Purchasing behaviour of the poor

Banerjee and Duflo (2007) show that the poor spend a surprisingly large fraction of
their total income on alcohol, tobacco, and entertainment (whether televisions,
weddings, or festivals).
The poor enjoy such products as much as affluent people do, and maybe even
more so, given their rather bleak lives of the poor.

The poor do not spend enough on their own nutrition, health and education.
One survey of the poor in Udaipur in India found that 55 per cent of the adults
were anaemic and that 65 per cent of adult men and 40 per cent of adult women
were underweight (Banerjee, Deaton, Duflo, 2004).


Which companies work with the BOP?

Some of them are:
in retail, Brazil
in dairy, India

Habibs in fast food, Brazil
Bradesco in banking, Brazil
Elecktra in retail and banking, Mexico
Groupo Bimbo in food, Mexico
Pattrimonio Hoy in housing, Mexico
Globe in telecom and water, Philippines
Grammen in micro finance, telecom, and food, Bangladesh
Aravind Eye Hospital Jalpur Food Narayana Hrudaayalayay in health care, India
ITC e-Choupal in agriculture, India
SKS Finance in micro finance, India
Airtel in telecom, India
Pick and Pay in retail, Africa
Mobile Telephone Networks in telecom, Afica
Savory and Brestler in ice cream, Chile

Casas Bahia
Founded by Samuel Klein in 1958
Largest retail chain in Brazil
Deals in electronics, furniture and appliances. CASAS BAHIA carries and sells top quality brands: Sony,
Toshiba, JVC, and Whirpool.
Company own more that 500 stores across the country
Employes around 60000 people and serve more than 31 millions customers
Annual revenues - $ 7 bilion

Services provided:
Credit Firm provides credit even to consumers with low and unpredictable income steams

Delivery &
Instalation of goods

Who are the customers of Casas Bahia?
Primarily maids., cleaners, cooks, independent street vendors and construction workers



.
Casas Bahia


http://www.savevid.com/video/casas-bahia-ck-prahalad.html
3 :08
So
Make customers want to buy
things they dont actually
need, such as Idc tvs, as they
could spend this money on
better education or food
Providing credit does not
change affordability of the
product

Sell customers things they
really need, such as ovens and
refrigarators, but never had
chance to buy
Fair & Lovely

Fair & Lovely, the largest selling skin whitening cream in the world
First launched in India in 1975
Fair & Lovely claims to offer dramatic whitening results in just six weeks.

HLL claims Fair & Lovely is doing good by fulfilling a social need.
According to Hammond and Prahalad woman has a choice and feels
empowered because of an affordable consumer product formulated for her
needs.
Further, they assert that by providing a choice to the poor, HLL is allowing the
poor to exercise a basic right which improves the quality of their lives.


safety and efficacy of Fair & Lovely

Should women have the right to buy Fair & Lovely?
Absolutely yes.
None of the womens groups want to ban the product.
Should Unilever have the right to make profits by selling these products?
Yes; it is a free market.


is it likely that the company has helped to sustain prejudices?
Unilever after all did not create the sexist and racist prejudices that, at least,
partially feed the demand for this product

Single Serve Revolution
Most often cited example of BOP sucess is shampoo sold in a single use
sachets. Companies learned to sell small pockets of varoius products such a
shampoo, ketchup, tea, coffee, buiscuit and skin cream.
Pioneer of this revolution was CavinKare-India start-up firm that first
introduced shampoo in sachets in 1983

Companies may prefer to sell small packages at lower profit margins to
encourage trial, brand sampling and impulse purchasing

POOR-may prefer small packages becasue of convenience and managing
cash flow. Poor find it difficult to save money due to lack of safe place to
keep money and paucity of banking services. Poor may not have the money
to buy a bottle of shampoo.

Small packages increase consumption by facilitating impule
buying.Consumer might be fooled into thinking the lower price of smaller
package makes it truly cheaper.
Affordability?
An ACNielsen study on rural markets in Indina found that for several
products the best-selling package size is the same across rural and urban
markets.
Annapurna salt

sell its Annapurna brand in a country where iodine deficiency is a
serious problem.
In small package size is exactly the same price per
kilogram as for larger package
CEMEX
Innovation in housing for the poor

Largest cement manufacturer in Mexico
started in 1907

Sells raw cement, ready mix concreate,
clinker etc
PatrimonioHoy:
Building a
better life

http://www.savevid.com/video/cemex-mexico.html

Patrimonio Hoy,revolutionzing the idea of savings by changing the basic
spending pattern of the poor in Mexico.

Program It provides microfinance to poor people to pay for services and
building materials and upgrade their homes.

Firstly, it does not increase the poor peoples income, so it fails on that
criterion. Secondly, according to Prahalad, the microfinance does not go
to the poorest of the poor rather CEMEX aims at ...the
4average family (five or six people) [which earn] between 50 and 150
pesos ($5 to $15 approximately) per day. The target population for the
Patrimonio Hoy is not the absolute bottom of the economic pyramid (for
whom the average per-capita income is less than $5 per day (Prahalad
2006:226). Again, it does not show how income poverty will be either
eradicated, nor substantially reduced.