5.1 billion people, or 78% of the world’s population, are low-income consumers¹. They live from less than $10,000 a year. Nevertheless, these shoppers become increasingly interesting to FMCG and retailers.
But how can companies effectively market to them? And what does this imply for shopper marketing?
In Russia, low-income shoppers spend $104 billion annually (30% of personal spending)¹. Moreover, they are brand conscious as they need reliable quality at a fair price. According to AT Kearney, 70% prefer multinational brands over domestic brands¹. However, due to globalization more and more individuals move up the income pyramid. Fostering early on brand loyalty among low-income shoppers allows companies to upgrade them to more expensive products at a later stage.
Yet, companies cannot just replicate shopper marketing campaigns designed for affluent shoppers to attract low-income customers.
Low-income shoppers usually frequent small stores. They comprise 50% of the world’s mom-and-pops customers². Their families are larger in number and they tend to tend to maintain classical role models (i.e. mothers do the groceries). Also, they usually are more religious and superstitious than affluent shoppers.
Consequently, companies must first understand the specific low-income shopper they want to target and generate insights.
For example, Danone in China enriches its biscuits with calcium and iron acknowledging that half of Chinese population lacks calcium. In India, Citibank installed ATM machines with fingerprint authentication and voice recognition to allow illiterate customers to access their bank account without interference of an employee.
Once a company understands the demographics and lifestyle of its targeted shoppers, they have to develop a consistent strategy for shopper marketing along the entire path to purchase.
TV, Internet and especially word-of-mouth are important to low-income shoppers. Social relationships and family ties tend to be stronger than for affluent customers. Companies who incorporate shoppers and convert them into brand advocates can create a strong and powerful social network. Nestlé Brazil for example, relies on direct sales for its yoghurt and biscuit products. Although customers are given a two-week credit to pay for the product, default rates are low due to peer pressure. Meanwhile, “(i)n Russia and Central Asia, door-to-door selling accounts for nearly 19 percent of the beauty market“¹.
The type of media to use to target low-income shoppers depends primarily on where your customers are living.
In rural areas, village markets and open-air festivals provide companies with an effective means to target larger audience. Colgate-Palmolive for example, sends a video van to rural areas of India. The program includes local movies as well as commercials for the company’s personal care products. Unilever in turn, uses magicians and dancers to promote their products in rural areas.
In major cities, traditional on-the-go media is best suited. Billboards and street furniture are only a few of the vehicles marketers can use to communicate their brand to shoppers. Although the message and key visuals might be different from campaigns directed at affluent shoppers, the vehicles are the same.
Although price is a key criterion for low-income shopper, they also tend to be more brand conscious as they are dependent on reliable quality. They just cannot afford to experiment and to spend their savings on impulse purchases.
With respect to packaging, smaller packages might be more appropriate for two reasons. First, the unit price declines and hence allows more low-income shoppers to access the product. Second, small mom-and-pops or village stores often do not have sufficient space to stock larger packages.
However, companies also have to ensure an appealing communication in-store. Procter & Gamble Mexico for example developed the “Golden store” program. “Golden stores” are smaller mom-and-pops that carry some 40 or more P&G products and display them together on the shelf instead of next to competitor’s brands. P&G’s sales force in turn offers more frequent stores visits and dedicates more resources on decorating displays.
As for any other shopper marketing campaign, marketing to low-income shoppers must be insight-driven. Understanding the targeted demographic group and their lifestyle is vital for any campaign. Yet, shopper marketing is not everything. Developing suitable and attractive products adapted to the needs of low-income customers is the very first step.
To benchmark, companies should have a close look at how local companies do business and evaluate the possibility of collaboration. For example, Unilever India introduced a low price detergent using a simplified formula which is manufactured by a local company. The results are impressive: “with only one strong competitor (…), Wheel quickly won 38 percent of the powder-detergent market in India, thereby matching the competitor’s market share“³.
Shopper marketing is not a costly tool for targeting only affluent buyers. Instead, it is insight-driven marketing along the entire path to purchase to any group of customers. Moreover, low-income consumers represent a little penetrated segment and hence, provide a huge business opportunity for any company that understands their very needs.
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