CASAS BAHIA-Marketing to the poor

Q1. Study and explain the unique features of Casas Bahia’s business
model? What, according to you, are the reasons for Casas Bahia’s
success? Explain.

The most important feature of Casas Bahia’s business model is credit financing. More than 90
percent of the company’s revenues come from credit sales. The stores provide credit to the
persons on the basis of information provided by the Service of Credit Protection (SPC), the
credit bureau of Brazil. In case of some customers who had not applied for credit earlier or had
been granted credit before, in this situation credit analyst of Casas Bahia played an important
role.

Casas Bahia undertakes transaction with people who have positive SPC score. In this case they
provided two options to their customers, the item of purchase cost less than $600 no proof of
income was required and the customer was asked to provide a valid permanent address. If the
SPC score of a customer is negative the store would not undertake the activities until the
customer resolves the credit problem. The store followed a scoring process which would take
less than one minute to identify the prospective customer’s credibility to afford and pay for the
purchase. If the scoring system approved the client’s credibility the sales person will proceed
with the transaction unless the client’s was directed towards the credit analyst.

The credit analyst would ask a series of question and it would take less than 10 minutes.
Decision regarding whether or not to extent the credit was taken depending on the information
provided by the customer, this also helps to know customers personally. All customer
information are centralized and they will evaluate the result and provide a new credit limit to the
old customers. A client will be allowed to entitle a new purchase only when 50 percent of the
previous bill was discharged. The company provides the lowest interest rates to the customers on
the basis of their installments. The client has to come to store every month for paying
installments and it was made on a pass book called Carne. This helps to maintain strong personal
relations with the clients and they were given a five day grace period.
As the store was large in size they were able to get the products from the suppliers at a lower
cost than the competitors and sold at a price lower than the competitors. The store manager had
the discretion to reduce the price by 10 percent to match the competition on the basis of cost
 CASAS BAHIA-Marketing to the poor

structure and target profits. In some cases the regional manager could authorize a price reduction
up to 25 percent.
 The unique feature of Casas Bahia’s business model was credit financing. 90 percent of
the company’s revenues came from credit sales.
 The company obtained the credit history of the customer from Service of Credit
Protection (SPC), the credit bureau of Brazil. The customers who wished to finance from
Casas Bahia were required to submit themselves to an SPC credit check.
 Casas Bahia had their own credit analysts for the customers who have not registered to
SPC
 The customer who has a positive SPC score he can get finance for the item less than
R$600 by submitting only the permanent address and no need of submitting any income
proof.
 The customer who had a negative SPC score, Casas Bahia would not undertake
transaction unless they resolve the credit.
 A proprietary system was developed to evaluate the prospective client who had to make
a purchase of above R$ 600 and had a positive SPC score. The evaluation process called
scoring process was completely automated and took less than a minute. If the scoring
system approved the affordability of client’s credibility, the sales person will proceed
with the transaction.
 The client would be directed to a credit analyst if he fails in the scoring process. This
helps to build a personal rapport with the customer and to inspire confidence in them.
 The client was asked with a set of questions and the process would took less than 10
minutes. This was done to assess the client’s creditworthiness. Decisions regarding
whether or not to extend the credit were taken on the basis of information provided by the
client.
 The information provided by the customers are centralized and made available to all the
stores. In addition to personal information, credit score and purchase history, the store
also maintained the personality traits of customers for future references. The information
was used by the store for not only checking their credit worthiness but also their
potential to purchase new items.
 CASAS BAHIA-Marketing to the poor

 A client became entitled to new purchase only when he discharged 50 percent of his
previous bill.
 The customers had to visit the store every month for paying the installments. This
innovative system is called Carne (passbook) and the installments schedule ranges from
one to 15 months. 5 days of grace period was provided by the store.
 Television was the main medium of advertisement since 90 percent of the Brazilian
household has access to it.

Question 2: Critically examine and comment on Casas Bahia’s

marketing strategy that targeted BoP market.

The main highlights of the marketing strategies adopted by Casas Bahia for the Bottom of
pyramid people are as follows:-

Developing Relationship-
As the owner of Casas Bahia , Mr. Samuel Klein belonged to a very poor family and had
to face a series of trouble in his earlier phase of life , he was able to connect with the
people, could feel their problems and think of their happiness. This developed a bonding
with the so called blue collared workers like maidservants, cleaners, cooks, construction
workers etc.

Trust among people-

Success of any business depends to a large extent on the level of trust between the buyer
and the seller. Samuel Klein trusted the people who had less creditworthiness. Even
though he took a risk while doing so but it resulted into higher unexpected returns. The
people also did not want to break the trust shown by Casas Bahia on them and therefore
were timely paying their installments.

Strategic Locations-
 CASAS BAHIA-Marketing to the poor

Casas Bahia stores were tactically located in places nearby the localities of the blue
collared workers. This resulted into a major success for Casas Bahia. The workers need
not have to go to distant places to acquire their goods. Even the outlets were not
decorated sophistically which might have refrain the workers to step back.

Targeted low income group-

Most of the big companies were not focusing on the purchasing power of the people
living in the BoP . Casas Bahia took it as an advantage and specifically targeted the low
income group. Monthly installments were fixed for the purchase of the goods which
were according to the budget of the poor people.

Aggressive Marketing-
Casas Bahia adopted an aggressive approach of marketing. Around 3 % of their revenues
were invested in advertisement, which was the largest budget for advertisement in Brazil.

Building a emotional brand personality-

Casas Bahia used famous personalities in the field of singing, acting and TV media for
promoting their products because the low income group can easily identify them.

Credit Sale-
Almost 90 percent of the revenue of Casas Bahia was originated from the credit sales.
The average monthly installment was fixed at around 4.3 % interest rate which is pretty
less as compared to the traditional money lenders.

Involvement of customers in promotion-

Casas Bahia involved their satisfied customers to take part in the promotional activities.
 CASAS BAHIA-Marketing to the poor

Q3. Examine the criticism leveled against Casas Bahia? Do you agree
with the critics that Casas Bahia exploited the poor or do you think it
was a win-win situation for both the company and the poor
consumers?

Criticisms labeled against Casas Bahia:

There are mainly two aspects which the critcs are pointing fingers at. They are:

 They say that the organization is exploiting the poor in making them buy expensive
goods which actually they do not require. They also say that the poor is getting dragged
automatically towards the low interest schemes and purchasing products which are
actually above their affordability and as a result they are sacrificing on their basic needs.
The example stated is that of the maid servant who is sacrificing on her broken sandals to
acquire costly goods like television, VCR etc.
 Another comment that came from the critics say that Casas Bahia is claiming their
products to be the cheapest whereas actually it’s not. They may be compromising on the
quality. It’s just that they are somehow trying to fit the installment schemes to the
pockets of the poor which is shadowing the inflated prices of the goods.

PERSONAL OPINION:

I think that the whole concept of Casas Bahia is a through Win-Win situation for both the
company as well as the customers. The first point made by the critics can be ruled out because if
the maid servant is encountering more satisfaction in paying the installment of her television set
rather than repairing her sandals, it surely implies that may be maintaining her reputation and
trust in the market is more important for her than to repair her sandals. Moreover she has got the
television from the store which she could have not dreamt of probably, if Casas Bahia was not
there. But because of the store today she can also derive the pleasure of being a television owner
 CASAS BAHIA-Marketing to the poor

which may be a matter of pride in her low income group. Therefore in return of the sacrifice she
is making, she is probably getting a satisfaction which is comparatively of much higher value.

Moreover Casas Bahia offers the goods only after through scrutinizing of the customer’s ability
to pay off his debts, depending on their income and past records. If they are not found able
enough they are given extended repayment period. So all these ensures that there is not much of
a problem that is being created for the poor.

Also collectively, the poor has a strong purchasing power and what they lack is the resources to
pay for it. No bank provide these category with adequate finance and the money lenders charge
exorbitant interest rates. So by providing easy installment schemes, its catering to the untapped
need of this segment. This is leading to satisfaction of these customers as well as profits for the
company.

The second point pointed out by the critics say that they are playing with the quality and that is
the reason for lesser prices. This can also be ruled out as due to the huge size of the store, it
manages to buy good from the vendors at much cheaper rates. This actually makes enables the
store to offer such flexible prices and payment schemes. Moreover such an innovative player
who dares to target such a risky customer in such an efficient way would not take any chances in
reducing the quality. That would surely ruin the image of such a well established company.

Therefore what I feel is Casas Bahia had dared to enter into a market that as not even considered
as a market atall by many. And to make such a strong foothold in this sort of a market is really
praiseworthy and what the store is doing id truly benefitting both the consumers as well as the
company.
 CASAS BAHIA-Marketing to the poor

Q4. Prof C.K Prahalad has emphasised the importance of the BOP
market in his book, “The Fortune at the Bottom of the Pyramid.” What
do you understand by BOP market? Comment on the importance and
potential of BOP market for multinational operating in the developing
countries?

The term bottom of the pyramid proposed by Prof C.K Prahalad in his book “ The fortune at the
Bottom of the pyramid” has an indepth significance in the case study provided

The bottom of pyramid refers to the bottom segment of the economic pyramid of the
population. Thus BOP market refers to the largest market consisting 5 trillion people according
to IFC and World Resource Institute (WRI). The IFC-WRI study that used data from national
household surveys in 110 countries serving the poorest segment of the socio-economic group

The phrase “bottom of the pyramid” is used in particular by people developing new models of
doing business that deliberately target that demographic, often using new technology. The
Bottom of the pyramid are those people who are unserved or undeserved by a large organised
private sector including multinational firms.This field is also often referred to as the "Base of the
Pyramid" or just the "BoP."

The importance and Potential of BOP market:

 The developing countries has a large population comparatively comprising of people

from the bottom of the pyramid thus the companies targeting such segment has a larger
customer base.
 Despite the vastness of this market it remains untapped by multinational companies.
Companies assume that people with such low incomes have little to spend on goods and
services and what they do spend goes to basic needs like food and shelter. Thus
companies can formulate and introduce products that best suits there needs at an
affordable price thereby to cater a large population of the market.
 CASAS BAHIA-Marketing to the poor

 BOP has a large contribution to the country’s GDP and plays a major role in its growth
and development.
 BOP, as a market, provides a new growth opportunity for the private sector and a forum
for innovations. Old and tired solutions cannot create markets at the BOP.
 BOP does not only attends to poverty as a whole, but on its attributes and its causes. This
view helps uncover interesting facets of poverty, explain it causes, and explore possible
ways business can innovatively deal with poverty.