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COURSE: CONSUMER BEHAVIOR
FACULTY: Mr. SUDHEER SUDHAKARAN
ASSIGNMENT: Case studies: a) Archies- The way Indians greet.
b) Casas Bahia-Marketing to the poor.
STUDENT DETAILS:
PGDM BATCH 18, INSURANCE & BANKING
Group- 3 RUPAIAH
1 Mr. DEEPAK SONI FN-106
2 Mr. ASHUTOSH KUMAR VERMA FN-67
3 Mr. HARISH FK-1931
4 Mr. ABHISHEK VERMA FN-73
5 Ms. GAYATHRI R FN-93
6 Mr. ANAND B FN-88
7 Ms. ANJALI R FN-66
TIME & DATE: 0900 Hrs; 09 Nov. 2010
FOR FACULTY COMMENTS
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EVALUATED BY:
Course code
KM2CNB3
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Score/Grade:
ARCHIES- The Way Indians Greet
Q1. Analyse the circumstances in which Anil Moolchandani started Archies and
highlight the reasons for the company’s runaway success. Why do you think Archies
could not sustain its profitability growth in 2000-01?
Archies was an initiative of a Delhi based business man Anil Moolchandani who was primarily
into business of sarees. He was also into selling good quality posters through mail order
catalogues, advertised in magazine-SUN. Due to increase in demand he increased his profile to
natural sceneries, film stars etc. He was also an avid music enthusiast and once he decided to sell
the books containing the lyrics of hit English songs along with posters. His idea worked well and
he got overwhelmed response when he sold over 10,000 copies in a single year.
a) Venturing into greetings- Anil observed that the Indian greeting cards market lacked
themes, lustre, creativity and appeal. During his visit to south-east Asia he was
mesmerised with warm ambience and soft back drop music of exclusive greeting card
shops. Mooting on the same idea Anil along with his brother Jagdish Moolchandani
started ‘Archies Gifts & Greetings’ as a partnership firm.
b) Market segmentation & acculturation- Archies was launched with plethora of themes
such as- Valentine’s Day, Friendship day, Mothers day, Fathers day etc which were
entirely new to Indian culture. This was to get the Indian consumer accultured with the
west and it was evident from the encouraging response from the youth. Keeping this
mind an exclusive Archies gallery was opened in the heart of the Delhi University campus.
The cards were made in the regional languages besides English and Hindi on a national
scale for almost every major festival.
c) Operational economies- The Archies business house shifter over to in-house printing
facilities to maintain production efficiencies. They also collaborated with many
companies like Gibson card manufacturing company (US based firm), American Greetings
Corporation (Paper Rose), Portal Publications (Paper Magic), Kingsley (UK) and Kel
Geddes (New Zealand) and used to sell the cards under Help Age brands.
Gifts division was primarily outsourced which was showing a growth of 30%.
d) Clientele base- Besides the retail route the Archies served the corporate clients such as-
Reliance, Samsung, LIC, Birla international and Dabur.
e) Wide range of products- The product offerings of Archies included everything meant for
the social expression market such as- Greeting cards, Photo albums, Frames, Stuffed toys,
auto graph books, Calendars, Gift wraps, Fancy stationery, kids range of products,
Indexes, Planners, Music cassettes and CDs, e-crackers, Perfumes etc. Estelle’s line of
fashion jewellery was made available at Archies outlets with an alliance made with
Normak Fashions.
f) Dedicated retail formats- To serve every strata of the consumer the Archies had distinct
retail format which offered products suiting to different consumer categories.
Archies Gallery- the first concept store.
Archies- The card shop- smaller format of the Archies gallery.
Paper Rose shoppe- catered 85% of Archies merchandise.
Archies Feelings- started in April 2000 by acquiring ‘Feelings’ chain of greeting
card and gift outlets in Gujarat.
Vision 2000 stores- exclusive Archies show rooms at premium locations.
g) Distribution- Archies had a strong distribution network with presence in all the
neighbouring countries – Bhutan, Bangladesh, Nepal, Srilanka and far flung areas like
Muscat and Abu Dhabi. It also catered to Indian festive needs in foreign nations of US,
UK, Middle East, South- Africa and South East Asia.
h) Franchise- Archies was first in the league to evolve with a franchise model this was to
reduce the real estate cost, furniture and fixings, overhead expenses etc. And this
enabled them to generate greater margins on performance based selling of their
franchises.
i) Smart marketing- Archies released movie specific items such as cards, picture frames
letter pads, calendars etc to coincide with the movie releases which were thought to be a
sale boosters. Near around the year 2000 the Archies came out with e-cards and message
cards to serve the tech savvy Indian population which were low on cost and high on
innovation and feelings.
Courier tie-ups (Elbee and Blue Dart), payment gateway tie-ups (Easy Net Com), online
hosts (yahoo.com, jaldi.com, indiagreetings.com, mantraonline.com), e-Kiosks etc were
initiated to leverage upon the partners.
Decline of profitability post year 2000
The business of Archies had started to decline because of the following factors-
1. e- Cards:
To tackle the threat posed by e-greetings Archies came out with their dedicated
portal- archiesonline.com. The number of registered users reached a phenomenal 0.6
mn and the number of e-cards sent through the site touched 54 mn. However this
service was a drain to the company’s finance since it made no profit. This was due to
the fact that the online services hitherto were free and the margins were insufficient
to cover the creating and hosting costs hence the company suffered a loss of Rs. 13.5
mn.
To cover this as a measure archiesonline was converted to a paid up site. This
resulted in loss of existing registered users and the tie up with yahoo was snapped.
The 6% of the turnover was spent on the aggressive campaigns to promote e-cards
but it failed to generate results and became an extra financial sink.
2. Retail revamping:
Archies was on a spree for exclusitivity drive. Most of the franchises were taken back
and exclusive retail chains were established with stress on direct contact with
customers. This called up for huge real estate expenses. Moreover company took
back all the stocks lying with the distributors thereby increasing the working capital
requirements. The ERP initiatives were taken back which contributed to the net
decline of the business. To cover up these losses funds were outsourced which
incurred a heavy interest burden.
3. Catastrophic events:
Companies revenue took a severe beating in 2000-01 due to a nationwide postal
strike i end 2000 that affected the Christmas and new year cards in 2001 valentine’s
day celebrations were hit hard due to opposition from fundamentalists and
earthquake in Gujarat which was a major market for Archies.
4. New rivals :
ITC’s entry into the greeting card business was a challenge to Archies. It posed a
threat to its market share and profitability due to its established brand equity in the
market. The music segment was threatened by Saregama and Tips cassettes.
Hindustan Lever and Cavin Care were a threat in the perfume segments.
Q2: Critically comment on the Archie’s franchising & distribution strategies for
expansion. Do you think that the company’s strategy in the initial years was right
in the light of rationalization exercises? Give reasons to support your stand.
According to analysts, Archie’s franchisee model contributed a great deal to its success.
Bharat Shah, chief investment officer Birla Capital said that “the key to understanding Archie’s
is to realize that it is not in the business of cards or gifts, but in franchisee management. One
of the critical success factors in the success of Archie’s as a business was the constant
updation of its strategies in franchising & distribution to ensure smooth functioning.
DISTRIBUTION REVAMP
During the financial year 1999-00, Archie’s decided to revamp its distribution network &
replace existing distributors by a C& F agent network. According to the new system, in place
of 68 distributors in 21 states, Archie’s appointed 10 C&F agents in 10 states who in turn
catered to distributors who in turn reached out to wholesalers. The problems encountered
with the earlier setup were that the distributor enjoyed a greater bargaining in the purchase.
Archie’s had no other option but to go by the distributors decision when they picked up only
those products, which they believed would do well. As a result Archie’s could not push its
entire range of products in the retail chain. The shift from distributors to C&F agents cut costs
significantly. The C&F agents were allotted the full responsibility for the distribution of
product in the assigned territory. They could appoint area wise distributors and were given
the full responsibility of controlling and managing these distributors. The exercise enabled
Archie’s to penetrate deeper into the market because wider reach. The long run focus was on
expanding the retail network.
RETAIL REVAMP
In 2001 Archie’s began its revamp in the retail format. It was an exclusive drive wherein all
existing Archie’s Gallery franchisees were asked to keep only Archie’s range of products. If the
did not want to be an exclusive outlet, they were given the option of converting into an
Archie’s Paper Rose Shoppe on a ‘non exclusive basis’. The focus was on having only Archie’s
Gallery & Archie’s Paper Rose Shoppe as the completely franchised outlets. Archie’s believed
that by establishing direct contact with the customers will help them in identifying the
detailed requirements of various product lines & have better inventory management and
product mix system.
In addition the company was also planning to increase the number of Vision 2000 stores
which were exclusive stores that stocked all the products marketed by the company. They
were comparatively much bigger than the other Archie’s retail outlets with world class
interiors. Archie’s was able to get full value for its products from Vision 2000 stores as they
could directly sell their merchandise to the customers at MRP instead of retailers to whom
they had sell earlier at 50% discount. The forward Integration strategy also eliminated the
need for having a 30-60 days credit window for its business partners which resulted in
immediate cash flow.
As per the new contractual agreement the franchisees were asked to make a commitment of
30-35% growth annually to ensure that the franchisees delivered results. Archie’s hoped that
the higher costs of owning a retail infrastructure would be offset by substantial savings in the
trade margins.
However the two rationalization initiatives resulted in a declining profitability for the
company.. During the transition the company had to buy back the existing stock from the
distributors causing the inventory levels to increase thereby increasing the working capital
requirements. This forced the company to outsource fund requirements thereby incurring a
heavy interest burden. They also had to incur substantial investments into real estate for
opening and operating exclusive stores which was not there in the earlier franchisee based
model. As a result the company’s top line grew by 18 % to 804.7 million in the year 2001-02
but the net profits declined to 75.3 million
RATIONALE FOR REVAMP
In the light of the rationalization initiatives, the strategies followed and implemented by the
company in its initial years was right not only because it was yielding extremely good results
for the company but also because those strategies allowed them to operate in the most
efficient and effective manner in the prevailing market conditions during those times. As
mentioned in the case the franchisee based business model was the most suited format for
Archie’s as the concept of organized retail was not there in India. Hence in order to establish a
foot hold in the retail space franchising was the most common practice. It was beneficial for
the company as there was no need for any substantial investments into infrastructure and
real estate and also the operational expenses were borne by the franchisee itself. The
changes in the market conditions over the years like the threat from e-greetings forced
Archie’s to rethink and rework upon its strategies which resulted in the rationalization
initiatives.
Q3. Do you think the measures taken by Archies to meet the threat of e-greetings
were adequate? Was the company’s decision to make its website a paid one, a
sound business move? Justify your answer.
By the year 1990 the concept of e-greeting was catching up faster. People were using online
services to send cards, gifts etc. The Archies initially denied that e-greetings posed a major threat
to the paper card industry but later they had to accept the fact and launched online portal-
archiesonline.com on May 2000.
The Archies took several steps to thwart the threat from the e-greetings such as-
The archiesonline.com had three major sections- meet, greet and gift where registered
users availed facilities such as free email, reminders, e-greeting cards transactions and
purchase/deliver gifts online.
They also tied up with courier companies to facilitate the delivery of online purchases.
Online payment gateway tie-ups for secure and convenient payments.
Leverage web hosting with yahoo.com, mantraonline.com etc.
Innovative measures like e-crackers and e-kiosks were introduced to attract innovators
(consumer adoption process).
Archies advertised heavily for non-resident Indians and enabled customers to perform
online rituals this gave them more popularity.
However the services were provided by Archies were free of cost which got more
registered customers to Archies but eventually proved to be loss making since it was not
making any profit. The measures taken to counter the e-greetings were now proving to
be ineffective. The measures taken were adequate in the sense of offerings but lacked in
appropriate pricing strategy.
Decision to make the online services a paid one-The decision taken by Archies was a sound
decision but it failed because it was not a gradual transformation and people could not adapt
to the rapid change of being charged for the services. This resulted in many people in
refraining from sundry services offered.
In addition to this even the webhosting partners did not find it profitable to be continuing
with the new payment based schemes.
Suggestions-
1. The Archies did face a loss from the competition posed by the e-greetings and
they had taken prudent steps to immune themselves out of the repercussions
however they could not prevent losses. Had they adopted a fine pricing strategy
with right timing they would have reaped a healthy market share.
2. The Archies should have opted to levy charges on premium offerings first and then
extending it to other class of products on a gradual increasing trend to escape the
threshold stimulus.
Q4.Discuss will Archies will be able to maintain its market share and leadership
in the future with the entry of players such as ITC? Will the company’s current
strategies help sustain in its competitive position?
With the increase in market demand for greetings card and gift items in the market many
companies have started invading the market segment so as to make profit along with the market
growth.
Some of the new players which have started and entered into the business segments are ITC;
Hallmark a US based company, Navneet Greetings etc.
The greatest threat that poses to the company is the Local hand made products that are doing in
a regional basis in different parts of country and handmade crafts , toys and boutiques for these
products which now a day’s customers are more tilted towards.
Current strategies which the company follows and forms a competitive edge over the other
competitors
1. Traditional vs. electronic greeting cards
2. Casteless greetings
3. Archies Scripting New Four-pronged Strategy
4. Great distribution system
5. Unique franchisee strategy
6. Variety and range of products/ One stop store for gifts and greetings
7. Ambience and world class look of the store
8. Economy cards for corporate
9. Competitive pricing
10. Major tie-ups with the companies
11. Co-Branding
12. ERP
13. C&F Agents Networks
14. Corporate social responsibility
15. Association with bollywood and other live talent shows
Discussion on above mentioned strategies:
1. Traditional vs. electronic greeting cards: Archies is in the business of gifts and greeting
from last three decades and have served the nation for a very long time. It showed
Indians a new way of greeting people in a form of greeting cards at various occasions.
Archies was the first company which started providing greetings in national as well as
regional language which no other company provided. But with the advancement in
Technology people started moving toward e-greetings more because it was faster current
and less costly than physical cards. Archies sensed the need of the hour and came into
the segment of online greeting system by introducing a new online e-greetings portal
named archiesonline.com which became very famous at later stage. Archies is now
stabled in both the traditional as well as electronic greetings.
2. Casteless greetings: Archies started a move wherein it provided a latest idea of coming
up with cards in multiple languages included both national as well as regional language it
had a strategy in which it showed a new way to celebrate different occasions and shared
the actual meaning to masses that celebration was not a restriction to any caste or creed.
3. Archies Scripting New Four-pronged Strategy: In a new initiative, Archies has identified
around 75 stores countrywide with retail-space of over 2,000 sqft which can be utilised to
develop a chain of shop-in-shop properties for its partners. Since the company’s
requirement for its own stocks is put at around 1,000 sqft, the surplus retail area could be
given to a range of premium brands for shop-in-shop development. A 500-store chain,
Archies has decided to focus on developing company-run properties in expensive mall
locations: having added 10 company-run outlets this year, Archies plans to add 10 more
outlets in the next six months to its current 38-store chain of company-run outlets.
4. Great distribution system: Company had set a vast distribution network in a period of
time which is an added advantage to the company which covered the most of the states,
cities, towns and even the remote areas of country. It forms a competitive edge over the
other players entering into the market. In a period of time it has set 8000-10000 retail
outlets with 75 distributing companies. It had four zonal offices in four metropolitans so
as to penetrate the market more and more.
5. Unique franchisee strategy: Archies is well known for its franchisee system of selling
product. It was the first Indian company to introduce franchisee outlets for products in
India. It was known that Archies were not only selling products and making profit but
owning a great distribution by selling franchisees. The different franchisee which it
offered included Archies gallery, Archies-card Shoppe, Paper rose Shoppe, Archies
Feelings, Premium Archies galleries or vision 2000 store, etc. This formed a great edge
over the competitors and a barrier for entry for the new entrants in the market segment
of gifts and greetings.
6. Variety and range of products/ one stop store for gifts and greetings: Archies entered in
all short of products which were required for gifts and greetings by people. It wanted to
place and position itself in a form where in it can be called as one stop store for gifts and
greeting product. It entered into verity of product segment and tried to bring an
excellencies in the segment. It started producing its own product such as greeting cards,
toys, key rings, candles, gifts, perfumes, deodorants, and many other products and on
different occasions such as Dipawali, Rakshabandhan etc. This strategy makes Archies an
incredible brand in terms of gifts and greetings.
7. Ambience and world class look of the store: Archies wanted the store or the franchisees
to follow certain parameters of standards. It had a standard look to be displayed at all
outlets wherein the products and gifts should be arranged in a particular format along
with soft music in the background which will make the customers more attractive
towards the store which will end with a buying behaviour. This is also another strategy
which makes it different from other brands and no other such brands follow such kind of
similar idea.
8. Economy cards for corporate: Archies comes up with economy cards for corporate
customers in which cheap products for group of members are made in a similar format in
a bulk. They provided this service which again makes Archies initiator in the particular
business and forms an edge over the competitors as well as new entrants.
9. Competitive pricing: Archies provides a competitive pricing strategy because it has got
economies of scale and it is on the peak of learning curve which makes it to lower down
the cost and pass on the profits to customers by providing products at a cheaper price
than other players in the market.
10. Major tie-ups with the companies and many courier companies
Archies have tie-ups with different companies like yahoo.com, Indiatimes.com, Gibson,
paper magic, kingseley, Kel Geddes, Helpage, Cry, etc. This makes Archies a brand
supported by many well established brand which other companies do not have in their
organization and which makes Archies product different from others. It also tied up for
mailing and courier services with different pioneer companies for providing courier
service to the customers under the same roof. The companies were Elbee, Blue Dart, Easy
Net Com, etc.
11. ERP: Archies incorporated enterprise resource planning for better utilization of resources
and to get a clear picture of business by integrating all its departments under a single
platform. This forms a major advantage for Archies and makes it differentiated from
others and more of cost effective than competitors.
12. Corporate social responsibility: It started bringing low cost products under CRY and
HELPAGE wherein the customer every time bought a card or any other product company
contributed a margin to these orphan organizations. This brought a image of CSR in mind
of people performed by company but later on was incorporated by others also. But still it
forms a positive image in minds of customers which make them buy the products of
Archies and which forms an edge over the others.
13. Association with bollywood and other live talent shows : Product started associating
itself with bollywood movie relies and came up with different products related to that
movie like Coffee mugs, toys, accessories etc. People started liking this concept of
Archies. It also connected the brand with reality shows like Big Boss, MTV Roadies , and
MTV Splitsvilla Etc. which made people to buy those products and visit the store. This is
also a competitive strategy which is unique in case Archies and forms a brand
differentiation.
CASAS BAHIA CASE STUDY
Casas Bahia is one of the largest retail chain stores in Brazil. Founded by Samuel Klein in 1958,
Casas Bahia was one of the first companies to offer the highly successful credit sales schemes in
Brazil mainly aimed at selling electronic and other household products to the urban poor.
The case highlights the marketing strategies of Casas Bahia and explains how the company was
able to unlock the enormous purchasing power of Brazil's low income working class by providing
them credit finance schemes wherein the customers could purchase branded consumer goods in
easy instalments.
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.
Ans:
a) The core competency of Casas Bahia’s business model is its credit financing, as 90%of the
company’s revenue are from credit sales. The company utilises the information provided
by ‘Service of Credit Protection’ (SCP) in maintaining the credit history of the customers.
b) Casas Bahia used SCP credit check as a base before lending credit to its customers. All the
transactions undertaken there by Casas Bahia after are based on the SPC credit record
information.
c) If the customer has clocked a negative SPC score, Casas Bahia made it a point not to take
that particular transaction until the customer resolved his/her credit problem. This
helped them to reject the applicants who are on the list of defaulters.
d) Casas Bahia used two alternatives, in case if the customer had a positive SPC score. It
uses the technique of ‘scoring process’ and the proprietary system to evaluate the
prospective client. The client is then later provided with a credit limit depending on
his/her total income. This system reconfirmed Casas Bahia about their prospective
client’s credibility to afford and pay for the purchase.
e) In case the client failed to pass the scoring test, Casa Bahia considered this as a crucial
opportunity for building a personal rapport with the clients and to inspire confidence in
them.
f) Casas Bahia has maintained a centralised customer information database, irrespective of
whether a customer has made a purchase or not. In addition to customer information,
purchase history and credit score, Casas Bahia’s maintenance of records on personality
traits of its customer, proved helpful in creating new credit limits to its existing
customers. It also helps to retain the existing customers.
g) The innovative system of maintaining passbook called ‘Carne’ proved effective. This
system maintained by Casas Bahia, was most effective to forge and maintain a strong
personal relation with the clients.
h) The five-day grace period and the marginal discounts offered for early instalment
payments encouraged the clients for prompt payments.
i) The major reason for Casas Bahia’s success is attributed to the ‘trust’ that they have
shown in the poor. It was observed that poorer the customer, the more punctual were
his payments. They did not want to betray the trust Casas Bahia had shown to them.
Casas Bahia thus gets in return the same trust from the customers, which they have showed to
the customers.
Q2. Critically examine and comment on Casas Bahia’s marketing strategy that
targeted BoP market.
Casas Bahia was founded by Samuel Klein (the third of nine children of a carpenter) in 1958.
In 1958, Samuel opened his first clothing and furniture store in Sao Caetano du Sol and named
it Casas Bahia, in honour of the home state, namely, Bahia, of his initial customers. Samuel
enticed the shoppers with unorthodox installment schemes.
Firstly, when most of the Brazilian low income population entered Casas Bahia stores, they
did not just buy a stove or a television set or a piece of furniture but a dream that they had
never thought they could realize with their meager salaries. Casas Bahia’s innovative
installment sales schemes unlocked the purchasing power of Brazil’s enormous working class
and cater to the needs of low income groups while earning good returns for the company.
Sales through installment are particularly designed for people who cannot afford to pay the
full price of a product. However, the facility of paying back the full price through part
payments over a period of time involves paying a little over the actual price of the article.
Casas Bahia made 90% of its sales on installment basis called credit sales. The purchase price
of the article is considered as the loan given by the stores to the buyer who will discharge the
debt through monthly payments.
Secondly, Casas Bahia realized that the consumers in the low income groups had the only
disadvantage of lack of adequate financial resources. It is because banks usually closed their
doors to unregistered workers, people without jobs or who did not have a regular income.
Thus the store planned to fulfill this untapped market segment by developing sustained
business model, focused entirely on consumers constituting the low income groups based on
providing easy and flexible credit to them.
Thirdly, the major attraction for the customers was the global brands sold by Casas Bahia
which included Sony, Kodak, Philips, Toshiba, Motorola, Panasonic, Brastemp (Whirlpool),
Epson, JVC and LG. Therefore, Casas Bahia made efforts to provide better quality, branded
products to its customers in spite of their financial limitations. Thus, financing the low-income
group consumers’ purchasing needs formed the core of Casas Bahia business operations.
Fourthly, majority of Casas Bahia stores were located in some of the most deprived
neighborhoods of Sao Paulo and Rio de Janeiro (Brazil). Casas Bahia’s strategy was to build a
cluster of stores in these areas so that the poor customers need not waste time and money
on travelling. The atmosphere in the stores and the attire of the staff was strictly casual so
that the poor customers never felt out of place. Samuel strongly believed that the continued
success of his business was possible only as long as the low-income consumers identified itself
with Casas Bahia. The company’s motto for its consumers was ‘Total Dedication to You’.
The focus of Casas Bahia was the art of selling. It could buy products at a lower cost from
suppliers and sell it at competitive rates. Cross selling also constituted towards impressive
sales figures. By making the customers to come to stores every month to pay the installments,
Casas Bahia induced them with an attractive display of latest products to make another
purchase.
Aggressive marketing was another reason for their success and popularity. Huge investments
were made on advertisements. Television was the main medium of advertisement.
By adopting these strategies like quality products at low prices, providing credit sales to low
income people through installment payment, Cross selling etc. Casas Bahia has attempted to
reduce its operational expenses.
Q3.Examine the criticism level 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? Take a stand and justify the answer.
No, we do not agree with the criticisms against Casas Bahia as it is a win-win situation for both
the company and the poor consumers. It was criticized that the company exploited the poor
in the name of selling them branded products in easy installment rather than giving priority to
the basic needs. But it is not so because the poor consumers who always felt that these
products are not affordable and it is their dream products was made available to them at
reasonable costs by Casas Bahia.
Another criticism which was quoted was that Casas Bahia played with people’s psychology.
One of the customers did not even know the amount of interest she was paying for her
purchases. But it is not so because if they cheat the poor consumers to pay a high rate of
interest, the existing customers will not come back for a repurchase.
There were also criticisms that Casas Bahia sold goods at an inflated rates and cheated
consumers by saying that they charged low rate of interest. But today the consumers are
more aware about the choices available to them through advertisements and other medium.
So even if Casas Bahia charges high prices for its products, the customers are smart enough to
compare and contrast the products with the available options.
Casas Bahia is a retail store dealing with very poor consumer segment which is also risky. So
Samuel should be rewarded for the risk undertaken.
The store has trained its employees to help customers choose products that suit their budget.
The store has also kept the consumers spending active even at the time of recession. Such
healthy circulation of money helped the economy stay afloat.
So Casas Bahia has benefitted not just itself or the customers rather the whole economy.
Q4 .Prof. CK Prahalad has emphasized 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
multinationals operating in the developing counties.
Bottom of the Pyramid (BOP) customers are the poorest section of the society. According to
World Bank, about 2.8 billion (which is about 50%) of the world’s population has as income
lesser than or equal to $2 per day. With stagnant growth in the developed market, companies
are eyeing on the base of the pyramid consumers, whose disposable income multiplied billion
times indicates a substantial purchasing power.
In the past, lots of discussions on the protection of BoP customers have aroused. However,
multinationals are now focusing on designing products to cater to the needs and ability of the
BoP customers. They have realized that this segment is a highly profitable one and worth
considering.
The sachet concept, refilling options and free offers provide economic purchase options to
the BoP consumers. Multinationals followed all such methods to woe the BoP consumers.
Companies have continually carried market research to comprehend the gap between
spending pattern, needs and requirements of this segment.
Lehar recently launched “Chota Kurkure Pack” priced at Rs.3. Coca Cola is coming up with its
new product Vintago priced at Rs.2.50 per 18gm pack. Nestle has launched Rs.4 Maggi
noodles and Rs.2 Maggi seasoning pack.
These companies are designing new price schemes, packaging schemes and others on the
existing brands and products. This is to retain the brand equity of the existing product. The
strategies are mainly applied in providing a low cost product with high quality. Also bottom of
the pyramid marketers aims at raising the standards of living of the consumer. The growth of
micro finance industry is the indicative of the fact that newer schemes and offerings are being
designed now-a-days to suit the requisition of the BOP customers.
An aggressive knowledge of the local environment and distribution channel should be
acquired before targeting this segment. Serving this section of the community not only brings
profit and helps in building strong brand for the companies, but also provides opportunity to
them in serving the poorest of consumers and contribute to development of the society.
Therefore, BoP plays a major role development of the economy as well as development of the
company which proves the importance of this segment for multinationals operating in
developing nations.
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