for thought. Strategies will have to be built from scratch. Sachetization brings with it its own challenges.

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