Consumer Behavior in Transitional Economies Part 2: Debunking Myths

06 Sep 2005|Added Value

In helping companies enter emerging markets, the first task at hand is to work with senior managers to debunk common myths or to question their own assumptions regarding consumers in these economies. Most of these myths are related to communicating price and accessibility of a product. Here, I discuss two of the most common examples. 1) The assumption that “cheap” price should be communicated as loudly as possible and 2) The assumption that industrial packaging is obviously better than sophisticated imaging.

Should I Communicate The Low Price of My Product?

While accessibility is a key concern when designing products for lower income communities, managers often spend too much time worrying about how to communicate that a product is cheap. My experience has taught me two important lessons regarding price, and the communication of price. First, since consumers in lower income communities are managing tight budgets, they are indeed very much aware of the cost of items, including small household items, groceries, and so forth. People will not only be aware the price, they will note the price for the value received by noting such things as the size of an item and the quality. For this same reason, it is not necessary to scream out the price of a product and remind people how cheap it is. People will figure it out quickly, and they don’t need to be reminded that they are poor and can only access cheap products. I have heard consumers tell me many times that while they seek a good deal, they don’t like to think of themselves as giving cheap products to their family, This leads me to the second point. Often is a deal is communicated too loudly, lower income consumers will often believe that there is some kind of fraudulent activity taking place. People have experienced bad deals where they remain in debt for long periods of time, when they are told that they can purchase something with small installments that never end. In transitional economies, the shady nature of the informal economy has often resulted in deals that are in fact “too good to be true” as people realize that they received something of inferior quality. “You get what you pay for” is a common phrase among folks in transitional economies and in the US Hispanic market.

In summary, while it is important to make products that are accessible, it is not necessary to throw it in people’s faces that a product is cheap. The price coupled with a product’s availability will do the job. Just make sure that the price is visible enough so as to not appear hidden .

Should I Avoid Fancy Package Design So As To Communicate Accessibility?

Another related common myth regarding consumers in emerging economies regards the design of packaging and image. Managers often assume that if a package seems too sophisticated, consumers will assume that it is expensive and therefore will not even pay attention to it. In fact, this applies to the product itself at times, with companies a ssuming that people in lower income communities only purchase need-based products, such as basic food, but will not purchase something beyond that. The result is many industrial looking products that communicate “I can meet your basic need” are launched in lower income communities.

Both assumptions are wrong. All consumers, and yes, even poor ones, are aspirational. This means they aspire to a better life, and a better life often means entering the doors of modernity. Packaged products represent modernity. I have witnessed many cases where people display packages of food products that they have consumed as household decorations. Companies such as BIMBO are experts in this area. Bimbo has designed sophisticated, metallic silver packages for many of its recent “sweet bread” product launches. Bimbo understands that the package itself is part of the product and communicates a modern , on the go lifestyle. Bimbo acknowledges that people in lower income communities aspire to this life. Bimbo understands that its products are small luxuries. No one needs to buy sweet bread for 2.5 pesos daily. But these are small rewards one gives one’s children, these are the toys, the goodies for celebrating life. Ponds creams also understand this. Ponds is widely available in many rural and semi rural towns throughout Mexico. They create sophisticated packaging for their creams, as they understand that for lower income consumers, this small luxury is just the type of thing that make life worth living.

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