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.